We’ve had the exclusive inside juice on a substantial fraud scandal at the ABC and these are the two stories that Terry Television has written on the subject for our Crikey subscribers.

Exclusive: Police investigate ABC fraud

By Terry Television

From the second November 24 sealed section

Federal Police are investigating claims of fraud in ABC News and Current Affairs that some estimates have been put at between $50,000 and more than $200,000. One estimate as high as $700,000 is thought now to be too high, but the investigation continues.

The claims centre on the activities of a key production executive in charge the finances of at least one program over the last one to two years. The executive did not run the program, but oversaw and controlled its finances, a key role in the ABC’s Production Resources department.

The role of this person, a male, is similar to that of unit or production managers in some commercial networks. Sources say the person named has been employed at the ABC for a while, perhaps as long as 10 years.

The range of the fraud estimates vary widely. An early estimate of $100,000, is now thought to be conservative. The sum involved is thought to be much greater than $100,000. Double that figure could be possible but the exact size remains a mystery at the moment.(That’s a lot of money, but not a huge amount in terms of the ABC budget in excess of $700 million a year).

That could be because the investigation is continuing and an old adage in investigations of this type is that the first estimate is always the smallest.

Sources say Federal Police sealed and seized the computer used by the person concerned last month before taking it away to forensically examine the hard drive and other data. The sources said that in cases like these the Federal Police are called in to seal the room and computer of the person concerned.

The investigation is looking at the use of forged and fictitious credit card receipts and expense claims submitted by this individual in the name of people working on at least one program and possibly more.

This went on for months, perhaps more than a year and only came to light when a list of alleged claims and expenses by a reporter went to that reporter by mistake on a program.

This followed the person concerned being moved to another job and the replacement receiving the details of some of the dubious transactions and not being able to reconcile them. One sum of $4,000 for purchases at US online book retailer Amazon.com is believed to have been involved in the initial investigation.

The person in whose name the Amazon purchases were made, was able to prove that they had not made the purchase. It was then the alarm was raised and an internal investigation was started.

Some sources suggest that the investigation should also look at other forms of re-imbursement in the ABC. The fraud claims are known through the Corporation, but the board’s course of action, isn’t known as yet.

The claims, if true, reveal that the audit and spending control systems inside some parts of the ABC are poor. Sources say the controls in the News and Current Affairs division, responsible for more than $250 million a year in spending, are known to be more relaxed than ABC TV, Radio or Enterprises.

Others say there is a lot of trust involved and that you cannot guard against a person determined to do something like attempt fraud. They say that if these fraud reports are proved, then it will show that someone in a middle level area that involves spending and reconciliation of that expenditure was not adequately supervised, or that the supervision and controls were very weak.

The checks to make sure that funds are spent according to budget seems to have been rudimentary in the least, if the reports of the way the alleged fraud was carried out are true.

The claims are an embarrassment for the ABC and especially Managing Director, Russell Balding. Before becoming the CEO when Jonathon Shier was ejected, Balding was the chief financial officer of the national broadcaster and oversaw all the reporting and audit systems inside the ABC.

It is not known if any charges have yet, or will be laid.

Exclusive: is this the biggest ever ABC fraud?

By Terry Television

From the November 26 sealed section

The inquiry into fraud claims inside the ABC is now concentrated on an examination of accounts and other paperwork two programs in the ABC news and Current Affairs and on two programs; the old Business Breakfast, which has now been folded into the Midday TV news and the Asia-Pacific service.

And while it is still thought the amount could remain in the $100,000 to $200,000 range, talk of a much higher figure won’t go away. The $700,000 figure discussed on Wednesday in Crikey could be accurate but it is still apparently too early to tell, according to sources.

One person familiar with the details had reportedly been so shocked as to say that it could be the biggest fraud of its type ever in the ABC. But other sources stress that could be over the top as it is too early to say.

Sources say the problems do not seem to be in the Resources Department of the ABC. News and Current Affairs is the focus of the inquiry.

Business Breakfastwas set up several years ago and ran for just over a year on the basis of a special $2 million grant obtained by the ABC. It was folded into the Midday TV News in August of last year when it failed to rate in its 6.30am timeslot.

A source says that Business Breakfast accounts and those of Asia Pacific have not been audited until now when the story erupted inside the ABC a month or so ago.

The source also said the level of internal auditing inside ABC TV is low to non-existent. ABC TV News and Current Affairs is also said to have low to non-existent levels of internal auditing, although the procedures and paperwork for spending and controlling spending are in place.

The source says no one outside the program checks line item reports up till now to make sure that the amounts in each line are actually what was spent correctly. The amount of reconciliation of spending in News and Current affairs programs is said to be low with some reporters and producers still to account for significant amounts of money from previous trips.

The reconciliation is needed to make sure the money advanced has been properly spent.

For example in the current case there were a number of items mentioned internally at the ABC, a New Year’s Eve yacht cruise on Sydney Harbour, a DVD system, and a car hire bill said to have been worth $5,000, and $4,000 worth of products ordered from Amazon.com which turned out not to have been ordered by the person in whose name the order appeared.

In the ABC receipts are not needed for spending up to $100, above $100 an invoice is generally needed, but Production Managers are said to have a higher limit: $1,000 has been mentioned in some cases.

The source said part of the problem in News and Current Affairs has been that all the managers are not very numerate and cannot read financial reports very well and have trouble understanding them.

They are fine with global budgets, but not necessarily the close scrutiny of accounts. Reconciliation and actual financial flows through the budget of each program or area is very weak. The source said the journalist managers seem to spend a lot of time trying to get round the controls, which in some cases are overly time consuming and bureaucratic.

This seems to be symptomatic of lax financial and audit controls at the ABC.

When ABC Television moved from Gore Hill to the newish Ultimo Building in inner Sydney last year, an audit of the phones left behind revealed thousands of dollars of rent being paid on phones never disconnected with Telstra. The offices and users may have moved, but the phones were left in place and the rent continued to be paid out on them.

The number of phones was never audited and checked against program details, budgets and actual installations. The source says against this background of lack controls, especially lax internal controls, it is easy to see how a fraud of this type could arise and not be detected for so long.

There is an internal audit function within the ABC, but its efficiency is obviously not high, if this case is any indication.

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