Agenda item

A report of the Head of Internal Audit, Veritau, was presented to update Members on the impact of fraud nationally and in particular on local authorities; summarise outcomes from the annual review of the Council’s counter fraud policy framework; and present an updated Counter Fraud Strategy action plan and Fraud Risk Assessment.

Fraud was a significant risk to the public sector.  The government estimated that between £33.2 and £58.8 billion of public spending was lost to fraud in 2020/212.  At a local level, fraud could impact a council’s ability to support public services and cause reputational damage.  To effectively combat fraud councils should have a counter fraud framework that helped to prevent, detect and deter fraud.

Covid-19 payments to businesses and the public concluded last year.  Councils across the country had been working with the former Department for Business, Energy and Industrial Strategy (BEIS) to complete reconciliation and assurance exercises.    BEIS estimated that 8.4% of payments (£985m nationally) was lost to fraud from the initial Covid-19 schemes at the start of the pandemic. Later schemes lost 1% (£83m) of payments due to fraud.   Councils and central government were currently working together to recover money lost due to fraud through Covid-19 grant schemes.

The Government had reacted to those losses and set up a public sector fraud authority to give advice and improve the fraud mechanisms in Government.   New legislation, which might affect public sector organisations, was being introduced to criminalise larger organisations who failed to prevent fraud from occurring.  The Bill was currently going through Parliament and the Committee would be kept updated on progress.

Veritau began providing counter fraud services to the Council in January  2020.  Raising awareness of fraud within the authority and with the public had been a key priority.  This had resulted in year on year increases in the numbers of cases of suspected fraud being referred to the team.  The chart at paragraph 8 of the submitted report showed the number of referrals received by the team since 2020, and the source of the referrals.

Between 1 April and 31 August 2023 the team received almost as many referrals as the total received in the previous year.  The number of referrals from Council officers and the public had also grown each year.  The team was increasingly taking more responsibility for the investigation of data matches highlighted by the National Fraud Initiative.

The Council’s current counter fraud and corruption strategy was adopted in 2020.  The strategy set out the Council’s aims for counter fraud work up to 2024.  The strategy also included actions needed to maintain and develop counter fraud arrangements at the Council.  The associated strategy action plan was reviewed and updated annually.  This year’s update was contained in Annex A to the submitted report and detailed progress made against last year’s plan and introduced new priorities for the counter fraud team in 2023/24 taking into account local and national developments.

New objectives this year included:

•           Presenting a new counter fraud strategy to the Audit Committee in 2024.

•           Supporting the Council to meet central government requirements

            around grant provision.

•           Delivery of new whistleblowing e-learning packages to support

            employees and managers.

No policy updates were identified as part of the current review.

Veritau completed an annual Fraud Risk Assessment, designed to identify the areas of fraud that presented the greatest risk to the Council.   National and regional reports of fraud affecting local authorities, as well as fraud reported to and investigated by the counter fraud team, were used to develop the risk assessment.  The updated risk assessment was attached at Annex B to the submitted report.

A Member noted that in 2021 there were 29 fraud referrals and asked how many converted into fraud or error being found.  The Auditor stated that each case was different but it was generally 50%.  When fraud was uncovered the subject would be invited for an interview under caution.  Sometimes it may just have been a mistake or equally it could be an attempt to defraud the Council.  Once all the facts were known they would be assessed and actions recommended to the Council.  Actions could include a warning, fine or prosecution which would be publicised to try and deter people.   Details of a prosecution that the Council was undertaking would with shared with the Audit Committee at the appropriate time.

The National Fraud Initiative (NFI) was a large-scale data matching exercise that involved all councils and other public sector bodies in the UK.  This exercise was completed every two years.

AGREED that the updated Counter Fraud Strategy Action Plan and the Fraud Risk Assessment were received and noted by the Audit Committee.