Agenda item

Report of the Director of Finance

The Audit and Procurement Committee considered a report of the Director of Finance that provided a summary of the Council's anti-fraud and error activity undertaken by the Internal Audit Service during the financial year 2020-21 to date.

A corresponding private report was also submitted to the meeting setting out the commercially confidential matters of the proposals. (Minute 38 below refers.)

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 Coventry City Council did not have responsibility for, such as social housing, and the levels of identified / reported fraud against the Council remained at relatively low levels, in both numbers and value. Notwithstanding this, it was recognised that the risk of fraud during emergency situations such as the pandemic was higher than at other times. This included an inherent risk of fraud in emergency programmes which local authorities had to administer on behalf of government, particularly in relation to grants paid to businesses. This risk had been explicitly acknowledged by government in guidance issued to local authorities and as such, the Internal Audit Service had specifically included this within its anti-fraud work undertaken in 2020-21.

The report documented the Council’s response to fraud and error during the first half of the financial year 2020-21 and was presented to the Audit and Procurement Committee in order to discharge its responsibility, as reflected in its terms of reference 'to monitor Council policies on whistle blowing and the fraud and corruption strategy'.

The Internal Audit Service was responsible for leading on the Council’s response to the risk of fraud and error with the work of the team focused on three main areas during 2020-21: Business Support Grants; National Fraud Initiative; and Referrals and Investigations considered through the Council’s Fraud and Corruption Strategy. A summary of the key activity that had taken place in these areas during 2020-21 to date was set out in the report.

Within International Auditing Standards there were clear expectations around the level of oversight that the Audit and Procurement Committee should have in relation to the risk of fraud within the Council. This included an expectation that appropriate detail was provided around significant fraud. The Council had applied the following principles when defining significant fraud:

•  A financial impact in excess of £10,000.

•  Frauds of under £10,000 could be included if the Chief Internal Auditor considered this justified by the nature of the fraud.

•  In terms of establishing when a fraud had occurred, this was normally defined as occurring when the disciplinary process had been concluded, although in cases not involving employees, this would be linked to other management action, such as criminal prosecution.

In the period April 2020 to September 2020, one significant fraud had been concluded and the corresponding private report provided detail of this case and the actions taken. 

Whilst the Internal Audit Service normally undertook a rolling programme of reviews of council tax exemptions and discounts, this work had not been progressed during the period April to September 2020, given the focus on business grant work. As a rolling programme of work, this was not viewed as significant. Some work in this area had commenced in the second half of the year.

The Council received referrals from both internal and external sources linked to concerns around the payment of council tax support or council tax discounts / exemptions. A table in the report set out the number of referrals received by source during the first half of the financial year 2020-21. Whilst appropriate cases were passed to the Department of Work and Pensions to investigate under agreed arrangements i.e. where housing benefit was also in payment, the Internal Audit Service have validated two concerns in 2020-21, which had resulted in revised bills / overpayments of around £14k being issued, of which £8K had been recovered to date. 

RESOLVED that the Audit and Procurement Committee notes the anti- fraud and error activity undertaken during the first half of the financial year 2020-21, subject to consideration of the private report on significant fraud.