Cracking down on public sector scams

3 Sep 14

Fraud risks are becoming more challenging and complex yet much of the counter-fraud architecture has disappeared. Vivienne Russell reports on a CIPFA initiative to bridge the gap.

When Local Government Secretary Eric Pickles addressed the CIPFA conference in July, the fight against fraud was the focus of his speech. In the current climate of austerity, where every public sector pound counts, fraud is a hot topic.

We know that £20.6bn is lost to fraud across the entire public sector, much of this in tax and credits. The loss to local government alone is a hefty £2.1bn, and to central government more still at £2.6bn.

But while ministers have kept up the rhetoric about fraud, they have at the same time dismantled much of the architecture that was in place across the public sector to tackle it.

Gone is the National Fraud Authority, which hosted local government’s Fighting Fraud Locally strategy. Soon to be gone is the Audit Commission, which ran the National Fraud Initiative, an extensive data-matching exercise between public and private sector bodies. It also carried out an annual fraud survey and, crucially, had a range of powers to compel councils to co-operate and name and shame those that refused.

‘The demise of the Audit Commission poses some problems on the fraud front, mainly around the need to co-ordinate activities,’ says Ian O’Donnell, executive director of corporate resources at Ealing Council and chair of Fighting Fraud Locally. ‘Who is going to step into that space and how will they manage it without the powers the Audit Commission had?’

Stepping up is CIPFA. In March, it was announced that the institute would take over the Audit Commission’s counter- fraud tools and in July CIPFA’s Counter Fraud Centre (CCFC) was formally launched at an event in the City of London.

Speaking at the launch, CIPFA chief executive Rob Whiteman set out his ambitions for the new centre.

‘We know that the landscape that we operate in is changing and that the risks that public organisations face are becoming all the more complex,’ he said.

‘The thing that CIPFA wants to do is be a good partner and make sure that, in terms of counter-fraud, we all understand the risks that are being faced, organisations can form a strategy, organisations understand the role of good governance in making sure that fraud can be countered and that we raise the profile of the profession.’

The point is echoed by Rachael Tiffen, former deputy director of the National Fraud Authority, who has been appointed to head the CCFC. She says the centre will bridge the gap in the counter-fraud landscape, particularly the hole left by the abolition of the NFA, which looked after Fighting Fraud Locally.

‘Someone was needed to pick up the reins on that and to host the current strategy and develop and research the next strategy,’ she tells Public Finance.

And from April next year, the CCFC will take over the Audit Commission’s counter-fraud tools: the annual fraud survey and the Protecting the public purse report that goes with it, as well as the changing organisational cultures toolkit.

But first on the agenda for the centre is the research for a new counter-fraud strategy for local government. It’s been three years since the last mapping exercise was carried out, and experts believe the time is ripe to take a fresh look at the fraud landscape in local government and the impact of new policies, particularly those concerning welfare reform.

So how has the fraud landscape changed? O’Donnell says it is difficult to be certain about new and emerging fraud threats because the research has yet to be done.But he does offer some observations. New arrangements for business rates, which allow councils to keep a proportion of the revenue they collect, create a stronger incentive for councils to crack down on business-rate fraud, which he suggests is ‘very big money’.

‘My feeling is there are lots of businesses out there that ought to be paying business rates that aren’t. It might be businesses that are sharing premises, it might be businesses that are using premises that are not currently in the rating system,’ O’Donnell tells Public Finance. ‘Other things that are really emerging now are attacks from organised crime – that’s something we’ve been seeing more of in benefits... Also, cyber attacks as we put more services online.’

Gareth Davies, partner at Mazars, one of the founding sponsors of the CCFC, echoes these views about the risks around business rates and cyber fraud. He adds that there is a whole set of property-related fraud that councils contend with, such as housing tenancy fraud and council tax discounts.

‘With spikes in property values in the Southeast, it puts more and more pressure on the costs of property and that is bound to lead to more temptation for that type of fraud.’

The roll-out of personal budgets in social care also brings new challenges. ‘The policy deliberately puts power in the hands of the user; that’s the aim of it,’ says Davies. ‘All you need is some users to misuse that power and you’ve got a new source of fraud risk.’

Another big change to the counter-fraud landscape is coming from the Single Fraud Investigation Service, the Department for Work & Pensions’ project to create a single investigation service, using a single set of policies and procedures, for countering welfare benefit fraud.

Although the government maintains that DWP aims to work closely with local authorities to ‘ensure that we continue to share data where permissible and work closely on cases of mutual interest’, O’Donnell is concerned that there is a big risk of duplication.

‘The Single Fraud Investigation Service will only do benefits, but fraudsters don’t just do benefits, they do everything they can think of, so what will happen, you’ll get the same fraudster being investigated by councils and by DWP entirely separately for separate things and duplication of prosecutions. We need to find a way of getting DWP engaged with councils.’

At the CCFC, Tiffen says the impact of the Single Fraud Investigation Service is already on the radar and the centre is beginning to work to ‘mitigate the risks’ that come along with it.

One solution is to train and build up a fraternity of fraud professionals across the public sector and to help upskill and professionalise the service.

As such, the centre has created two qualifications, accredited through Portsmouth University, and bringing with them CIPFA affiliation. There is interest from both local and central government as well as the third sector, Tiffen says, and the qualifications offer opportunities for sectors to learn from each other.

‘Fraud is evolving all the time and we need to work together to learn from each other about what is happening,’ she tells PF. A network of counter-fraud specialists would ‘get people to start talking about common risks and learning lessons from each other’.

O’Donnell agrees that professional- isation of the counter-fraud service will help improve communication and co-ordination, while at Mazars, Davies says the firm intends to avail itself of the training. ‘Having a more standardised, recognised qualification specifically for public sector counter-fraud specialists is going to be very useful for us, so we’re right behind that.’

This article was first published in the September edition of Public Finance magazine

  • Vivienne Russell

    Vivienne Russell is managing editor of Public Finance magazine and

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