Report serious fraud and corruption

Financial impacts

Measuring the financial cost of fraud is challenging. Based on international estimates, fraud against public sector organisations could result in the loss of 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 – money that could otherwise support vital public services, infrastructure, and environmental protection. In times of crisis or emergency there is a higher risk of fraud and corruption, and it is estimated that 10–15% of emergency funding is lost to these crimes.

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How to measure financial impacts

Indicated fraud loss

This refers to suspected instances of fraud that have yet been confirmed. There is a range of metrics that can be used to support or validate these suspicions within an organisation. These can include referrals, intelligence, investigations begun, and any identified anomalies in systems.

Detected fraud loss

Detected fraud represents the financial loss that has been uncovered and acknowledged by the organisation. It includes cases where fraud has been confirmed through investigation or other means. This figure does not reflect the total fraud loss, only what is known and verified.

Estimated fraud loss

Only a proportion of fraud against an organisation is ever detected. Organisations can estimate the level of fraud within their payments and systems by testing statistically valid samples and extrapolating the results across the population.

Unknown fraud loss

Some fraud will always remain undetected. There is always likely to be an element of unseen, unmeasurable fraud loss within an organisation. It is not possible to consider all fraud risks when undertaking a fraud measurement exercise as the nature of fraud is so diverse and quickly evolving.

Recovered fraud loss

Sometimes detected fraud is subsequently recovered by organisations. In some circumstances, organisations can offset these recovered losses against their detected loss to give a more accurate view of the financial impact of the detected loss.

Key questions to consider 

Understanding the broader financial impacts of fraud means asking the right questions.

  • Do you have any reliable data on the financial cost of fraud against your programme?
  • Do you know the level of detected fraud in your programme? 
  • Does your organisation accept the limitations of these numbers? 
  • Do you have an estimate of the total level of fraud in your programme (noting that the detected level and total level are not the same)? 
  • Can you benchmark against other public sector agencies? 
  • Are there any comparators you could use from other public bodies to provide a view of the potential level of fraud in your programme? 
  • Is the difficulty or complexity of measuring the financial loss from fraud understood by those who will review the numbers or take decisions based on them?

Other impacts

Download the full guide

Explore the full resource to identify the impacts of fraud, read about real-world examples, and consider key questions to help assess and prepare for potential risks to your programme or operations. Not every impact will apply to every organisation or initiative, but being aware of them can help your organisation strengthen its fraud prevention efforts and protect those who rely on its services.

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