FRAUD is rising in the public sector, says accountants PwC.

It found that 60% of public sector organisations suffered fraud in the past 12 months, compared with 52% in 2009.

Financial crime is on the rise as increased scrutiny in some areas and cuts as a consequence of the spending review in others increase detection rates and opportunities for fraud.

The profile of the typical public sector fraudster has also radically changed.

Internal fraudsters are now reported as more common than external ones, responsible for 53% of detected economic crime, up from 39% in 2009.

A deterioration in industrial relations is playing a part as loyalty and employee engagement are eroded by redundancy announcements and pay freezes.

In these situations, there is an increased risk of some staff – and sub-contractors – maximising their benefits on their departure through fraud.

Will Richardson, director in PwC’s forensic accounting team in the North West, said:

“Spending cuts have created ill-will among public employees in some areas and, in others, more opportunities for Government workers to cross the line.

“More opportunities for fraud are created as mid-office functions are stripped away and responsibility for auditing and authorising activity is spread more thinly.”