Impacts of public sector fraud

Fraud affects more than just finances – it can harm people, services, organisations, industries, security and the environment. A clear understanding of these broader impacts helps public sector organisations better asses their fraud risk and make informed decisions to prevent it.

Fraud can be difficult to define, measure and communicate, but assessing its full impact helps public sector organisations better understand their risks. Although measuring the financial loss is key, other impacts can be just as (if not more) damaging to public services, the government that delivers them and, most importantly, the people that rely on them.

Key fraud impacts

Find out more about the potential consequences of fraud and use key questions to assess your organisation’s exposure. This will support the development of targeted, effective fraud prevention strategies.

Human

Public sector fraud and corruption is not a victimless crime. It can cause trauma, with real and irreversible impacts for victims and their whānau. These crimes can also lead to a sense of betrayal and loss of trust for those close to the offender.

Business

Fraud against government programmes can result in significant costs that go well beyond the direct financial loss. Responding to fraud can include assessment, detection, investigation and response costs, as well as potential restitution.

Environment

Fraud and corruption in the public sector can lead to immediate, long-term or irreversible environmental harm through pollution and damage to ecosystems. This poses risks to our cultural values, natural resources and agricultural industry.

Finance

Measuring the financial cost of fraud is challenging. Internationally, fraud loss for public bodies could be between 0.5% and 5% of their annual spend. In New Zealand, public sector losses could be between $500 million and $5.04 billion every year.

Government outcomes

Fraud can compromise the government’s ability to deliver services and achieve its goals. It diverts resources from where they’re needed, leading to substandard or unsafe services, cancelled programmes and missed opportunities.

Government systems

Fighting fraud drains government systems. It diverts limited resources from essential areas such as welfare, health, education, trade, national security and justice and reduces the government’s ability to address other critical priorities.

Industry

Fraud and corruption against public bodies can result in distorted markets where fraudsters obtain a competitive advantage and drive out legitimate business. It can affect services delivered by business and expose other sectors to further fraud risks.

Reputation

Fraud can affect any public sector organisation. When it is handled poorly, fraud can erode trust in public institutions. Organisations that proactively manage risks may reduce reputational harm and can use their response to build confidence with stakeholders.

Security

Fraud against public bodies can compromise national defence, security and community safety, putting New Zealanders at risk. Fraud can be a significant source of funding for organised crime and terrorism, and can compromise border security.