Fraud risks in government-funded initiatives

Government-funded initiatives play a vital role in supporting research and innovation, community projects, business development, education, arts and culture. To minimise the opportunity for fraud against funding programmes, organisations should put in place effective countermeasures and ensure that staff are aware of the common fraud risks and how they can be mitigated.

Public sector financial support can be exploited

Government-funded initiatives are programmes and projects that receive public sector financial support, for example through grants, funding and subsidies.

Although this funding is intended to provide benefits to the public, it can be exploited through fraudulent means. This risk is greater during emergency or disaster relief situations when programmes are administered under time pressure. There is also a greater risk of fraud when funding is administered with limited oversight or through a new system or process. Below are some of the commonly observed fraud risks in government-funded initiatives.

Identity crime

Funding recipients use a false identity or identities to apply for funding payments.

Fictitious organisations

Applicants create a fake organisation or shell company to apply for funding and pretend they are eligible.

False information

Applicants falsify eligibility information to qualify for funding. Recipients falsify performance data or misrepresent the project status to continue to receive funding.

Funds used for improper purposes

Funding that is spent outside of its intended use. For example, funding recipients dishonestly spend funding on personal items or other companies.

Inflated costs

Funding recipients inflate costs to receive additional funding. For example, applicants falsify records, inflating the amount of funding required to achieve the agreed funding outcome or service.

Substituted materials

Funding recipients deceptively use cheaper or substandard products, materials, service models or types to receive a financial benefit. For example, individuals receive funding to install home insulation, but then use an insulation product inferior to the agreed standard.

Duplicate applications or funding

A funding recipient obtains funding for the same or similar activity from more than one source. This involves fraud if the respective fundings are not intended to apply simultaneously, and the funding recipient fails to declare the other funding.

Corruption

A public official exploits their position of trust, insider knowledge or authority to manipulate systems and processes for personal gain. The outcome does not necessarily need to result in a financial gain for the official, for example, they could award funding to ineligible applicants to meet performance targets.

Undeclared conflicts of interest

A person makes a decision or exercises a power in a way that is influenced by personal interests or associations. For example, an official specifically tailors a funding opportunity to ensure a friend’s organisation is eligible to be awarded the money.

Download the full guide

Download the guide for in-depth information on common fraud risks in government-funded initiatives, including:

what red flags to look out for
the fraudster personas associated with each risk
countermeasures to put in place.

The guide provides case studies where government-funded initiatives were defrauded, along with a self-assessment checklist to evaluate your organisation’s processes against good practice standards.

Fraud risks in government-funded initiatives (PDF 1.9 MB)