Public sector fraud: the Malaysian perspective

Published date17 May 2021
Date17 May 2021
Subject MatterAccounting & finance,Financial risk/company failure,Financial crime
AuthorAfzal Izzaz Zahari,Jamaliah Said,Nurisyal Muhamad
Public sector fraud: the
Malaysian perspective
Afzal Izzaz Zahari and Jamaliah Said
Accounting Research Institute, Universiti Teknologi Mara,
Shah Alam, Malaysia, and
Nurisyal Muhamad
Faculty of Business, Finance and Social Science,
Kolej Universiti Poly-Tech MARA, Kuala Lumpur, Malaysia
Purpose This paper aims to exploreand compare the perception of public sector employeeson fraud and
associatedfraud behaviours.
Design/methodology/approach The population of this study comprised 44 managers from the
Malaysian Federal government departments. The analysis was basedon an open-response questionnaire using
data-driven thematic analysis. This wasbased on the context and latent content of the respondents. The items in
the questionnaire examined theperceived def‌inition, actions and experience of corruption in their departments.
Findings The f‌indings revealed that respondents acknowledged thatbribery as one of the central element of
fraud. They recognise fraudulent behaviour and practice in their organisation together wi th sharing these
experiences in the study. Common results indicate that leaders play a major role in shaping the organisation as they
present themselves as a model to the mployees. From the human resource perspective, having multiple side
businesses while being in employed in the government sector would heavilyimpact performance and accountability.
Research limitations/implications Fraud is observed as a practice that needs to be addressed to
improve government eff‌iciency. The uniqueness was that the respondents acknowledged the existence of
fraud and its implicationsthrough the activities of bribery, abuse of power and givingout favours. There is a
need for organisationsto focus on transparency and value to mitigatefraud.
Practical implications This paper contributes towards the continuous effort in expanding fraud
literatureand human behaviour. The data obtained was distinctive in terms of the perspectiveof a developing
economyand such fraud information and responses are different as comparedto developedeconomies.
Originality/value The empiricalstudy of the public sector organisations enables importantcontribution
towards effective public governance and administration. The results have important implications for
preparingfunctional strategic management and controlsfor the public sector.
Keywords Values, Leadership, Public sector, Transparency, Fraud
Paper type Case study
1. Introduction
The global phenomenon of fraud had caused countries,governments and private companies
to endure costs that are beyond measurable consequences. The costs of fraud had always
been an ongoing debate in terms of its origins and reasoning. The question and reason
towards f‌inding the meaning of why an individual who has secured employment (in the
context of income, job security and future values) would still commit fraud in their
organisation. This includes government leaders who are with respectable and hold
Funding: This study was funded by the Kolej Universiti Poly-Tech MARA (KUPTM) Internal
Research Grants (URG SESI 2/2020)
Public sector
Journalof Financial Crime
Vol.29 No. 1, 2022
pp. 309-324
© Emerald Publishing Limited
DOI 10.1108/JFC-01-2021-0013
The current issue and full text archive of this journal is available on Emerald Insight at:
substantial power are the people who are caught in the incidencesof fraud. Each year, fraud
costs nations billions of dollars,in the UK alone, it was estimated fraud had an impact to the
amount of 193bn pounds a year (Button,2016).
Globally, fraud had cost the world trillions of dollars every year (ACFE, 2019). This issue is
on-going harm to the governments as fraud becomes the social norm in the way of life of
public and private sector employees. The normalisation of fraud in terms of culture, practice
and acceptance is one of the central factors that makes it diff‌icult to contain such behaviour
(Ashforth and Anand, 2003). Institutionalised corruption especially in the public sector
promotes def‌iciency that presents a major loss to the society. Studiesof Malaysian fraud dated
in the early 1990s has established the existence of institutionalised corruption that occurs due
to the abusing the bureaucratic process in the public sector (Teh, 1994). Throughout the years,
there had been many studies that investigated the causal impact of fraud in Malaysia
(Mohamed, 2013;Said and Omar, 2014;Aziz et al., 2015;Said et al., 2018;Zahari et al., 2019).
1.1 Public sector
Public sector fraud has always been an area of interest for government stakeholders. The
tax-payers have a rightto know how their money is spent. It would be a waste of resources if
the allocations for government expenses are vulnerable to fraud. There is a need for
government employees to maintain certain levels of quality leadership and integrity to
prevent such events from occurring. Research into public sector fraud in Malaysia has
expanded considerably in the past decade (Koh et al., 2009;Ahmad and Samsudin, 2014;
Othman et al.,2015). Within the context of fraud, the common areas of research are very
often on abuse of power and corruption (Huberts,1998;Akech, 2011;Bendahan et al.,2015).
Abuse of power for instance is using the individuals position in the organisation for their
own or other personal gains (Zahari et al., 2019). Corruption is the act of being dishonest in
return for money or personal gain (Kimemia, 2013).
The Malaysian public sector as one of the emerging economies had always had the issue in
terms of fraud. Recently, there had seen several cases involving senior leadership in the public
sector. The previous Prime Minister of Malaysia was found guilty by the High Court of
Malaysia for abuse of power, criminal breach of trust, and money laundering belonging to SRC
International Sdn Bhd (Yatim, 2020). A government assistant director was apprehended for
giving out illegal licenses for contractors that involves abuse of government power (Jude, 2020).
A deputy assistant director who was an immigration off‌icer was charged with f‌ive counts of
receiving bribes to release foreign immigrants who are in custody (BERNAMA, 2021).
Education, health care and enforcement agencies are one of the common organisations
that are associated with the public sector. This is due to the nature of these services that are not
prof‌it-motivated as in other countries. One nations military for instance is part of public sector
service, as they are enforcement agencies tasked with safeguarding the members of the society.
Thesamegoeswithenforcementagenciessuchasthepoliceandf‌iref‌ighters, that are tasked with
guarding the safety and protecting the people during emergencies. These departments are among
the areas that are vulnerable in the context of public sector fraud. The Associated Certif‌ied Fraud
Examiners (ACFE) Report of the Nations Global Report stated that a single case of government
fraud would costs the government an average loss of US$00,000 per case (ACFE, 2019). The
Centre for Counter Fraud Studies (CCFS) produced a report stating that the practice of fraud
commonly costs of fraud at 5.6% of Gross Domestic Product (GDP) in 2015 and the cost of fraud
has only been increasing since. There is a need for studies to be conducted to unders tand the
forms and actions of fraud that is always changing over the years. Prior works of literature
provide the landscape of such studies, and current research should always be constants to
improve the necessary counter-measures in preventing and controlling fraud.

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