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 for the financial year 2020-21.

The report documents the Council’s response to fraud and error during 2020-2021 and was presented to the Committee in order to discharge its responsibility, as reflected in its terms of reference ‘to monitor Council policies on whistleblowing and the fraud and corruption strategy’.

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

During 2020-21, there have been a number of grant schemes announced by the Government which has reflected various periods of local and national restrictions as a result of the Covid 19 Pandemic.  A summary of the schemes, along with the number of awards made and the value of payments issued was set out within the report.

Within the International Auditing Standards, there are 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 includes an expectation that appropriate detail is provided around significant fraud. The following principles were applied 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 March 2021, there was one significant fraud identified.  Details of this had been provided to the Committee in January 2021.

From time to time the Internal Audit Team receive referrals or are asked to assist in investigations relating to employee misconduct and other fraud against the Council involving external individuals.  During 2020-21, the Council received 24 referrals, 14 of these led to full investigations.  The reasons for referrals not resulting in a full investigation was set out in the report.  In addition to the 14 investigations, one investigation was carried forward from 2019-20.  Of the 15 investigations, eight related to fraud / theft or other activities linked to obtaining a financial benefit, whilst the other six involved a code of conduct issue.  Three of the investigations are still ongoing.  The outcomes of the remaining 12 investigations were set out within the report submitted. 

In relation to the work undertaken within the area of Council Tax, a rolling programme of reviews is undertaken on an annual basis to provide an appropriate response to the inherent risk of fraud / error in the area as the Council is reliant on the customer to report any changes in circumstances that would affect their entitlement to an exemption or discount.  During 2020/21, limited work was undertaken due to the focus on business grant work.  However, the work undertaken resulted in 22 exemptions / discounts being removed and revised bill amounting to approximately £49k have been issued.  £34k of this money has been paid to the Council to date and the outstanding balances are being recovered through agreed payment instalments or the Council’s standard recovery arrangements in relation to Council Tax.

Within the International Auditing Standards, there are clear expectations around the level of oversight that the Committee should have in relation to the risk of fraud.  This includes an expectation that appropriate detail is provided around significant fraud. The report set out the definitions of significant fraud and it was confirmed that in the period April 2020 to March 2021 there had been one significant fraud concluded.  Details of this had been provided to the Committee in January 2021.

RESOLVED that the Audit and Procurement Committee notes the anti-fraud and error activity undertaken in the financial year 2020-21.