Forensic accountants warned officials about a "perfect storm" of fraud risks after as much as $15,000 disappeared from the inmates' trust account inside Canberra's prison.
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They also warned the ACT's justice directorate to keep a close eye on conflicts of interest that could create cosy relationships between guards and inmates.
Auditors from consultancy KPMG were called in to investigate the Alexander Maconochie Centre's detainee trust account after officials noted between $10,000 and $15,000 had potentially gone missing in 2016.
A KPMG report, published in July 2017, said there was no clear evidence of fraud in relation to the missing money, although the historical management of detainees' accounts had created "a 'perfect storm' where fraud can occur".
"The investigation report identified that the management and operation of the trust account appears to be exposed to a broad range of fraud risks," KPMG auditors wrote.
"At the time of the investigation report, and since then, AMC has been making a range of improvements to the operation and management of the trust account."
Inmates at the prison can receive money in online trust accounts run by the justice directorate.
The maximum amount that can be sent to a single prisoner is $150 a week, according to the ACT Corrective Services website.
Money is used to make phone calls as well as to buy items such as toiletries and magazines.
After investigating the $15,000 account "anomaly", KPMG also conducted a more general assessment of fraud risks related to detainees' trust accounts.
"The majority of fraud risks identified are associated with the risk of the perpetrator being internal, whilst only two of the 13 fraud risks were attributed to the risk arising from a third party external to AMC," auditors wrote.
"However, employees can often be the best defence in helping to both prevent and detect fraud."
Auditors did find that several recent changes inside the prison were having a positive effect, such as the decision to adopt a cashless, electronic payment system.
"This has had a significant impact upon the fraud risk profile for the management and operation of the trust account, largely in a positive way as it has restricted the opportunity for theft of cash or cash equivalents."
But they cautioned the justice directorate to keep a close eye on the potential for conflicts of interest to arise in dealings between guards and inmates.
"Actual conflicts of interest may heighten the motivation for an AMC employee to inappropriately favour a detainee or supplier, thereby increasing the likelihood of a risk.
"Further, actual or perceived conflicts of interest may intensify the consequence of any fraudulent or corrupt conduct, especially associated with reputation and image."
Tender documents from the ACT justice directorate described how officials detected an "anomaly" in the way funds within these accounts had been managed.
"In January 2016, ACT Corrective Services identified an anomaly in the management of funds in the Alexander Maconochie Centre detainee trust account, indicating a potential loss of between $10,000 and $15,000," the documents read.
Corrections Minister Shane Rattenbury referred questions about the fate of the prisoners' lost money to the justice directorate, whose spokesperson emphasised the finding that there was no clear evidence identified that fraud had actually occurred.
The spokesperson said the errors were "administrative" and "largely due to debts that detainees have incurred".
"These debts were unable to be recovered and include items such as fines, financial advances for shop items, tobacco advances and phone credit advances."
The new cashless system had eliminated administrative and accounting errors and improved visibility of the movement of funds, restricting the opportunity for theft of cash or cash equivalents.
The spokesperson said after six years unclaimed trust money was notified to the Treasurer and while attempts were made to contact ex-detainees, they could not always be found.
The ACT justice directorate originally refused to release some documents related to the KPMG audit, although this decision was reversed after an application for internal review under freedom of information laws.
The KPMG fraud risk assessment began in March 2017 and was presented to the directorate's audit and performance improvement committee in September for consideration.
"The committee were satisfied that ACT Corrective Services had put in place strong controls to mitigate the risks identified in the original report," a justice spokesman has said previously.
KPMG said it was expected that actions to address all fraud risks would be completed before the end of September 2017.
