Recommendations & Conclusions
20 items
3
Conclusion
Sixty-Ninth Report - Tackling fraud and…
Accepted
Departmental counter-fraud staff often lack the credibility and authority needed to exert influence at senior levels. Historically, counter-fraud experts have focused on investigating suspected fraud and have not been brought into wider policy making and design. Many departments lack senior counter-fraud professionals with influence in their organisations and counter-fraud staff …
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Departmental counter-fraud staff often lack the credibility and authority needed to exert influence at senior levels. Historically, counter-fraud experts have focused on investigating suspected fraud and have not been brought into wider policy making and design. Many departments lack senior counter-fraud professionals with influence in their organisations and counter-fraud staff have often struggled to get the attention, understanding and support needed from senior decision-makers. In part, this is because the counter-fraud profession itself is relatively young and needs time to reinforce itself as a function. But many of those working in the counter- fraud function are not members of the profession and have not been trained or assessed against the professional standards. The Cabinet Office and HM Treasury have said that government will conduct annual workforce and performance reviews to provide insights on areas outside tax and welfare that demand attention and support. HM Treasury, starting with an expectation of a return of £3 for every £1 spent, also says that it will, where possible, expect increasing returns on its counter- fraud investments. Recommendation 3: The Public Sector Fraud Authority should: a) update the Committee in 12 months on the outcomes of its next annual Workforce and Performance Review and whether public bodies start to invest the right amount in their counter-fraud and corruption capability and achieve value for money from their efforts. b) set out what it has done to address any identified weaknesses in the effectiveness of departments’ efforts to tackle fraud and corruption, including their understanding of risks, resourcing of counter-fraud and delivery of counter-fraud outcomes.
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Government response AI summary
The government agrees and is implementing the recommendation. The PSFA will update on its Workforce and Performance Review, review compliance, launch a risk and prevention service, double specialists, launch a fraud leadership qualification, and coordinate reviews of department resourcing and outcomes, developing financial targets.
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HM Treasury
4
Conclusion
Sixty-Ninth Report - Tackling fraud and…
Accepted
Government has often failed to implement basic counter-fraud measures into its new initiatives. Government’s COVID-19 response highlighted the importance of designing counter-fraud measures, including controls, reporting and recovery, into new initiatives at an early stage of the policy cycle. Government could have maintained several basic standards of public accountability, even …
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Government has often failed to implement basic counter-fraud measures into its new initiatives. Government’s COVID-19 response highlighted the importance of designing counter-fraud measures, including controls, reporting and recovery, into new initiatives at an early stage of the policy cycle. Government could have maintained several basic standards of public accountability, even at the height of the COVID-19 emergency: more transparency; better management of conflicts of interest; promptness in addressing known fraud risks; and timely financial reporting. Some lessons learnt have already been put into practice, for example, in the case of government’s energy schemes where customers received discounted bills from the suppliers rather than direct cash payments from government. Government’s introduction of the Initial Fraud Impact Assessments (IFIAs) is a welcome development that will help public bodies address known vulnerabilities sooner. HM Treasury intends to embed the IFIAs into its spending approval processes. It has trained 700 of its staff on matters relating to fraud. Tackling fraud and corruption against government 7 Recommendation 4: HM Treasury should: a) confirm, in its Treasury Minute response, how it plans to embed Initial Fraud Impact Assessments (IFIAs) within its formal departmental spending approval processes; and the consequences for public bodies if they do not meet its expectations. b) work with departments, as part of its existing work to share best practice with departments, to help them use IFIAs to inform Accounting Officer Assessments and to ensure that a summary of the IFIAs, where they flag significant risks, is included in the published summary Accounting Officer Assessments sent to the Committee.
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Government response AI summary
The government agrees and is implementing. The PSFA offers support and training for embedding Initial Fraud Impact Assessments (IFIAs). HM Treasury will update Accounting Officer Assessment guidance to reference the PSFA and advise AOs-in-training to use IFIA outcomes and explicitly set out fraud risk in …
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HM Treasury
5
Conclusion
Sixty-Ninth Report - Tackling fraud and…
Accepted
Government is not generating enough of a deterrence effect from pursuing those that commit fraud against the public purse. Most of government’s investigatory and enforcement capability sits in HM Revenue & Customs and DWP. PSFA will in due course set up a central enforcement unit. Some departments have the choice …
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Government is not generating enough of a deterrence effect from pursuing those that commit fraud against the public purse. Most of government’s investigatory and enforcement capability sits in HM Revenue & Customs and DWP. PSFA will in due course set up a central enforcement unit. Some departments have the choice of referring a fraud they detect for prosecution or applying a civil penalty, normally with a lower burden of proof and lower fine. The latter can offer a more cost-effective route to investigate fraud and recover funds, but may not offer the same deterrent effect. Government has not set out the level of prosecutions and convictions for fraud that it wants to achieve in order to produce an effective preventive deterrent. Departments are also not yet able to demonstrate that they have the right balance between civil and criminal sanctions to achieve both the optimal recovery of funds and a deterrent effect. Government can do more to increase transparency on the extent of prosecutions to highlight the consequences of committing fraud, deter people from committing fraudulent activities, and reassure the public that fraud and corruption does not go unpunished. Recommendation 5: The Public Sector Fraud Authority, in collaboration with other departments, should develop a cross-government communication strategy for highlighting government’s efforts in pursuing fraudsters and the effectiveness of counter-fraud measures. It should, in the Treasury Minute, confirm it will oversee the implementation of this strategy.
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Government response AI summary
The government agrees. The PSFA is working with Cabinet Office Communications and has established a Cross Government Counter Fraud Communications Working Group. This group will develop a cross-government communications plan to highlight anti-fraud efforts and create a deterrence effect.
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HM Treasury
6
Conclusion
Sixty-Ninth Report - Tackling fraud and…
Accepted
It is very unlikely that most of the losses due to fraud and corruption will ever be recovered. While fraud detection levels are rising, a large gap still remains between the estimated underlying levels of fraud and amounts detected. In 2020–21, while PSFA estimated fraud and error losses between £3.5 …
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It is very unlikely that most of the losses due to fraud and corruption will ever be recovered. While fraud detection levels are rising, a large gap still remains between the estimated underlying levels of fraud and amounts detected. In 2020–21, while PSFA estimated fraud and error losses between £3.5 billion and £29.1 billion excluding tax and welfare fraud, government only detected £243 million of fraud. Government also only ever recovers a small minority of this detected fraud. For example, in 2020– 21, only £29 million of the £243 million detected fraud was recovered. Enforcement and recovery powers are also fragmented across government. The Cabinet Office and HM Treasury say they will continue to try to recover as much of the £21 billion lost during the pandemic as possible, and will not write off any amounts, but accept that it is unlikely they will be able to recover most of it. But while it is too late to prevent this fraud and most will never be recovered, government could do more to retrieve what it can. HM Treasury has committed an additional £900 million to 8 Tackling fraud and corruption against government the Department for Work & Pensions on which it expects a return of £9 billion by 2027–28 through improved general compliance. It has not invested similar amounts to tackle fraud in the other departments. Recommendation 6: HM Treasury should work with departments to help them recover as much of the money paid out to fraudsters as possible and set out in the Treasury Minute: • its expectation of the extent of departments’ recovery of losses due to fraud; • the return on investment it expects from money spent on recovery; and • why it is not investing more money to recover more.
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Government response AI summary
The government agrees and is implementing, stating a clear policy to find, report, and recover fraud. HM Treasury will continue to invest in recovery initiatives, considering returns case-by-case, and will work with the PSFA to hold departments accountable for financial targets, also pursuing legislative options …
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HM Treasury
7
Recommendation
Sixty-Ninth Report - Tackling fraud and…
Accepted
Central government often relies on local government to manage fraud risks on its behalf but does little to support local authorities’ capability to do so. For example, the Department for Business, Energy and Industrial Strategy required local authorities to pursue any losses from error and fraud they identify arising from …
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Central government often relies on local government to manage fraud risks on its behalf but does little to support local authorities’ capability to do so. For example, the Department for Business, Energy and Industrial Strategy required local authorities to pursue any losses from error and fraud they identify arising from payments in COVID-19 business grant schemes. However, as all recovered monies must be paid back to central government, local authorities have had no financial incentive to go beyond the minimum required action to identify losses. And only a small proportion of the estimated losses, £21 million out of an estimated £1.1 billion, has been recovered so far. Central government has tried to provide some support to local authorities, for example, local authorities were provided with around £200 million for the cost of administering the schemes, and local authorities have been able to make use of the data matching functionality of the National Fraud Initiative to counter fraud. But the different governance architecture in place across local government has added a layer of complexity to the interactions of central and local government. Local government bodies have also struggled to maintain timely financial reporting. The Treasury agreed to speak to the Department for Levelling Up, Housing and Communities officials about what more can be done to support local authorities manage the risk of fraud and corruption in their spending. Recommendation 7: HM Treasury should set out, in its Treasury Minute response: a) how it plans to understand the challenges for local government counter- fraud work. b) what support central government plans to provide to local government bodies who administer schemes and manage fraud and corruption risks to funds on behalf of central government. Tackling fraud and corruption against government 9 1 The problem
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Government response AI summary
The government agrees but states the PSFA's mandate is primarily with ministerial departments. It highlights existing support for local government through sharing standards, the Counter Fraud Profession, providing expert advice on specific schemes, and the National Fraud Initiative.
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HM Treasury
1
Conclusion
Sixty-Ninth Report - Tackling fraud and…
Accepted
On the basis of a report by the Comptroller and Auditor General, we took evidence from HM Treasury, Cabinet Office and the Public Sector Fraud Authority (PSFA) about tackling fraud and corruption against government.2
Government response AI summary
The government acknowledges fraud as a national security threat and highlights the PSFA's establishment with new funding, exceeding its initial savings target. It also cites DWP and HMRC's efforts and the encouragement for departments to set financial impact targets to combat fraud.
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HM Treasury
8
Conclusion
Sixty-Ninth Report - Tackling fraud and…
Accepted
We were interested to hear about how government was demonstrating leadership at the most senior levels on tackling fraud and corruption. HM Treasury explained the steps it is taking to change and embed the counter-fraud culture across the public sector. It has asked every major department to target a return …
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We were interested to hear about how government was demonstrating leadership at the most senior levels on tackling fraud and corruption. HM Treasury explained the steps it is taking to change and embed the counter-fraud culture across the public sector. It has asked every major department to target a return on investment of at least £3 for every £1 spent on counter-fraud.16 It has committed to an investment of £1 billion since the pandemic on tackling fraud, including £900 million on DWP, over the period 2022–23 to 2024–25, from which it expects a return of £9 billion by 2028.17 Cabinet Office brought to our attention that as part of government’s wider investment in tackling fraud and corruption, the number of people working at the PSFA has increased from 60 to 150.18 HM Treasury has also implemented Initial Fraud Impact Assessments (IFIAs) with the intention of designing out fraud at the start of initiatives.19 IFIAs are rapid assessments of potential fraud and corruption risks in policies so that appropriate controls can be designed and put in place before implementation.20 In tandem with the creation of the PSFA, HM Treasury told us that these collective changes are testament to the resolve of government to tackle fraud and corruption.21 Gaps in government’s understanding of fraud and corruption risks
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Government response AI summary
The government agrees with the recommendation and notes it is already implemented, detailing significant existing investments in counter-fraud, such as PSFA funding and DWP/HMRC recovery targets. It also reiterates encouraging all departments to set financial impact targets for their counter-fraud work to improve transparency and …
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HM Treasury
12
Conclusion
Sixty-Ninth Report - Tackling fraud and…
Accepted
In 2018, Cabinet Office established the GCFF, which in turn launched a set of Counter Fraud Functional Standards to set out minimum expectations for how government organisations should manage their fraud and corruption risks. In October 2018, government also launched the GCFP to support the development of capability for counter- …
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In 2018, Cabinet Office established the GCFF, which in turn launched a set of Counter Fraud Functional Standards to set out minimum expectations for how government organisations should manage their fraud and corruption risks. In October 2018, government also launched the GCFP to support the development of capability for counter- fraud professionals across government. The GCFP grants membership to the profession based on the evaluation of knowledge and skills codified by the GCFP standards.36 We asked PSFA about the impact of introducing government counter-fraud functional and professional standards. PSFA told us that the functional standards have provided the public with transparency on the basics of what they can expect public bodies to do to 28 Qq 23, 79 29 Qq 18–19; C&AG’s Report, para 1.20 30 Qq 40, 42; C&AG’s Report, para 1.14 and 1.16 31 Q 18 32 Qq 31, 56, 58 33 Q 31; C&AG’s Report, para 19 34 Q 58 35 Qq 29–30; C&AG’s Report, para 1.9 36 C&AG’s Report, para 2.5 Tackling fraud and corruption against government 13 counter fraud and corruption. PSFA’s assessments prior to the onset of the pandemic suggested that use of and compliance with the functional standards was on the increase. It plans to repeat its assessments to establish recent trends. On the professional standards, PSFA explained that they have led to an upskilling of the counter-fraud practitioners across government by sharing with them the available skills, knowledge and experience of the profession. PSFA told us that, internationally, the UK is the first country in the world to have a counter-fraud profession, as well as the first to have a professional standard for fraud prevention.37
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Government response AI summary
The government agrees and details several actions, including prioritising support based on fraud understanding, launching a Risk, Threat and Prevention Service, developing a fraud leadership qualification, and strengthening the process for reviewing compliance against Counter Fraud Functional Standards.
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HM Treasury
13
Conclusion
Sixty-Ninth Report - Tackling fraud and…
Accepted
However, PSFA recognised that there is further work to be done on developing the counter-fraud profession. There are over 13,000 members of the counter-fraud function across government, around 84% of whom work for DWP or HMRC. Less than 45% of counter-fraud practitioners are members of the GCFP.38 HM Treasury told …
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However, PSFA recognised that there is further work to be done on developing the counter-fraud profession. There are over 13,000 members of the counter-fraud function across government, around 84% of whom work for DWP or HMRC. Less than 45% of counter-fraud practitioners are members of the GCFP.38 HM Treasury told us that the aim is for 3,000 more people to be members of the GCFP in the next three years.39 PSFA explained that historically counter-fraud practitioners were not always able to demonstrate a wider understanding of the business context in which they operated. There is also evidence that many departments lack senior counter-fraud professionals with influence in their organisations.40 Cabinet Office highlighted the fact that the counter-fraud function is a relatively young function compared to more established functions, such as, HR, finance and commercial. The counter-fraud discipline needs time to reinforce itself as a function, a profession, and “a key way of doing business in government”.41
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Government response AI summary
The government accepts the recommendation for further professionalisation, committing to actions such as doubling the number of counter-fraud specialists, launching the world’s first fraud leadership qualification, and providing further standards and training. It will also coordinate reviews of department resourcing and develop outcome metrics and …
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HM Treasury
14
Conclusion
Sixty-Ninth Report - Tackling fraud and…
Accepted
In 2021, HM Treasury commissioned GCFF to undertake a Workforce and Performance Review (WPR) to map the counter-fraud resources and delivery outcomes of 70 central government organisations.42 HM Treasury and Cabinet Office said that the WPR exercise will now be an annual undertaking to enable government to focus on areas, …
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In 2021, HM Treasury commissioned GCFF to undertake a Workforce and Performance Review (WPR) to map the counter-fraud resources and delivery outcomes of 70 central government organisations.42 HM Treasury and Cabinet Office said that the WPR exercise will now be an annual undertaking to enable government to focus on areas, particularly outside the tax and welfare systems, most in need of improvements.43 HM Treasury explained that in return for its investment in government’s counter-fraud capability, and to encourage a culture change in public bodies’ attitudes towards tackling fraud and corruption, it will ask for organisations to achieve, or work towards, a return of £3 for every £1 they spend on counter-fraud activities.44 PSFA told us that a 3 to 1 return on investment is a “reasonable place to start” but expectations will have to be tailored to reflect the risk profile of organisations.45 37 Qq 17, 34–36 38 Q 17; C&AG’s Report, Figure 10 39 Q 38 40 Q 49; C&AG’s Report, para 3.8 41 Q 50 42 C&AG’s Report, para 2.11 43 Qq 39, 48 44 Q 65 45 Qq 66–67 14 Tackling fraud and corruption against government 2 Government’s response Designing out fraud and corruption
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Government response AI summary
The government agrees and commits that the PSFA will update the committee in 12 months on the outcome of the next Workforce and Performance Review, confirming it will be an annual undertaking.
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HM Treasury
15
Conclusion
Sixty-Ninth Report - Tackling fraud and…
Accepted
Government’s response to the COVID-19 pandemic underlined the need to design counter-fraud measures, including controls, reporting and recovery, into new initiatives at an early stage of the policy cycle. Government could have maintained several basic standards of public accountability to minimise opportunities for fraud and corruption. It could have: increased …
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Government’s response to the COVID-19 pandemic underlined the need to design counter-fraud measures, including controls, reporting and recovery, into new initiatives at an early stage of the policy cycle. Government could have maintained several basic standards of public accountability to minimise opportunities for fraud and corruption. It could have: increased transparency to parliament and the public; better managed conflicts of interest; promptly addressed known vulnerabilities; and ensured timely financial reporting.46 The Public Sector Fraud Authority (PSFA) recognised the imperative to build in fraud and corruption controls when new schemes are introduced. HM Treasury and the PSFA told us that government, to achieve its aim of designing out fraud from the start, has now introduced Initial Fraud Impact Assessments (IFIAs), which are embedded within HM Treasury’s formal spending approval processes.47 IFIAs are rapid initial assessments of the likely fraud risks in new major spending initiatives.48 HM Treasury told us that 700 of its staff have been trained on matters relating to fraud to ensure they are able to fulfil their responsibilities on scrutinising departmental IFIAs.49
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Government response AI summary
The government accepts the recommendation and confirms Initial Fraud Impact Assessments (IFIAs) are embedded in HMT's approval processes with required training for officials. It further commits to using spending conditions to enforce fraud risk management expectations and requiring Accounting Officers to report irregularities in fraud …
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HM Treasury
16
Conclusion
Sixty-Ninth Report - Tackling fraud and…
Accepted
PSFA also informed us that it would soon launch its ‘risk, threat and prevention service’, which it wants to provide departments with further support on early risk assessments.50 The Cabinet Office made an announcement on 24 May, shortly after our evidence session, confirming the launch of this new team and …
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PSFA also informed us that it would soon launch its ‘risk, threat and prevention service’, which it wants to provide departments with further support on early risk assessments.50 The Cabinet Office made an announcement on 24 May, shortly after our evidence session, confirming the launch of this new team and that it was starting work immediately.51 PSFA brought to our attention the work of a cross-government ‘tiger team’ of experts, which undertook IFIAs and fraud risk assessments, and provided initial prevention advice on government’s energy schemes.52 HM Treasury told us that some of the lessons learned from government’s experience of administering the COVID-19 schemes have already informed the design of some new initiatives to minimise fraud. For example, government, in its energy schemes, used discounted energy bills, administered by the energy suppliers, to provide support to those in need rather than giving out cash up front.53 Deterrence
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Government response AI summary
The government accepts the importance of early risk assessment and confirms the PSFA has launched its Risk, Threat and Prevention Service. It also commits to doubling counter-fraud specialists, launching a fraud leadership qualification, providing further training, and strengthening compliance reviews to improve capabilities and outcomes …
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HM Treasury
17
Conclusion
Sixty-Ninth Report - Tackling fraud and…
Accepted
Detecting and pursuing fraudsters and corrupt officials is important for the provision of justice, to provide intelligence on the types of fraud and corruption occurring and to act as a deterrent for others.54 Cabinet Office told us it is the intention of government to step up its enforcement activities, and …
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Detecting and pursuing fraudsters and corrupt officials is important for the provision of justice, to provide intelligence on the types of fraud and corruption occurring and to act as a deterrent for others.54 Cabinet Office told us it is the intention of government to step up its enforcement activities, and in a very public and transparent way, to demonstrate to people the consequences of fraud. Under the new Procurement Bill, if passed by Parliament, government can bar people from taking part in public procurement if they have committed fraud. There is also scope to disqualify people as company directors. 46 C&AG’s Report, para 1.23 and 3.10 47 Qq 32, 34, 61 48 C&AG‘s Report, para 26 49 Q 62 50 Q 34 51 www.gov.uk/government/news/new-specialist-fraud-squad-to-help-departments-prevent-fraud-in-public- services 52 Qq 46, 70; C&AG’s Report, para 2.5 53 Qq 71, 82 54 C&AG’s Report, para 3.11 Tackling fraud and corruption against government 15 Cabinet Office explained that these examples, alongside the other sanctions available to government, are part of a plan to create an environment in which people are deterred from committing fraud and the public have confidence in the way government pursues fraudsters.55
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Government response AI summary
The government accepts the importance of deterrence through transparency and communication, establishing a Cross Government Counter Fraud Communications Working Group to develop a common narrative and amplify successful counter-fraud activities by June 2024. The PSFA will also publicly report on its strategic plans and progress …
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HM Treasury
18
Conclusion
Sixty-Ninth Report - Tackling fraud and…
Accepted
On the deterrence effect of convictions and whether there is a sufficient level of convictions to create a suitable deterrent, the PSFA told us that it was not aware of any evidence to indicate what the right level of prosecutions would be to create a deterrent.56 After our evidence session, …
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On the deterrence effect of convictions and whether there is a sufficient level of convictions to create a suitable deterrent, the PSFA told us that it was not aware of any evidence to indicate what the right level of prosecutions would be to create a deterrent.56 After our evidence session, the Cabinet Office wrote to us providing us with statistics for the main areas of government’s prosecution activity, including HM Revenue & Customs (HMRC) and Department for Work & Pensions (DWP). Between 2019–20 and 2021–22, HMRC’s criminal investigations had led to the prosecution of 1,090 and the conviction of 983 individuals. Between 2020–21 and 2022–23, DWP referred 1,213 cases to the Crown Prosecution Service or Procurator Fiscal for prosecution, and secured 1,154 convictions.57 While it acknowledged the importance of prosecutions and convictions, the PSFA said it was important to make use of the full suite of interventions available to government in tackling fraud and corruption, for example, better controls, better prevention and better use of data analytics. Cabinet Office told us about the importance of getting the balance between civil and criminal sanctions right. While successful criminal sanctions can create a very strong deterrent effect, they can also be expensive and time-consuming.58 Civil sanctions on the other hand can be discharged more quickly and with a lower burden of proof but may not offer the same deterrent effect.59
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Government response AI summary
The government agrees that transparency and clear communications are a priority, committing to establish a Cross Government Counter Fraud Communications Working Group to develop a plan, amplify successes, and promote the deterrence effect by June 2024.
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HM Treasury
19
Conclusion
Sixty-Ninth Report - Tackling fraud and…
Accepted
DWP and HMRC are the two departments at the front line of the battle against fraud. These departments have their own fraud investigation and enforcement legal powers.60 Cabinet Office told us that the PSFA will itself be setting up an enforcement unit to meet the demand across government for effective …
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DWP and HMRC are the two departments at the front line of the battle against fraud. These departments have their own fraud investigation and enforcement legal powers.60 Cabinet Office told us that the PSFA will itself be setting up an enforcement unit to meet the demand across government for effective civil and criminal enforcement actions.61 Government has neither the ability or capability to detect, investigate and gather sufficient evidence to support a prosecution for all fraud and corruption.62 We asked how government planned to use transparency to make the most of its investigative capabilities. Cabinet Office told us about the importance of annual reporting on fraud, where it occurs, the actions taken in response to it and the outcomes achieved. It is also of vital importance to provide transparency to public on the consequences of fraudsters’ actions, and for organisations to expose themselves to internal and external scrutiny of their counter-fraud and corruption efforts.63 HM Treasury also acknowledged the importance of transparency and celebrating tackling fraud and corruption to deter others.64 55 Qq 5, 93 56 Q 11 57 Letter to the Chair of the Public Accounts Committee from Alex Chisholm, Cabinet Office Permanent Secretary, 25 May 2023 58 Qq 10–11 59 Q 11, C&AG’s Report, para 3.11 60 Q 25; C&AG‘s Report, para 22 61 Qq 25, 55 62 C&AG‘s Report, para 3.11 63 Q 88 64 Q 28 16 Tackling fraud and corruption against government Recovery of losses
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Government response AI summary
The government accepts the importance of transparency, establishing a Cross Government Counter Fraud Communications Working Group led by the PSFA to develop a consistent communications plan by June 2024. The PSFA will also continue public reporting through strategic plans and an Annual Report to highlight …
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HM Treasury
21
Conclusion
Sixty-Ninth Report - Tackling fraud and…
Accepted
Departments also only recover a minority of the fraud they detect. In 2020–21, departments had recovered £29 million out of the £243 million of detected fraud. Enforcement and recovery powers are also fragmented across government, which exacerbates the challenge government faces to recover fraud losses.69 We asked HM Treasury how …
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Departments also only recover a minority of the fraud they detect. In 2020–21, departments had recovered £29 million out of the £243 million of detected fraud. Enforcement and recovery powers are also fragmented across government, which exacerbates the challenge government faces to recover fraud losses.69 We asked HM Treasury how much of the £21 billion estimated fraud over the pandemic it expected to recover. HM Treasury told us that DWP and HMRC will have their own specific targets, and the returns on their spending are scrutinised by the Office for Budget Responsibility at fiscal events. HM Treasury and Cabinet Office confirmed that government was not writing off any of the losses associated with fraud during the COVID-19 pandemic period. It was actually increasing its efforts to recover those losses, for example, through its £1 billion investment in counter-fraud capability, but it would not be reasonable to expect government to recover all of the losses.70 Local government
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Government response AI summary
The government commits to continue investing in fraud recovery initiatives and pursuing legislative options to strengthen the public sector's counter-fraud response. It will also work with the PSFA to hold departments accountable for financial targets on counter-fraud investment, building on existing efforts that have already …
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HM Treasury
22
Conclusion
Sixty-Ninth Report - Tackling fraud and…
Accepted
The accountability system between local and central government is complex. This complexity means it can be difficult to identify who is accountable for what.71 Central government often relies on local government to manage fraud risks on its behalf, for example, on grants administered to individuals and businesses. An organisation’s exposure …
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The accountability system between local and central government is complex. This complexity means it can be difficult to identify who is accountable for what.71 Central government often relies on local government to manage fraud risks on its behalf, for example, on grants administered to individuals and businesses. An organisation’s exposure to grant fraud often depends on how specific the grant agreement objectives and outcomes are, and the quality of the post-award monitoring arrangements.72
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Government response AI summary
The government states that responsibility for local government fraud lies with council CFOs, while DLUHC is responsible for the wider accountability framework and has published new guidance. PSFA already supports local government through sharing practices, providing standards, and running the National Fraud Initiative.
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HM Treasury
23
Conclusion
Sixty-Ninth Report - Tackling fraud and…
Accepted
Between March 2020 and March 2022, local authorities distributed COVID-19 grants costing £22.6 billion via 4.5 million payments to businesses. By October 2022, the Department for Business, Energy & Industrial Strategy (BEIS) estimated that error and fraud across all the COVID-19 grant schemes was in the region of £1.1 billion …
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Between March 2020 and March 2022, local authorities distributed COVID-19 grants costing £22.6 billion via 4.5 million payments to businesses. By October 2022, the Department for Business, Energy & Industrial Strategy (BEIS) estimated that error and fraud across all the COVID-19 grant schemes was in the region of £1.1 billion (just under 5% of the value of grants paid to businesses). BEIS required local authorities to 65 Q 37; C&AG‘s Report, para 1.18 66 C&AG’s Report, Figure 5 67 Qq 20, 33 68 Qq 37–38; C&AG’s Report, Figures 1 and 5 69 C&AG’s Report, para 1.18, 3.11 and Figure 5 70 Qq 83, 86 71 C&AG’s Report, Departmental Overview 2019–20: Ministry of Housing, Communities & Local Government, January 2021 72 C&AG’s Report, Tackling fraud and corruption against government, Session 2022–23, HC 1199, 30 March 2023 Tackling fraud and corruption against government 17 pursue any losses from error and fraud they identify arising from payments. However as all recovered monies must be paid back to central government, local authorities have had no financial incentive to identify losses beyond those contained within the BEIS-directed samples used to derive the estimates of error and fraud losses73 Only about 2% of the fraud and error losses, £21 million, had been recovered when we took evidence in May.74 Local authorities are also under considerable pressure to complete their audits. Only 9% of local government bodies received audited accounts for 2020–21 by the extended statutory publication deadline of 30 September 2021 and 12% received audited accounts for 2021–22 by the statutory deadline of 30 November 2022. Against such a background, we asked HM Treasury whether PSFA should be given a wider remit to also cover the management of fraud across local government.75
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Government response AI summary
The government states that local council Chief Financial Officers are responsible for tackling fraud, while DLUHC accepts responsibility for the wider accountability framework and has published new guidance. The PSFA already shares practices, makes standards available, and runs the National Fraud Initiative to support local …
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HM Treasury
24
Conclusion
Sixty-Ninth Report - Tackling fraud and…
Accepted
HM Treasury told us that while it may appear reasonable to extend the PSFA’s remit to also cover local government, there are different governance architectures across central and local government, and any change to the roles and responsibilities of the PSFA would entail “a very large increase” in the mandate …
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HM Treasury told us that while it may appear reasonable to extend the PSFA’s remit to also cover local government, there are different governance architectures across central and local government, and any change to the roles and responsibilities of the PSFA would entail “a very large increase” in the mandate of the PSFA and there are no plans to take such a course of action. HM Treasury brought to our attention a cost-sharing agreement that they had agreed with local authorities to provide them with £200 million for the administration of the schemes.76 HM Treasury agreed to engage with the Department for Levelling Up, Housing and Communities to ascertain what more government could do to support counter-fraud activities in local authorities.77
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Government response AI summary
The government states that responsibility for local government fraud lies with council CFOs, while DLUHC is responsible for the wider accountability framework and has published new guidance. PSFA already supports local government through sharing practices, providing standards, and running the National Fraud Initiative.
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HM Treasury
25
Conclusion
Sixty-Ninth Report - Tackling fraud and…
Accepted
Cabinet Office and the PSFA told us that while local government does not explicitly fall under their remit, they still provide support to local authorities through various means. Local authorities can make use of the data-matching functionality of the National Fraud Initiative. Local authorities have access to the resources of …
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Cabinet Office and the PSFA told us that while local government does not explicitly fall under their remit, they still provide support to local authorities through various means. Local authorities can make use of the data-matching functionality of the National Fraud Initiative. Local authorities have access to the resources of the counter- fraud profession and members of the profession work in local government. And under the new procurement legislation, people could also be barred from local government procurement.78 HM Treasury, however, confirmed that central government does not monitor local government’s management of fraud and corruption risks.79 73 C&AG’s Report, COVID-19 business grant schemes, Session 2022–23, HC 1200, 24 March 2023, para 7, 12 and 14 74 Committee of Public Accounts, Oral evidence: Local Authority administered COVID grant schemes, HC 1234, 11 May 2023, Qq 13–14 75 Q 92; C&AG’s Report, para 1.23 76 Q 92 77 Q 93 78 Q 93; C&AG’s Report, Figure 10 79 Q 94 18 Tackling fraud and corruption against government
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Government response AI summary
The government states that responsibility for local government fraud lies with council CFOs, while DLUHC is responsible for the wider accountability framework and has published new guidance. PSFA already supports local government through sharing practices, providing standards, and running the National Fraud Initiative.
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HM Treasury