Explanatory Statement
Commonwealth Fraud Control Guidelines
The instrument to which this explanatory statement relates
This explanatory statement relates to the ‘Commonwealth Fraud Control Guidelines’ (the instrument).
The legislative authority under which the instrument is made
Section 64(1) of the Financial Management and Accountability Act 1997 (FMA Act) provides that the regulations may authorise a Minister to issue guidelines to officials on matters within the Minister’s responsibility. Regulation 16A of the Financial Management and Accountability Regulations 1997 provides that the Minister for Home Affairs may issue guidelines (to be called Fraud Control Guidelines) about the control of fraud, dealing with fraud risk assessments, the preparation and implementation of fraud control plans and reporting of fraud.
Purpose of the instrument
The Fraud Control Guidelines establish the policy framework and articulate the Government’s expectations for effective fraud control for all departments and agencies (agencies), and their employees and contractors, subject to the FMA Act, when performing duties related to the efficient, effective and ethical management of public resources.
Background
On 24 February 2011, the Minister for Home Affairs issued revised Fraud Control Guidelines to take effect on 29 March 2011. The Fraud Control Guidelines were previously released in 2002. This reissue clarifies policy and simplifies text and structure.
Notes on the instrument
The Fraud Control Guidelines apply to all FMA Act agencies. A body subject to the Commonwealth Authorities and Companies Act 1997 (CAC Act) is not subject to the Fraud Control Guidelines unless the Finance Minister has made a General Policy Order (GPO) in accordance with section 48A of the FMA Act, specifying the mandatory requirements for that body under the instrument. CAC bodies which are not subject to such a GPO should consider applying the Fraud Control Guidelines as a matter of policy.
Fraud control encompasses the whole process of fraudulent activity and includes prevention and detection, the related investigation and where appropriate, prosecution of offenders. The Fraud Control Guidelines establish the framework within which agencies determine their own specific practices, plans and procedures to manage fraudulent activities. The instrument sets out the definition of fraud and obligations of Chief Executives and outlines the requirements for risk assessments, fraud control plans, awareness and training, detection, investigation and response, quality assurance and information management and reporting.
The Fraud Control Guidelines should be read in consultation with documents relevant to investigation of Commonwealth offences and responsibilities of FMA Act and CAC Act agencies. The Fraud Control Guidelines are not intended to be an exhaustive tool to deal with all types of agency risk and should also be considered with other appropriate guidance materials.
Agencies were consulted during the development of the Fraud Control Guidelines. A draft copy of the Fraud Control Guidelines was circulated to all Australian Government Departments for comment.
Overview
The Commonwealth Fraud Control Guidelines, issued in 2011 under the authority of the Financial Management and Accountability Act 1997, were enacted to establish a robust framework for fraud control across all agencies subject to the Act, aiming to ensure the efficient, effective, and ethical management of public resources. These Guidelines were developed to address gaps in existing policies by providing a comprehensive policy framework that includes expectations and requirements for fraud prevention, risk assessments, control plans, and reporting mechanisms. The Minister for Home Affairs reissued these Guidelines to clarify policy and simplify the text and structure, ensuring they remain relevant and effective in combating fraudulent activities within the Commonwealth. The Guidelines serve as a critical reference for agencies, outlining the obligations of Chief Executives and detailing the necessary steps for managing fraud risks, from awareness and training to detection, investigation, and prosecution.
Scope and Application
The Commonwealth Fraud Control Guidelines apply to all entities subject to the Financial Management and Accountability Act 1997 (FMA Act), including Commonwealth departments, agencies, and their employees and contractors. This encompasses a broad spectrum of activities within the federal government, ensuring that all public resources are managed efficiently, effectively, and ethically. The guidelines aim to establish a robust framework for fraud prevention, detection, investigation, and prosecution. While the guidelines are primarily directed at FMA Act agencies, bodies under the Commonwealth Authorities and Companies Act 1997 (CAC Act) are only subject to these guidelines if a General Policy Order (GPO) is issued by the Finance Minister, specifying mandatory requirements. The Fraud Control Guidelines, therefore, provide a comprehensive approach to managing fraudulent activities while being flexible enough to be considered as policy by CAC bodies not bound by a GPO.
Key Provisions
The Commonwealth Fraud Control Guidelines, issued under section 64(1) of the Financial Management and Accountability Act 1997 (FMA Act) and regulation 16A of the Financial Management and Accountability Regulations 1997, establish a policy framework for managing fraud risk within all agencies subject to the FMA Act. These guidelines (section 1) aim to articulate the Government’s expectations for effective fraud control, encompassing the prevention, detection, investigation, and prosecution of fraudulent activities. They provide a structured approach for agencies to develop specific practices, plans, and procedures tailored to their needs, ensuring the ethical and efficient management of public resources.
Under these Guidelines, agencies are required to conduct comprehensive fraud risk assessments, as outlined in section 2, to identify potential vulnerabilities and areas susceptible to fraudulent activities. This involves analysing historical data, identifying fraud risks, and assessing the adequacy of existing controls. Additionally, agencies must develop and implement fraud control plans (section 3) that detail specific measures to mitigate identified risks, including the establishment of internal controls, the designation of fraud control officers, and the implementation of training programs for staff. Furthermore, agencies are obligated to foster a culture of fraud awareness and prevention through regular training and communication of fraud-related policies and procedures to all employees and contractors.
Failure to comply with the Fraud Control Guidelines may result in significant consequences, as detailed in section 4. While the Guidelines themselves do not explicitly prescribe penalties for non-compliance, agencies that neglect to implement adequate fraud controls or fail to detect and report fraudulent activities may face scrutiny and potential repercussions under the FMA Act. This could include disciplinary action against individuals responsible for fraud, as well as reputational damage to the agency. Additionally, under section 5, the Minister for Home Affairs may issue a General Policy Order (GPO) under section 48A of the FMA Act, imposing mandatory requirements on Commonwealth Authorities and Companies Act 1997 (CAC Act) bodies not otherwise subject to the Guidelines, thereby extending the scope of fraud control obligations to these entities. Non-compliance with such a GPO may result in legal and financial penalties, including fines and sanctions against the responsible officers.