Inadequate fraud processes leave Welsh public services ‘with £1bn hole’

11 Jun 19

Public services in Wales are at risk of losing up to £1bn a year as a result of fraud - but public bodies lack the resources to take effective action, auditors have warned.

A new report from the Auditor General for Wales has found that inadequate resources have hampered public bodies from taking proactive measures to prevent fraud, focusing instead on reactive investigative work when fraud had already taken place.

Budget pressures within local government have reduced the sector’s capacity to investigate fraud and corruption, and most councils no longer had a dedicated counter-fraud resource, it said.

“Councils tend to focus more on investigations rather than prevention – due to a lack of resources and competing priorities,” it said.

Local authorities recognised the value of collaboration and the opportunity to share resources, skills and work across boundaries, but joint working was often hindered by lack of time and resources, as well as sensitivity over data sharing.

“Although collaboration could ultimately lead to cost savings, there are conflicting short-term demands in times of austerity,” the report said.

This picture was echoed in central government, with no additional funding for the team responsible for coordinating counter-fraud arrangements across the Welsh Government, despite the conclusion of an internal review two years ago that the function was under-resourced.

“The counter-fraud team only undertakes a limited amount of proactive work,” auditors found.

“The team recognises that more proactive work would be beneficial in helping to prevent and/or detect fraud.

“However, there are limited resources and so the team has to prioritise its reactive investigation work.”

Within the health sector, specialist investigation services are provided to all health bodies by the NHS Counter Fraud Service (NHSCFS) Wales to ensure a consistent approach.

Although most of the team’s activity was reactive, involving investigative work, the report said, NHSCFS Wales also undertook proactive measures such as presentations to NHS staff to raise awareness of potential fraud risks and the reporting routes for any concerns.

Estimating the potential fraud-related loss to the public sector to be as high as £1bn a year, the report said the risk of fraud intensified at a time of austerity because of the greater financial pressure on individuals and lower levels of investment in internal controls.

Adrian Crompton, the Auditor General for Wales, said it was more important than ever that public bodies minimised the risk of losses through the new fraud threats which were continually emerging.

“Fraudsters do not respect geographical boundaries and the ways in which fraud is committed are constantly evolving as society and technology changes – this is becoming ever more apparent in today’s digital age,” he said.

“It’s therefore vital that collaboration and the sharing of intelligence and good practice in tackling fraud takes place between public, private and third-sector bodies across Wales, the UK and internationally.”

The Auditor General is expected to undertake a fuller review of anti-fraud arrangements within the Welsh Government, health service and local authorities over the next 18 months.

The Welsh Government said its counter-fraud team made a significant contribution to combating fraud in Wales.

“They co-ordinate with a network of business specialists across government who assist with counter-fraud and accordingly the sum total of resources we put to this important task is far more than just the full-time people referred to in the…report,” said a spokesman.

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