An audit has called for the National Indigenous Australians Agency (NIAA) to take a more proactive approach in managing potential provider fraud.

In a review covering the period from July 2020 to December 2022, the Australian National Audit Office (ANAO) has revealed that the NIAA did not consistently prioritise fraud prevention in its grant design and planning processes. 

Despite funding over $1.03 billion worth of grants to more than 1,000 external providers under the Indigenous Advancement Strategy (IAS) in 2021-22, no provider fraud investigations were initiated.

The report highlighted that the detection of provider fraud primarily relied on complaints, calling for improved proactive detection controls. 

The ANAO rated the NIAA's prevention, detection, and referral of potential provider fraud as only “partly effective”.

To address these concerns, the ANAO recommended that the NIAA conduct regular fraud risk assessments and implement proactive measures to detect fraud. 

The NIAA's Integrated Program Compliance and Fraud Management Framework, slated for review this year, will explore the inclusion of additional proactive fraud detection measures.

The report also noted a significant delay in finalising compliance reviews, with an average of 1,232 days, or over three years, required in 2021-22. 

The ANAO discovered a backlog increase between 2020-21 and 2021-22, highlighting deficiencies in compliance review and fraud investigation record-keeping.

Among the recommendations, the ANAO advised the NIAA to monitor the resources, time, and outcomes of compliance reviews and fraud investigations. 

NIAA CEO Jody Broun confirmed that the agency would implement all seven recommendations immediately, saying the agency is committed to continuously improving risk management, fraud control, and compliance.

Broun acknowledged that resolving serious and complex allegations of fraud could be time-consuming, requiring collaboration with other funding providers, law enforcement agencies, and prosecutors.

In its broader message to all government entities, the ANAO stressed the importance of fostering a fraud awareness and prevention culture within accountable authorities and audit committees. 

The report said there is a need for organisational commitment to the prevention and detection of fraud, as well as the identification and remediation of provider non-compliance, with strong leadership driving continuous improvement.

The NIAA has expressed its dedication to enhancing its approach to fraud control, compliance, and legislative adherence, and will work diligently to address the audit's findings and recommendations.