The 2002 survey was released today. It is the fifth edition of the biennial survey that has become a leading source of information on fraudulent activity against Australian business.

The 2002 survey attracted 361 respondents from Australia and New Zealand's largest private and public sector organisations. 55% reported the detection of at least one fraud incident in the survey period (October 1999 to September 2001). Respondents reporting at least one fraud incident suffered losses totaling $273 million - an average loss of $1.4 million per organisation. This represents a jump of almost 40% over the average loss reported in the 1999 survey.

The survey shows that fraud is not just alive and well in Australia and New Zealand - it is thriving. Organisations are being attacked on two fronts - persons external to the organisation on the one hand and management and non-management employees on the other."

Thirty organizations responded from the resources sector, representing the second highest response rate by industry. Of those, 30% reported experiencing fraud in the two year period surveyed totaling $1.3 million.

Helen Herbage, Senior Manager with KPMG Forensic explained the results for the sector.

"External parties perpetrated 92% of frauds reported by value in the resources sector. This is in contrast to the overall survey results, which indicates that internal parties to the organisation are the greater perpetrators of fraud"

"Theft of inventory and plant represented 77% of the value of fraud by external parties compared to 3% in the case of the overall survey results for external parties, " she said.

Inline with the overall survey results, organisations in the resources sector responded that fraud was a major problem in Australia and on the increase however did not consider fraud was a problem for their own business. Of those affected by fraud, more than one third of survey respondents reported that warning signs ignored by the organisation would have led to earlier detection if they had been acted upon.

43% of resources sector respondents had some form of an employee fraud reporting system however only 27% offered an anonymous reporting system.

"It seems that one of the major problems that allows fraud to occur is overriding of internal controls or poor/lack of internal controls. In light of this, controls over business dealings with sub contractors and external parties should be vigorously reviewed', said Ms Herbage.

"Consideration should be given to a comprehensive approach to fraud control planning and implementation is key to combating the risk of fraud as the costs of implementing fraud control strategies are minimal compared to the impact of fraud."

In other major findings across all sectors

· dishonest managers accounted for the highest proportionate losses outside the financial services sector - 40% of losses by value representing an average loss of $96,732 per fraud;

· within the financial services sector, the overwhelming proportion of loss was suffered as a result of external attack - 91% of losses by value representing an average loss of $3,585 per fraud;

· 52% of the losses committed by external party were credit card related;

· 92% of organisations with more than 10,000 employees experienced at least one fraud incident and averaged losses of $17.8 million per organisation;

· more than $30 million was lost to fraud in off-shore operations, an increase of more than 100% over the loss reported in the 1999 survey;

· theft of inventory and plant continues to be the most common form of internally instigated fraud with more than 40% of frauds being of this type;

· more than 62% of frauds detected by respondents during the survey period were reported to the police; and

· internal control was a factor in identifying only 23% of frauds detected- the remaining fraud incidents were detected by various other means including: notification by other employees and management and external parties including police and suppliers.

More than 60% of organizations said they neither planned, nor implemented, appropriate fraud control strategies.

"A clear lesson here is that organisations without effective fraud control systems and risk management strategies significantly increase their risk of loss, " said Ms Herbage.

Ms Herbage can be contacted at KPMG Forenisc on (08) 92637179.