Big danger in the Big Society, by Jim Gee

16 Feb 11
A new report shows that the public sector leads the way on fraud prevention. So what does this mean for a government committed to transferring functions to the private and voluntary sectors?

With the financial squeeze set to tighten month on month, we cannot afford to be complacent about fraud. It eats into the money we pay in tax for public services, undermines our job security, reduces the value of companies for us as shareholders and even denies the beneficiaries of charities the full value of the donations that we make.

Fraud officially costs the UK economy £38bn with £21bn lost in the public sector alone. But, no doubt to the surprise of some, the public sector actually leads the way on fraud prevention.

A report published today, The Resilience to Fraud of UK PLC, compares the performance of different sectors. It shows that the majority (54%) of voluntary organisations have failed to put a counter-fraud strategy in place, as has a quarter of the private sector. By contrast, 93% of public sector bodies have one.

Out of a maximum score of 50, public sector bodies had a mean score of 34 and were rated best in eight areas; private sector companies had a mean score of 30 and rated best in four areas; and voluntary sector organisations had a mean score of 24 and didn’t rate best in any area, lagging substantially behind the other sectors.

The report, published by PKF in association with the Centre for Counter Fraud Studies at the University of Portsmouth, shows that some parts of the public sector are far from perfect. But many private sector companies and voluntary organisations are, quite simply, poorly protected against fraud.

The findings will come as a shock to some. For those of us who have worked hard for many years to protect public funds, while they don’t come as a surprise they are still very much a cause for concern.

We have a government that is committed to transferring functions and resources from the public sector to private and voluntary sector organisations as part of wide-ranging reforms including the creation of a ‘Big Society’.

And yet the evidence is clear, unless private companies and voluntary sector organisations make some rapid improvements, this will mean a bigger role for entities that are less well protected against fraud, and bigger fraud losses will inevitably follow.

Jim Gee is director of counter fraud services at PKF

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