potential implications for fraud detection by councils in a post ......irrv – keele university...

Protecting the Public Purse – potential implications for fraud detection by councils in a post SFIS world

IRRV – Keele University 30th April 2014

Alan Bryce, Head of Counter Fraud,

Agenda

•  Treat fraud as fraud – a few reflections •  Protecting the Public Purse 2013

–  National messages –  Local messages

•  Post SFIS, areas of non-benefit fraud focus

•  Questions

A little bit about myself • Head of Counter Fraud

• Qualified external auditor

• Accredited investigator

• MSc in Counter Fraud and Counter Corruption

• Former police officer

a-bryce@audit-commission.gsi.gov.uk

And the question for today is?

What is the most effective way of

reducing the level of detected fraud in local government?

I believe that………. •  Fraud is endemic

•  Civil definition of fraud, on balance of probabilities

•  No fraud detected does not mean no fraud committed, OR that all fraud has been prevented

•  Prevention is cheaper than cure

•  Do not forget deterrence!!!!

•  Counter fraud specialists in post SFIS world should have combined investigative and audit role

Protecting the

Public

Purse

Audit Commission report on fraud targeted English local government

bodies

•  Re-introduced in 2009

•  Annual report, only one of its kind in UK (and worldwide?)

•  Identifies and promotes good practice

•  Unique survey on levels of detected fraud & counter-fraud

arrangements, with a 100% submission rate

We define detected fraud as: •  On the balance of probabilities, civil definition •  A manager makes that determination •  Some form of action has been taken The vast majority of local government fraud is not dealt with

criminally Treat fraud as fraud – but do all departments, and

would colleagues recognise a fraud?

So is this fraud?

•  Personal budgets example

•  Procurement fraud example

•  Council Tax Discount fraud example

So what have we been reporting since 2009

•  Protecting the Public Purse 2009/10 financial year - 119,000 cases of all fraud with a value of £135M - nearly 1,600 cases of social housing fraud - 63,000 cases of HB/CTB fraud worth £99M - 48,000 cases of CT Discount fraud, worth £15M

•  Protecting the Public Purse 2012/13 financial yar - 107,000 cases of all fraud with a value of £178M - 2,642 cases of social housing fraud - 47,000 cases of HB/CTB fraud worth £120M - 54,000 cases of CT Discount fraud, worth £19.6M

Variation in detected non-benefit fraud by authority type, excluding county councils

0

500

1000

1500

2000

2500

3000Numbers of detected non-benefit frauds cases arranged by council type (excluding

county councils) 2012/13

LondonBoroughs

Metropolitan Districts

Unitary Authorities

District Councils

79 districts councils detected no non-benefit fraud cases

Total and average number of non-benefit fraud cases detected in 2012/13 by the top quartile performers for each authority type Council Type Proportion of cases

detected of non-benefit fraud by top quartile councils in each group

Average number of detected non-benefit fraud cases in the top performing quartile of each group.

London Boroughs 70% 2,288

Metropolitan Districts 63% 829

Unitary Authorities 88% 734

District Councils 90% 234

County Councils* 76% 37

All councils 76% 549

Individual Fraud Briefings

•  353 individual fraud briefings developed by Audit Commission

•  Tailored comparative information on fraud detection

activities

•  For audit committees or equivalent, on request from your external auditor

•  London Boroughs, unitary authorities/ metropolitan districts and county councils (from late 2013)

•  District councils (January 2014)

Interpreting fraud detection results •  Is the value of fraud detected or the number of cases

detected the better indicator of counter fraud performance?

•  Snapshot of annual performance

•  And a caveat – high value/low volume versus low value/high volume

DOES your organisation use fraud detection results to inform fraud risk, prevention and

PERFORMANCE?

The local picture How your district council compares to all other districts in your county Total detected cases and value 2012/13

Mets & UA with housing stock 2012/13 Region X The “detected zero” councils account for 95,802 homes (23% of total in region)

Region X -Metropolitan districts and unitary authorities 2012/13 Council tax (CTAX) discount fraud Detected value and detected value as a percentage of council tax income

Average:

188 cases, valued at £53,054

£-

£50,000

£100,000

£150,000

£200,000

£250,000

£300,000

£350,000

0.000

0.100

0.200

0.300

0.400

0.500

0.600

Detected value Detected value as % of CTAX income

2012/13 Average value of frauds detected – low volume/high value vs high volume/low value

•  Business rates - £48k •  RTB – £58k •  Tenancy fraud - £18k nominal value •  Insurance - £41k •  Social care – £20k •  Abuse of position (internal) – £13k •  Grants – £35k •  Procurement – £10k (was £100k three years ago) •  Schools- £12k (mostly internal)

•  CT discount – £363 •  HB/CTB - £2.5k •  Blue badges - £500 per badge

Prevention

•  Report fraud prevention work

•  Does your organisation pro-actively review counter fraud defences?

•  A recent mandate fraud example – over £200k of loss!!!

•  Fraud proofing systems – a role for investigators and auditors????

Deterrence

•  Evidence is that the risk of detection is more important than punishment

•  The council tax SPD example –  nationally about a third of households claim SPD –  typically 4% to 6% of all SPD claims are fraudulent

Deterrence – the council tax SPD fraud example

•  In 2008 –  23 councils had 40% or more households claiming

SPD –  Highest, at one authority 48% of households claimed

SPD

•  By 2013 –  7 councils had 40% or more households claiming

SPD –  Highest, at one authority 41.2% of households

claimed SPD

ANY QUESTIONS