15/04/2009 - 22:00

Resource sector fraud on the rise

15/04/2009 - 22:00

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THE resource sector has been exposed to higher levels of fraud involving the theft of funds and physical assets due to increased jobs uncertainty, according to KPMG.

Resource sector fraud on the rise

THE resource sector has been exposed to higher levels of fraud involving the theft of funds and physical assets due to increased jobs uncertainty, according to KPMG.

The company's 2008 Fraud Survey revealed the most common type of fraud among resources companies last year was theft of funds (57 per cent), followed by theft of plant and equipment (30 per cent).

The rates of these types of fraud upon organisations in the resources sector were all proportionally higher than those recorded in the other industry groups, with an average loss per organisation of $33,000.

KPMG forensic partner Matt Fehon said the survey confirmed the large volume of funds and large quantities of physical assets in the sector made it a common target.

He warns this is likely to increase in the current environment of contract withdrawals reductions, cost pressures and decreased performance for some companies.

"It's people coming out of good salaries who are still trying to manage their mortgages, credit cards and personal loans who we are seeing committing acts of deception," Mr Fehon said.

He said smaller to mid-sized companies were most at risk, having experienced a rapid growth during boom times that they could not keep up with in terms of scrutiny levels and back-up procedures.

"If there's only one or two people dealing with it do they have the capacity to cope with a larger workload, there's larger numbers of transactions going through and larger amounts of money," Mr Fehon told WA Business News.

Deloitte forensic partner Martin Langridge said deceptive acts were likely to be triggered by the global financial crisis and an economy that was not as buoyant as before.

"It can also give rise not only to behaviours like people helping themselves to company funds, but people not wanting to report bad news, so people misrepresent financial stats," he said.

"People are more fearful of divulging bad news to management for a number or reasons; it may not only affect jobs but other opportunities, like cash bonuses."

Ernst & Young fraudulent investigations and disputes services partner Paul Fontanot said individuals were creating more opportunities to recover or raise funds.

"A lot of employees and a lot of syndicates are losing money, so they don't know if they'll have a job tomorrow, and they don't know if they can count on cash bonuses," he said.

The company was also seeing an increase in reactive investigations, where companies were being more active seeking out the loss of funds.

"Partly because of the economic downturn, companies are looking at all the ways they can retrieve funds," Mr Fontanot said.

In the resource sector there was more manipulation of payouts during closures, fraudulent redundancy payouts and theft of funds from asset sales, the survey found.

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