Agenda item

Report of the Deputy Chief Executive (Place)

The Audit and Procurement Committee considered a report of the Deputy Chief Executive (Place), which provided a summary of the Council’s anti-fraud and error activity undertaken by the Internal Audit Service during the during the financial year 2019/20 to date.

The Committee noted that fraud in the public sector had a national focus through the publication of “Fighting Fraud and Corruption Locally – The Local Government Counter Fraud and Corruption Strategy”.  Whilst the national strategy stated that the level of fraud in the public sector was significant, the current trends in fraud activity included areas which the Council did not have responsibility for, such as social housing, and the levels of identified / reported fraud against the Council were at relatively low levels, in terms of both numbers and values.

The Internal Audit Service was responsible for leading on the Council’s response to the risk of fraud and error.  The work of the team focussed on four main areas during 2019/20, namely council tax; National Fraud Initiative; referrals and investigations considered through the Council’s Fraud and Corruption Strategy; and proactive work. 

In relation to Council Tax, work had focussed on reviewing Council Tax Exemptions and Discounts.  This work had resulted in 20 exemptions being removed as the customer had failed to report a change in circumstances.  Given that on an individual basis, the amounts involved were not sizeable, these had been treated as an error rather than a fraudulent application to obtain an exemption they were not entitled to.  Revised bills amounting to £28,000 had been issued of which £20,000 had been repaid to the Council to date.  The outstanding balances were being recovered through agreed payment instalment arrangements or the Council’s standard recovery arrangements.

In addition, the Council received referrals from both internal and external sources linked to concerns around the payment of Council Tax Support or Council Tax Exemptions / Discounts.  In total, 18 referrals had been received.  The report indicated that, whilst most of these were passed to the Department of Work and Pensions to investigate under agreed arrangements, 2 concerns had been validated, which had resulted in revised bills / overpayments of around £8,000 being issued, all of which had been recovered.

With regards to the National Fraud Initiative (NFI), the exercise was led by the Cabinet Office and took place every two years, matching electronic data within and between public bodies with the aim of detecting fraud and error.  The results of the last exercise were released in January 2019 and identified approximately 10,000 matches for the Council to consider.  Around 2,500 matches had been reviewed and processed.  Given the high number of matches, priority had been given to known problem areas and key matches as judged by the Cabinet Office.  The Committee noted that, changes introduced by the Cabinet Office in the risk rating approach and release of additional matches under a pilot scheme had required more focus to be given to this area of work in 2019/20.  The report provided a breakdown of those areas where errors / overpayments were identified.  In summary, this comprised 35 errors / overpayments totalling £156,350.  This sum included additional matches released by the Cabinet Office in August 2019 under the pilot scheme, which used data held by the HMRC to target 3 fraud risks of undeclared property ownership, undeclared earnings and capital, and undeclared persons in a household.  The initial results from the pilot both in the Council and across other local authorities suggested that use of this data within the NFI would further strengthen the effectiveness of information available to the Council through this exercise to tackle fraud and error.

It was reported that whilst the NFI exercise took place every two years, Council Tax matches relating to the award of single person discounts was reviewed on an annual basis against the new electoral register which is published each December.  This resulted in 15 single person discounts being cancelled in 2019/20 and revised bills / overpayments being issued for around £16,800.

From time to time, the Internal Audit Service received referrals or were asked to assist with investigations relating to employment misconduct and other fraud against the Council involving external individuals.  During 2019/20, 8 referrals had been received to date, 3 of which had led to full investigations.  It was noted that there were various reasons for referrals not leading to investigations including, for example where an initial assessment / fact finding does not find evidence to support the allegations; appropriate action has already been taken; and the nature of the event means it is impractical to pursue further.

In addition to the 3 investigations for 2019/20, a further 3 investigations were carried forward from 2018/19.  Of these 6 investigations, 3 were still on going.  Of the remaining 3, one related to Adult Social Care and action was taken to change the care provider being used and around £2,000 being recovered from the provider.  In one case, whist there was insufficient evidence to pursue the matter under the Council’s disciplinary process, other action was taken by management / Human Resources to manage wider employment risks which were identified in the course of the investigation.  In the final case, involving external fraud against the Council, it was impractical to pursue the matter further.  However, as a result of the investigation, a number of control improvements were identified and implemented in order to provide a robust response to increased risk of fraud in the area.

The Council’s response to fraud also considered an element of proactive work to ensure that all key fraud risks were considered.  In 20119/20 this work had included continuing delivery of face to face awareness sessions with staff from Adult Social Care in relation to direct payment fraud and participation in a regional worktop to assist in development of the new national fraud and corruption strategy for local government.

RESOLVED that the Audit and Procurement Committee note the anti-fraud and error activity undertaken during the first half of the financial year 2019/20.