The exact scale of fraud within central government is unknown but excluding tax credit and benefit fraud, detected fraud in 2014-15 across government was equivalent to only 0.02pc (£72.9m) of total expenditure (£306 billion). That is according to a report by the National Audit Office (NAO).
However there is a large disparity between what fraud and error is reported and what other available estimates suggest might be occurring which needs explaining.
As the auditors point out, that UK government detected fraud figure of 0.02pc of spending is far lower than some estimates of 3pc to 5pc in the European Union and US. While these comparisons need to be treated with caution, it suggests there could be significant fraud and error which is unreported or undetected and losses which are not being adequately addressed, the NAO says. Given current fiscal challenges, reducing the level of fraud is one potential way of making savings while protecting services.
According to the NAO the Government lacks a clear understanding of the scale of the fraud problem and departments vary in their ability to identify and address fraud risks. Data is patchy, inconsistent and of variable quality. While as reported in the March 2016 print issue of Professional Security, the Home Secretary unveiled a ‘joint fraud taskforce’ with industry and police, the NAO points to the closing of the National Fraud Authority (NFA), the previous lead on fraud across government, in March 2014. NFA responsibilities passed to a number of bodies: the City of London Police, the National Crime Agency, the Home Office and Cabinet Office. However, a few of its functions such as producing the annual fraud indicator have not continued.
The most comprehensive data relates to areas of known risk – tax credit and benefit fraud – but information across the rest of government is clearly incomplete. As the NAO points out, it is difficult to formulate solutions if the scale and nature of the problem is unknown.
The Cabinet Office has recently started collecting fraud returns from departments but there are gaps and inconsistencies in the data sets. What the data does indicate though is that departments are reporting less fraud loss than expected given the scale of expenditure and range of activities. Some submitted nil returns, despite reporting cases of fraud elsewhere. The Cabinet Office is trying to improve the quality of fraud information and raise departments’ ability to address fraud risks.
It is difficult to assess if Government action is improving fraud detection or prevention because of that lack of data and absence of measures to evaluate performance. Most central activity to date has focussed on getting departments to recognise the risks and establish governance structures and processes to better identify and address fraud, which the NAO calls a necessary first step to being able to evaluate success.
Among the NAO recommendations are that departments should undertake thorough fraud risk assessments of all new policies; and improve the quality and completeness of fraud data. Once the Cabinet Office is confident about the quality of this data, it should publish an annual report on fraud losses across government to improve transparency and raise awareness of fraud, the NAO suggests. For the 43-page report in full visit https://www.nao.org.uk/wp-content/uploads/2016/02/Fraud-landscape-review.pdf.
