Agenda item

Report of the Chief Operating Officer (Section 151 Officer)

The Audit and Procurement Committee considered a report of the Chief Operating Officer (Section 151 Officer) that provided a summary of the Council's anti-fraud and error activity undertaken by the Internal Audit Service during the first half of the financial year 2023-24.

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 states that the level of fraud in the public sector is significant, the current trends in fraud activity includes areas which Coventry City Council does not have responsibility for, for example, social housing, and the levels of identified / reported fraud against the Council remain at relatively low levels, in terms of both numbers and value. 

The report documented the Council’s response to fraud and error during the first half of the financial year 2023-24 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 strategic response to the risk of fraud and error. The work of the team had focused on four main areas during 2023-24: Business Support Grants; National Fraud Initiative; Referrals and Investigations considers through the Council’s Fraud and Corruption Strategy; and Fraud awareness.

A summary of the key activity that has taken place during 2023-24 to date were:

Business Support Grants – Work to assist in the administration of the debt recovery process of grants paid fraudulently or in error had continued during 2023-24.  This had included:

•  Ongoing meetings with colleagues from the Revenues Service to monitor the status of debts which were still undergoing recovery action, including monitoring of on-going payment plans to ensure they were still being adhered to.

•  Where a decision was reached that recovery options had been exhausted, administration of the process to refer the debt to the Department for Business and Trade (DBT). Grants in relation to four businesses had been referred to DBT during the year and in one case, the Department had accepted assignment of the debt, whilst in the other cases, the Council was awaiting a decision. 

•  Assisting in the process to return recovered grant funding to DBT.

As there were now only a small number of grants which remained outstanding, work in this area had reduced in 2023-24.  However, a detailed update on the debt recovery position would be provided in the next monitoring report to the Committee.

National Fraud Initiative (NFI) – The NFI exercise was led by the Cabinet Office. The main exercise took place every two years and matched electronic data within and between public bodies, with the aim of detecting fraud and error.  The follow up of matches could also provide assurance that the Council’s own arrangements for preventing and detecting fraud / error were effective. The results of the last exercise were released in March 2023. As from April 2023, the Revenues and Benefits Service had become responsible for matches relating to Housing Benefit / Council Tax Support, whilst the Internal Audit Service were responsible for other match types. (The Internal Audit Service have continued to support Revenues and Benefits during this transitional period.)

Given the number of matches released, a risk-based approach was used in following up the matches. To date, around 800 matches had been processed. A table in the report provided a breakdown of those areas where overpayments / forward savings had been identified to date (where overpayments were identified, these were subject to standard recovery arrangements.)

Referrals and Investigations – From time to time, the Internal Audit Service received referrals or were asked to assist with investigations relating to employee misconduct and other fraud against the Council involving external individuals. A further table in the report detailed the number of referrals by source in 2023-24, along with figures for the previous three financial years.

It was important to note that there was no mechanism for determining the number of reports the Council should receive on an annual basis and it was very difficult to anticipate or identify the reasons behind fluctuations in numbers.  It was also worth noting that this information only reflected referrals made in respect of concerns relating to fraud and corruption and did not include other matters raised under the Whistleblowing Policy.

Of the ten referrals received, four had led to a full investigation. The reasons for referrals not resulting in a full investigation included (a) initial assessment / fact finding does not find any evidence to support the allegations (b) appropriate action had already been taken, and (c) the nature of the event meant it was impractical to pursue further.

In addition to the four investigations highlighted, three further investigations were carried forward from 2022-23. All seven investigations related to fraud / theft or other activities linked to obtaining a financial benefit. Four out of the seven investigations were still on-going, whilst of the remaining three:

•  In two cases, the concern was not substantiated, although action was taken to re-set standards.

•  In one case involving the provision of false information to support a claim for homelessness assistance, the Council withdrew the application for assistance and rescinded its duty to provide temporary accommodation. 

Fraud Awareness – In 2023-24 to date, the Internal Audit Service had attended four training sessions with employees from Adult Social Care to raise awareness of the types of fraud that could occur within the social care environment, and particularly within direct payments. The Service were also currently updating the Council’s intranet pages in respect of fraud and corruption and were planning to attend an event hosted by a local charity who supported immigrants to explain the consequences of benefit fraud, in order to help deter individuals from committing fraud.

Significant frauds - Within the 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 following principles had been 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 was 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 2023 to September 2023, no significant frauds had been concluded. 

The Committee asked questions and received assurances at the meeting from officers on matters that included: Blue Badge overpayments and the mandatory requirement for a notional figure to be applied, provided through data matching, by the Cabinet Office; the provision of business grants during the Covid pandemic; and costs of recovery – receipt of new burden funding. Members requested that information relating to the number of Blue Badges issued in the city, be circulated to them. 

RESOLVED that the Audit and Procurement Committee notes the anti- fraud and error activity undertaken during the first half of the financial year 2023-24.