Agenda item

The Head of Internal Audit and Corporate Fraud will submit a report providing his Annual Report on the counter fraud activities undertaken by the Internal Audit Corporate Anti-Fraud Team for the period 1^st April 2015 to 31^st March, 2016 and providing information and assurance to the Committee regarding key aspects of the Authority’s risk management, control and governance framework.

The Head of Internal Audit and Corporate Anit-Fraud submitted his annual report on the counter-fraud activities undertaken by the Internal Audit Corporate Anti-Fraud Team for the period 1^st April, 2015 to 31^st March, 2016.  The report provided information and assurance to the Committee regarding key aspects of the Authority’s risk management, control and governance framework.

Of particular note were the following:-

·         The role of the Corporate Anti-Fraud Team in ensuring that the Council had the appropriate arrangements to deter, detect and investigate fraud, and setting out the key activities of the team in taking forward this work.

·         The specific work being undertaken to develop an anti-fraud culture across the Authority, including the delivery of guidance and training, acknowledging the responsibility of managers for fraud prevention.

·         The continuous review of policy and procedural measures within the Council to ensure that any areas of systems weakness were identified.  Internal Audit was also a member of the South and West Yorkshire Fraud Investigators Group, which met twice a year to share information and best practice.

·         The outcome of the national fraud initiative, which examined twelve mandatory datasets to form the basis of national data matching.  This work had identified 32 cases of fraud or error, resulting in the recovery of £135,879, of which £129,748 related to duplicate creditor payment error as previously reported to the April 2016 meeting of the Audit Committee.

·         The Corporate Anti-Fraud Team had undertaken a range of reactive fraud work in relation to fraudulent claims for council tax support and council tax liability, with respectively 20 and 23 referrals accepted for investigations.  A pro-active data matching exercise in relation to the payment of single persons’ council tax discount had resulted in 6,942 review letters being sent.  As a result, to date there had been cancellations in 1,179 accounts resulting in an additional council tax income of £321,947.  There had been challenges to 104 of these responses, which had resulted in changes to the declared date and a further increase in council tax income of £20,699.

·         The increase in the right to buy discounts had prompted the Corporate Anti-Fraud Team to apply an enhanced fraud prevention process, given the greater risk of fraud.  Checks of 131 applications during the financial year had resulted in two sales being stopped.  Awareness training had also been provided to Berneslai Homes in respect of housing tenancy fraud, made an offence under legislation introduced in November 2013.  Although there had been 14 referrals of alleged tenancy fraud, there was only evidence of this in 1 case, which had been referred to Berneslai Homes for further investigation.

·         The key priorities for the Corporate Anti-Fraud Team in 2016/17 related to the development of fraud awareness e-learning packages, reviews of council tax single persons’ discount and the counter fraud policy framework, a further data matching of creditor payments and investigations of instances of council tax reduction scheme fraud.

In the ensuing discussion, and in response to detailed questioning, the following matters were highlighted:-

·         It was noted that referrals for potential fraud were often not pursued  due to the lack of evidence that fraud had occurred, or no evidence when subsequently investigated.  It was confirmed that there was no value of detected fraud below which action was not taken.  However, a judgement was made about the amount that would be recovered compared with the cost of recovery.

·         The Corporate Anti-Fraud team had focused initially on those areas where there was known scope for fraud, hence the investigation in respect of council tax single person discounts.  Future areas for investigation were being considered particularly in the area of care provision.  It was noted that adult services staff already audited information provided by service users, and this process had itself been reviewed by internal audit.  There had been no prosecutions, although some overpayments had been recovered.

·         Members commented that the transaction value in respect of business rates, traded services and sundry creditors was greater than that of council tax, and queried why these former areas had not been pursued.  It was noted that the opportunity for fraud or error in these areas was considered to be less than areas such as council tax discounts, given the systems in place and basis for liability.  Those areas where fraud might be possible had a range of balancing checks that would prevent this.  However, the corporate anti-fraud team continued to consider additional areas where investigation might prove fruitful.

·         The areas that were subject to data matching were nationally mandated and some changed from year to year.  The electronic data provided identified for investigation those individuals who appeared in a number of different categories and those individuals were then subject to investigation by the local authority concerned.  This was now done by the corporate anti-fraud team, rather than services, to ensure a consistent and more rigorous approach.

·         It was noted that duplicate creditor payments generally related to the payment for the same services or supplies being made more than once, more usually in error rather than as a result of fraud.  Work was done to identify such errors and recover any over-payment.

·         The scope for fraudulent orders or payments was limited by the separation of ordering and authorising roles within the Council.  There was perhaps greater scope for fraud in those areas not entirely under council control or using council systems, or where there was the possibility of collusion between those in the respective roles.  The need for a focus on fraud detection, particularly to identify where the opportunities for collusion in fraudulent activity, was noted.

RESOLVED:-

(i)        that the Annual Fraud report, which forms part of the framework of assurances to support the Annual Governance Statement, be approved; and

(ii)       that the continued embedding of a culture of zero tolerance and high levels of awareness regarding fraud and corruption be supported.