Agenda item

Report of the Director of Finance and Resources

The Audit and Procurement Committee considered a report of the Director of Finance and Resources (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 2025-26.

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, e.g. social housing, and the levels of identified / reported fraud against the Council remained 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 2025-26 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 three main areas during 2025-26: National Fraud Initiative; Referrals and Investigations considered through the Council’s Fraud and Corruption Strategy; and Fraud Awareness. A summary of the key activity that had taken place during 2025-26 was set out in detail in the report.

A National Fraud Initiative exercise, led by the Cabinet Office, 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 January 2025 and formed part of the planned programme of work for 2025-26. It was noted that matches relating to Housing Benefit / Council Tax Support / Single Person Discounts fell under the responsibility of the Revenues and Benefits Service. Given the number of matches released, a risk-based approach was used in following up the matches. To date, around 700 matches had been processed and 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.

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 indicated the number of referrals by source in 2025-26, 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 noted 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 18 referrals received, eleven have 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, e.g. the fraud had been prevented, and (c) the nature of the event meant it was impractical to pursue further. Two further investigations were carried forward from 2024-25. All investigations related to fraud / theft or other activities linked to obtaining a financial benefit. Five out of the 13 investigations were still on-going, whilst of the remaining eight:

•  In one case, the employee resigned during the disciplinary investigation.

•  In three cases, the concern was not substantiated.

•  In one case, a formal re-setting of standards took place.

•  In one case involving a direct payment, the direct payment was ended.

•  In one case involving the theft of ICT equipment, the employee was dismissed and was prosecuted by the police. 

•  In one case involving European grant funding provided to four local businesses (who were connected to each other), a sum of £138k was recovered and returned to central government.

In 2025-26 to date, the Internal Audit Service continued to support 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 was also in discussion with colleagues from Customer Services around how the single resident record which was in development could be used to detect / prevent fraud in claims for financial assistance. 

Within 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 for which principles had been applied. In the period April 2025 to September 2025, the report detailed two significant frauds that had been concluded. Whilst in both cases, the investigations related to previous financial years, associated legal processes had not been concluded until 2025-26. Further to these cases: the service area had taken action to review their processes for verifying grant claims and put in place additional measures to minimise risk; and Digital Services had worked closely with Internal Audit to strengthen arrangements with a specific software package procured which should provide a more efficient and robust solution in the longer term.

RESOLVED that the Audit and Procurement Committee, notes the anti- fraud and error activity undertaken during the first half of the financial year 2025-26.