When embarrassing revelations about Defence Department fuel card fraud were aired at a Senate Estimates hearing last June Secretary Dennis Richardson assured the committee that dishonesty was not a major problem. To give his claim context, Mr Richard said the fraud loss for Defence corporate credit cards of $96,429 in 2013-14 represented just "0.02 per cent of total corporate credit card expenditure".
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The credibility of Mr Richardson's claim looks somewhat strained this month after the release of a performance audit into Defence's management of credit and other transaction cards audit conducted by the Australian National Audit Office. The ANAO report found that monitoring and control of the estimated 100,000 cards on issue in mid 2015 was deficient, that spending limits were inconsistently applied, and that verification measures and mechanisms for detecting or reporting for misuse were either of limited effectiveness or not implemented at all.
This poor to non-existent oversight encouraged a plenitude of suspect, unethical or fraudulent spending. Authorised card holders charged taxpayers more than $3.3 million over three years on sports memberships, entertainment and events at private golf courses. Three departmental staffers used their travel cards for one-way taxi trips from Sydney to Williamtown RAAF base and Whittingham (near Singleton airport) of more than $700 each, presumably because they didn't have the time or the inclination to book a self-drive hire car.
Over $75,000 in fines was put on purchasing cards between July 1, 2012 and November 9, 2015 – in direct contravention of Defence policy that drivers of departmental vehicles are personally liable for all traffic infringements. And that figure was inflated by penalties incurred as a result of the refusal of some authorities to name the driver or drivers concerned.
Only after the ANAO drew these payments to the attention of Defence's fraud control branch was an assessment of the effectiveness of traffic fine management sought, with senior officials expressing concern about "what appears to be a cultural attitude within some ADF units towards protecting members from the … consequences of committing traffic offences while driving Commonwealth-plated vehicles".
In spite of clear Department of Finance edicts about departmental purchasing or payment cards being used only for amounts below $10,000, ANAO found 125 Defence purchasing cards with limits for cash withdrawals of up $1 million, and a further 115 cards with limits ranging from $5000 to $500,000. Responding to the audit in April this year, Defence stated that with the exception of cases approved by the relevant authority, access to cash from purchasing cards was being removed.
The implementation of these and other ANAO recommendations is welcome. But how did Defence come to have such such a patently deficient internal audit process in the first place, and how much money was fraudulently or wastefully spent in the years when credit cards were being handed out in the tens of thousands? Some elaboration by Mr Richardson at his next Senate Estimates hearing (including whether anyone was brought to account) would be pleasing.
