Commonwealth public servants are the unsung heroes in the battle against corruption, dobbing-in dodgy colleagues in their thousands, according to a new report on fraud against the government.

Fraudsters have ripped off at least half a billion dollars from taxpayers in just three years with scams against Commonwealth departments and agencies, according to  Australian Institute of Criminology researchers.

But rank-and-file public servants have emerged as very effective corruption busters with more than 2000 instances of "internal fraud" in Commonwealth departments and agencies detected after staffers turned state's evidence against dodgy colleagues.

Only the increasingly sophisticated "internal controls" proved more effective in catching internal fraudsters in the public service between 2010 and 2013 with nearly 3500 scams detected by systems put in place to prevent them.

The Institute found that internal fraud by public servants and other government employees declined in the three years between 2010 and 2013 but reports of "external fraud" against the government had increased massively during the same period, largely due to improved detection methods.

Most instances of "internal fraud" internal fraud involved financial benefits such as obtaining cash without permission or the misuse of government credit cards, with almost one-quarter of agencies and departments reporting such activity.

The Institute also found that "entitlement" fraud was on the increase, with more rorts against payroll departments and travel and expense claims.

More broadly, more than a quarter of a million separate incidents were reported in the three-year research period but very little of the money was recovered, swindlers were unlikely to be prosecuted and even when they faceg courts, only one in 10 would  go to jail.

The researchers conceded that the problem could be much bigger because nobody knew how many offences went undetected each year.

Scams against the government were a massive problem, according to the report Fraud against the Commonwealth, with opportunities for offending "limited by one's imagination, with methods varying from the simple and obvious to the sophisticated and obscure".

But the researchers warned that "inside jobs" with government officials colluding with fraudsters outside the organisation were  an emerging risk factor.

Several high-profile frauds had  been reported recently, with the Defence Department failing to recover $585,000 after leaving a fuel card on a mini-bus.

Another was an Airservices manager who was sentenced to four years in jail after using fake aviation companies and false documents to defraud the tax office of more than $320,000.

The biggest area of external fraud was government entitlements, mostly revenue or taxation scams, visa or citizenship rackets with more than 90,000 incidents detected or reported in 2012-2013.

The institute found very few fraudsters were given jail sentences when caught, with the most common sentence for proven fraud offences a good behaviour bond.

Nearly a quarter of convicted fraudsters, mostly welfare scammers,  got off with suspended sentences, 10 per cent of them copped fines and only 13 per cent found themselves behind bars in 2012-2013.

External and internal whistleblowers were found to be an efficient way to detect fraud with "dob-in" lines particularly effective in catching fraudsters.