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In August 2022, Michael Phelan, the CEO of the Australian Criminal Intelligence Commission, revealed that organized criminals were exploiting vulnerabilities in the National Disability Insurance Scheme (NDIS) on an unprecedented scale. It is estimated that as much as 15 to 20 percent of the $30 billion annual cost of the NDIS is misused by organized criminals involved in drug trafficking, violence, money laundering, and other illicit activities.

The NDIS Quality and Safeguards Commission maintains a register under the NDIS Act, which lists recipients of banning orders and other compliance and enforcement actions. Currently, there are 129 individuals and organizations listed with banning orders under section 73ZN of the NDIS Act.

The NDIS expects integrity, honesty, and transparency from workers and providers delivering care under the Scheme through its code of conduct. Instances of criminal misuse of a program intended to support the most vulnerable members of society are deeply concerning.

Equally alarming are the less obvious acts of dishonesty committed by qualified providers in the day-to-day delivery of NDIS services. Employee fraud, when undetected, not only undermines public confidence in the integrity of the NDIS but also poses significant reputational and business risks for NDIS providers.

NDIS fraud is often carried out by employees in unsophisticated ways. They may access and misuse confidential or restricted data, provide false information or prepare fake documents and invoices. It could also involve employees making false claims for time not worked or services not provided. Such fraudulent activities compromise the intended beneficiaries of NDIS services and expose NDIS provider employers to reputational and business risks.

In this article, we examine a recent case of employee fraud and discuss the steps businesses can take to minimize their risk.

Case Example: Health Care Complaints Commission v Vaughn [2022] NSWCATOD 82 A recent reported case of employee dishonesty and NDIS fraud is Health Care Complaints Commission v Vaughn [2022] NSWCATOD 82.

Brendan Luke Vaughn, an Occupational Therapist, was brought before the Health Care Complaints Commission for overbilling clients of his employer, TBS, on at least 83 occasions. Mr. Vaughn overcharged 21 clients receiving NDIS funding.

Mr. Vaughn’s employer became aware of his actions when they noticed discrepancies in the NDIS statement. Mr. Vaughn admitted to committing fraud due to feeling overwhelmed and under pressure while serving over 20 clients. He distributed the fraudulent entries across his client base to minimize detection.

The Tribunal disqualified Mr. Vaughn from registering as an Occupational Therapist for two years and ordered him to pay the costs of the Health Care Complaints Commission.

The legal and business risks posed by Mr. Vaughn could have been avoided or identified earlier with independent checks and balances to verify the provision of actual services against recorded time and fees for specific clients. This case also highlights other important considerations related to employee-related NDIS fraud risks.

Key Takeaways: Employee fraud exposes both individual employees and their employers to liability to the National Disability Insurance Agency and overcharged clients. It also poses significant reputational and business risks for NDIS provider employers.

If financial advantage is obtained through deception, both the fraudulent employee and their employer may face criminal prosecution and civil recovery proceedings.

Mandatory notification obligations should be considered with the guidance of early legal advice, especially for NDIS providers registered as charities, as additional reporting obligations may apply.

Any internal risk management decisions, including investigations and recovery options for misappropriated amounts, should be undertaken with early legal advice to ensure client-solicitor legal privilege covers internal deliberations and communications.

Legal recovery options may involve seeking urgent court orders to freeze or preserve the assets of the perpetrator, as well as exploring non-court resolution options.

Having appropriate policies and mechanisms in place