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Case Studies

CIPFA fraud risk report

A ‘preventive, proactive’ response to the risk of fraud is the future for work against fraud in local government, according to a survey by Perpetuity Research for CIPFA, the Chartered Institute of Public Finance and Accountancy.

For the 66-page report, Tackling Fraud in the Public Sector, in full, or a summary, visit the Perpetuity website.

The report ended by suggesting that ‘service users, staff and opportunists’ are most culpable; and that weak controls are the most likely reason for people being able to do fraud, whether internal or from outside, besides staff not being trained and able to spot signs of fraud. Most respondents believed that austerity had significantly contributed to fraud in local government.

The authors summed up: “Although respondents felt that fraud was more prevalent in the public sector than in the private, and indeed increasing in local authorities, the majority did not view fraud as a major problem in their own organisations and this was especially so in their departments. Generally, respondents felt that their colleagues understood the risks that they faced and that their organisations adequately responded to them, having created effective anti-fraud environments. That aside, they felt that staff would benefit from further training to identify fraudulent activities, especially front-line staff dealing with service users.”

Some 303 managers responded to an online survey, working in finance, human resources, IT, internal audit and counter fraud. Three roundtable discussions followed; two in London, one in Chester.

The survey opinion was that most frauds seen by local authorities were not new and were likely to remain; in housing, council tax, procurement, benefit and Blue Badge frauds, as well as what the survey report termed ‘lower-level opportunistic fraud’, including by staff. As for social care, it’s felt to be
particularly susceptible to abuse by service users due to the lack of reassessment of care packages, once awarded. This may result in people continuing to receive funds they are no longer eligible for, nor entitled to. While councils have specific powers to investigate and to obtain intelligence for some frauds, such as council tax and housing, they do not have such powers for social care.

Changes in rules for services and in service delivery, such as in the Blue Badges for disabled drivers, can mean new types of frauds. As for council services in recent years going online, the survey found concern that technology, and a lack of human verification, could add to fraud risk; complexity of IT systems ‘could easily be abused by offenders who may be more informed than the staff charged with working and maintaining the systems’. And as for commissioning of services through private external contractors, the research raised the point that ‘public sector employees have limited expertise in dealing with the commercial sector and are, therefore, ill-equipped in drawing up and monitoring such contracts. As a result, both local authority employees and contractors may find themselves in positions to commit fraud (through bribery and kickbacks, overcharging, creating fictitious companies, contract splitting)’.

Those responding to the survey pointed to the Single Integrated Fraud Investigation Service, whereby councils and central government departments work on fraud; but it’s seen as under-funded in local government, and ‘potential offenders notice this lack of preventive action’.

The round-tables brought out four barriers to tackling fraud: disjointed working (councils should do joined-up thinking and better sharing and use of data, also with the NHS and HM Revenue, for best practice); resources (or lack of; counter-fraud was not immune from cutbacks, and ‘unlike internal audit, counter fraud is not a statutory function in local government’); data use and sharing (‘key to countering fraud’); and ‘culture and commitment’ (‘more fraud awareness training for staff was important’).

The round-tables lamented that there was ‘no widely supported formula for calculating the financial benefits of investment in fraud’. Too often, chief executives are ‘not matching a verbal commitment to a zero tolerance to fraud’ with action.


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