Australia: Protecting public money from procurement and funding fraud through rewarding whistleblowing

Last Updated: 10 May 2013
Article by Ben Allen and Siobhan Higgins


As published in The Canberra Times Public Sector Informant on 7 May, 2013

Whistleblowers could save taxpayers hundreds of millions of dollars by the early identification of fraudulent claims made against the government. Whistleblowers could also receive a share of the funds recovered as a result of their claims, if a US type of 'False Claims Act' is introduced.

Results from a survey conducted by the Australian Institute of Criminology (AIC) show that $495,534,658 was lost to external fraud (that is, fraud committed by a third party) against the Australian Government in 2009-2010. Approximately $196 million, significantly less than half of that amount was recovered, of which $87 million related to "entitlements" fraud (such as social security and Medicare fraud).

For many reasons, it now appears that these figures grossly underestimate the true extent of such external fraud. The Association of Certified Fraud Examiners has noted that on average organisations and governments lose 5% of revenue or expenditure to fraud. If this figure is applied to Australian Government expenditure of $378 billion, it could equate to a loss of up to $19 billion. In particular, the lessons of the United States in responding to instances of "non-entitlements" external fraud by large multi-nationals suggest that its occurrence in Australia is significantly higher than currently reported and that losses arising from contract procurement and funding fraud are costing the Australian Government many, many more millions each year.

Recovery of fraud losses from third parties

Whenever the Australian Government contracts with a third party, the potential for fraud exists: for example, by that third party submitting invoices for work not actually undertaken or producing inferior goods to that contracted for. While the actual amount the Australian Government loses to external fraud in a given year likely exceeds by far the already considerable amount reported in current AIC surveys, the question remains: why are these losses not identified or recovered, and what can be done about it?

Measures to detect, prevent and identify fraud, especially in procurement and funding, are critical if embarrassing historical frauds such as those committed under the home insulation scheme and the school buildings program are lessons to be learned. Having someone "blow the whistle" on the third party is by far the easiest means of detection.

In the past few years the Australian Government has taken significant steps to strengthen whistleblower protection both within and outside the public service, which is encouraging. There is, however, still much more that could be done to encourage a culture of whistleblowing, especially in the area of external fraud.

Introduction of a False Claims Bill?

The possible introduction in Australia of legislation akin to the False Claims Act in the United States could see recovery of funds due to external fraud skyrocket, with individuals able to bring claims against private organisations on behalf of the Australian Government and claim a percentage of the overall amount recovered - in effect, "incentivising", compensating or rewarding whistleblowers. How such legislation will work in practice in Australia remains to be seen.

Since 2010, the Australian Federal Police Association has been calling for such legislation, which would create civil actions for recovery of money obtained by means of false claims to the Australian Government (or a government contractor, if the cost is ultimately passed on to the government). This action, a civil equivalent to the criminal offences currently contained in Part 7.3 of the Criminal Code (contained in the schedule to the Criminal Code Act 1995 (Cth)), may in itself assist Australian Government agencies to recover money lost to external fraud by giving another legal alternative to proceeds of crime legislation or contractual enforcement.

However, the more significant aspect of the United States legislation is its qui tam provisions, which allow a private individual (the "relator") to bring a claim on behalf of the government and claim a percentage of the overall amount recovered if successful – in effect, the reward for whistleblowing. With growing support for this kind of legislation and empirical evidence such as the AIC survey justifying its potential, it seems likely that the introduction of a Bill is an inevitability.

So if qui tam claims are the future for Australian Government procurement and grants-related fraud control, what could an Australian False Claims Act mean for agencies?

The future for Australian qui tam claims

In the United States, the False Claims Act, also known as the "Lincoln Law", was introduced by President Lincoln in 1863 during the American Civil War to combat the defence contractor fraud that was rife in both the Union North and Confederate South and, thanks to some major amendments in 1986, has been given a new lease on life.

Contained in § 3729-2733 of the US Code, the Act establishes liability when any person or entity improperly receives payment from or avoids payment to the US Government (other than via tax fraud). A qui tam claim is established by section 3730, and allows the relator to recover 15-25% of a successful claim where the government regulator decides to join the claim, or 25-30% where the regulator chooses not to be involved.

According to statistics published by the US Department of Justice on litigation under the False Claims Act from October 1987 to September 2012, over $40 billion has been recovered through the legislation in the last 25 years. Of that, almost $24 billion was recovered through qui tam claims, with the figures showing a steady upward trend in the number of qui tam claims over the years – in 2012, there were 647 qui tam claims brought compared to only 135 non-qui tam claims. Commentators generally agree that qui tam claims also act as a deterrent to committing fraud in the first place, as higher recovery rates translate into a higher chance of getting caught.

Obviously the United States is a much larger country than Australia in terms of population and government expenditure and, in practica terms, similar legislation here would recover much lower figures. Nevertheless, the United States experience demonstrates huge potential to decrease the amount of public money lost through fraud every year.

In 2009-10, during the same period the subject of the AIC survey, the US government recovered over $5 billion through litigation under the False Claims Act. Taking into account that entitlements fraud would generally not be large-scale enough to fall within the scope of a False Claims Act claim, this can be contrasted with the $109 million recovered in Australia through non-entitlements fraud in the same period – representing only about 2 per cent of the funds recovered in the United States.

Put simply, Australia can do much more to recover money lost to external fraud. The strong recovery trends in the United States are in large part because of the False Claims Act and the existence of qui tam claims. Such legislation has potential to recover a significant part of the funds lost each year through fraud.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

To print this article, all you need is to be registered on

Click to Login as an existing user or Register so you can print this article.

Ben Allen
Some comments from our readers…
“The articles are extremely timely and highly applicable”
“I often find critical information not available elsewhere”
“As in-house counsel, Mondaq’s service is of great value”

Mondaq Advice Centre (MACs)
Up-coming Events Search
Font Size:
Mondaq on Twitter
Register for Access and our Free Biweekly Alert for
This service is completely free. Access 250,000 archived articles from 100+ countries and get a personalised email twice a week covering developments (and yes, our lawyers like to think you’ve read our Disclaimer).
Email Address
Company Name
Confirm Password
Mondaq Topics -- Select your Interests
 Law Performance
 Law Practice
 Media & IT
 Real Estate
 Wealth Mgt
Asia Pacific
European Union
Latin America
Middle East
United States
Worldwide Updates
Check to state you have read and
agree to our Terms and Conditions

Terms & Conditions and Privacy Statement (the Website) is owned and managed by Mondaq Ltd and as a user you are granted a non-exclusive, revocable license to access the Website under its terms and conditions of use. Your use of the Website constitutes your agreement to the following terms and conditions of use. Mondaq Ltd may terminate your use of the Website if you are in breach of these terms and conditions or if Mondaq Ltd decides to terminate your license of use for whatever reason.

Use of

You may use the Website but are required to register as a user if you wish to read the full text of the content and articles available (the Content). You may not modify, publish, transmit, transfer or sell, reproduce, create derivative works from, distribute, perform, link, display, or in any way exploit any of the Content, in whole or in part, except as expressly permitted in these terms & conditions or with the prior written consent of Mondaq Ltd. You may not use electronic or other means to extract details or information about’s content, users or contributors in order to offer them any services or products which compete directly or indirectly with Mondaq Ltd’s services and products.


Mondaq Ltd and/or its respective suppliers make no representations about the suitability of the information contained in the documents and related graphics published on this server for any purpose. All such documents and related graphics are provided "as is" without warranty of any kind. Mondaq Ltd and/or its respective suppliers hereby disclaim all warranties and conditions with regard to this information, including all implied warranties and conditions of merchantability, fitness for a particular purpose, title and non-infringement. In no event shall Mondaq Ltd and/or its respective suppliers be liable for any special, indirect or consequential damages or any damages whatsoever resulting from loss of use, data or profits, whether in an action of contract, negligence or other tortious action, arising out of or in connection with the use or performance of information available from this server.

The documents and related graphics published on this server could include technical inaccuracies or typographical errors. Changes are periodically added to the information herein. Mondaq Ltd and/or its respective suppliers may make improvements and/or changes in the product(s) and/or the program(s) described herein at any time.


Mondaq Ltd requires you to register and provide information that personally identifies you, including what sort of information you are interested in, for three primary purposes:

  • To allow you to personalize the Mondaq websites you are visiting.
  • To enable features such as password reminder, newsletter alerts, email a colleague, and linking from Mondaq (and its affiliate sites) to your website.
  • To produce demographic feedback for our information providers who provide information free for your use.

Mondaq (and its affiliate sites) do not sell or provide your details to third parties other than information providers. The reason we provide our information providers with this information is so that they can measure the response their articles are receiving and provide you with information about their products and services.

If you do not want us to provide your name and email address you may opt out by clicking here .

If you do not wish to receive any future announcements of products and services offered by Mondaq by clicking here .

Information Collection and Use

We require site users to register with Mondaq (and its affiliate sites) to view the free information on the site. We also collect information from our users at several different points on the websites: this is so that we can customise the sites according to individual usage, provide 'session-aware' functionality, and ensure that content is acquired and developed appropriately. This gives us an overall picture of our user profiles, which in turn shows to our Editorial Contributors the type of person they are reaching by posting articles on Mondaq (and its affiliate sites) – meaning more free content for registered users.

We are only able to provide the material on the Mondaq (and its affiliate sites) site free to site visitors because we can pass on information about the pages that users are viewing and the personal information users provide to us (e.g. email addresses) to reputable contributing firms such as law firms who author those pages. We do not sell or rent information to anyone else other than the authors of those pages, who may change from time to time. Should you wish us not to disclose your details to any of these parties, please tick the box above or tick the box marked "Opt out of Registration Information Disclosure" on the Your Profile page. We and our author organisations may only contact you via email or other means if you allow us to do so. Users can opt out of contact when they register on the site, or send an email to with “no disclosure” in the subject heading

Mondaq News Alerts

In order to receive Mondaq News Alerts, users have to complete a separate registration form. This is a personalised service where users choose regions and topics of interest and we send it only to those users who have requested it. Users can stop receiving these Alerts by going to the Mondaq News Alerts page and deselecting all interest areas. In the same way users can amend their personal preferences to add or remove subject areas.


A cookie is a small text file written to a user’s hard drive that contains an identifying user number. The cookies do not contain any personal information about users. We use the cookie so users do not have to log in every time they use the service and the cookie will automatically expire if you do not visit the Mondaq website (or its affiliate sites) for 12 months. We also use the cookie to personalise a user's experience of the site (for example to show information specific to a user's region). As the Mondaq sites are fully personalised and cookies are essential to its core technology the site will function unpredictably with browsers that do not support cookies - or where cookies are disabled (in these circumstances we advise you to attempt to locate the information you require elsewhere on the web). However if you are concerned about the presence of a Mondaq cookie on your machine you can also choose to expire the cookie immediately (remove it) by selecting the 'Log Off' menu option as the last thing you do when you use the site.

Some of our business partners may use cookies on our site (for example, advertisers). However, we have no access to or control over these cookies and we are not aware of any at present that do so.

Log Files

We use IP addresses to analyse trends, administer the site, track movement, and gather broad demographic information for aggregate use. IP addresses are not linked to personally identifiable information.


This web site contains links to other sites. Please be aware that Mondaq (or its affiliate sites) are not responsible for the privacy practices of such other sites. We encourage our users to be aware when they leave our site and to read the privacy statements of these third party sites. This privacy statement applies solely to information collected by this Web site.

Surveys & Contests

From time-to-time our site requests information from users via surveys or contests. Participation in these surveys or contests is completely voluntary and the user therefore has a choice whether or not to disclose any information requested. Information requested may include contact information (such as name and delivery address), and demographic information (such as postcode, age level). Contact information will be used to notify the winners and award prizes. Survey information will be used for purposes of monitoring or improving the functionality of the site.


If a user elects to use our referral service for informing a friend about our site, we ask them for the friend’s name and email address. Mondaq stores this information and may contact the friend to invite them to register with Mondaq, but they will not be contacted more than once. The friend may contact Mondaq to request the removal of this information from our database.


This website takes every reasonable precaution to protect our users’ information. When users submit sensitive information via the website, your information is protected using firewalls and other security technology. If you have any questions about the security at our website, you can send an email to

Correcting/Updating Personal Information

If a user’s personally identifiable information changes (such as postcode), or if a user no longer desires our service, we will endeavour to provide a way to correct, update or remove that user’s personal data provided to us. This can usually be done at the “Your Profile” page or by sending an email to

Notification of Changes

If we decide to change our Terms & Conditions or Privacy Policy, we will post those changes on our site so our users are always aware of what information we collect, how we use it, and under what circumstances, if any, we disclose it. If at any point we decide to use personally identifiable information in a manner different from that stated at the time it was collected, we will notify users by way of an email. Users will have a choice as to whether or not we use their information in this different manner. We will use information in accordance with the privacy policy under which the information was collected.

How to contact Mondaq

You can contact us with comments or queries at

If for some reason you believe Mondaq Ltd. has not adhered to these principles, please notify us by e-mail at and we will use commercially reasonable efforts to determine and correct the problem promptly.