It must now be quite obvious to you reading this chapter, from the surveys, research and media reports, that frauds are being perpetrated and the rate is increasing. Frauds threaten an organisa- tion's physical and data resources as well as the intangible assets such as reputation and ability to secure information. Data stored in an accounting system are threatened as most data are digitised. Although computers make it more efficient to capture and store accounting transactions (data) as well as turn them into information, they open up more vulnerabilities and attack is easier. Many examples have been given of how pressures have led to opportunity seeking behaviour to attack systems at input, process and output stages leading to frauds. Reading the following report from NSW audit office and discuss what would the impact can be if insufficient internal control is not in place for local councils.

The strength of fraud control systems varies significantly across New South Wales local councils, and our survey found that many need to improve significantly. Of the 83 councils that completed our survey:

1.5 have implemented most of the controls recommended by the kit

2.a further 40 have implemented half or more of the recommended controls

3.38 have implemented less than half the recommended controls.

While 65 of the 83 councils that completed the audit survey have fraud control policies, 52 councils do not have fraud control plans that direct resources to address the specific fraud risks they face. In the last two years only 15 councils that completed the survey have assessed their fraud risks to identify a need for refreshing or improvement.

The audit also identified a pattern of councils putting in place a policy, procedures or systems but not ensuring people understand these or how they work. We found that less than one-third of surveyed councils:

1.regularly train staff to identify and respond to suspected fraud

2.tell staff or the public how to report suspected fraud and how they investigate these reports.

This increases the potential that staff may not adhere to specific fraud control practice requirements, contributing to the sector wide weaknesses in awareness and notification systems identified by the audit.

Despite several New South Wales state entities collecting data on suspected fraud, the cost, extent, and nature of fraud in local councils is not clear. Collaboration between state agencies and councils to address inconsistencies in data collection could provide a clearer picture to the public and councils on the incidence of fraud.