Recommendations & Conclusions
5 items
2
Recommendation
Sixty-Ninth Report - Tackling fraud and…
Rejected
There are large gaps in government’s understanding of the extent and location of fraud and corruption risks. Most departments are exposed to several types of fraud and corruption risk in their income and spending, but few produce regular, reliable, and comprehensive estimates of the level of fraud and corruption of …
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There are large gaps in government’s understanding of the extent and location of fraud and corruption risks. Most departments are exposed to several types of fraud and corruption risk in their income and spending, but few produce regular, reliable, and comprehensive estimates of the level of fraud and corruption of their risky areas. Government expects the number of fraud measurement experts across public bodies to increase from 99 to around 180. But the current system of fraud measurement does not tell us, beyond the well-known problems in tax and benefits, where the problems are or which public bodies are most affected. Where government does attempt to measure fraud, it often includes more innocent errors because it finds it difficult to establish the intent behind the misinformation provided. Conflating error with fraud can give the impression that government is underestimating and obscuring where the real fraud problems are. PSFA estimates that, for the two thirds of government expenditure where it does not have specific estimates, the level of fraud and error is somewhere between 0.5% and 5% of expenditure. This implies that in addition to the £10 billion of tax fraud and £6.4 billion of benefit fraud last year (2022–23), government lost somewhere between £2.5 billion to £28.5 billion from fraud and error, but it does not know exactly where or how. Recommendation 2: The Public Sector Fraud Authority should publish an annual strategic intelligence report on the level of fraud and corruption across government and where across government’s activities the main risks and issues 1 Q 54 6 Tackling fraud and corruption against government lie. This should build on the previous landscape reports and use better targeted fraud measurement and assurance exercises to provide an overall estimate of the extent and location of fraud and corruption by recognising the difference between fraud and error.
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Government response AI summary
The government rejects the recommendation to publish a separate annual strategic intelligence report, stating the PSFA's High-Risk Fraud Portfolio will provide a strategic picture, and that disaggregating fraud and error is cost-intensive.
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HM Treasury
9
Conclusion
Sixty-Ninth Report - Tackling fraud and…
Rejected
Most departments are exposed to more than one type of fraud risk, while all have exposure to internal fraud and corruption risk.22 However, few departments produce regular, reliable, and comprehensive measurements on the level of fraud and corruption in major areas of their spending.23 PSFA estimates that, for the two-thirds …
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Most departments are exposed to more than one type of fraud risk, while all have exposure to internal fraud and corruption risk.22 However, few departments produce regular, reliable, and comprehensive measurements on the level of fraud and corruption in major areas of their spending.23 PSFA estimates that, for the two-thirds of government expenditure where there are no specific estimates, the level of fraud and error is somewhere between 0.5% and 5% of expenditure.24 This implies that in addition to the £10 billion a year of lost tax revenue from evasion and criminal attacks and £6.4 billion of benefit fraud last year (2022–23), government is losing somewhere in the range of £2.5 billion to £28.5 billion to fraud and error each year across the rest of its expenditure.25 PSFA and its predecessors have run a Fraud Measurement and Assurance (FMA) programme since 2014 to assess the level of fraud and error outside of the few areas, such as tax, welfare and Ministry of Defence (MoD) spending, where there are annual exercises.26
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Government response AI summary
The government disagrees, stating that while PSFA is creating a High-Risk Fraud Portfolio and will continue publishing annual Fraud Landscape Reports and conducting fraud measurement exercises, it will not publish a separate strategic intelligence report. Disaggregating fraud and error is considered cost-intensive and discretionary for …
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HM Treasury
10
Conclusion
Sixty-Ninth Report - Tackling fraud and…
Rejected
Each FMA exercise covers a specific area of spend and estimates the level of fraud and error in that spending. Since 2014, the FMA programme comprised 62 assessments covering £224 billion of spending. The GCFF’s Oversight Board concluded that 32 of the assessments, representing more than half (57%) of assessed …
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Each FMA exercise covers a specific area of spend and estimates the level of fraud and error in that spending. Since 2014, the FMA programme comprised 62 assessments covering £224 billion of spending. The GCFF’s Oversight Board concluded that 32 of the assessments, representing more than half (57%) of assessed expenditure, produced outcomes that are not reliable.27 When challenged on the value of the counter-fraud function, PSFA told us that the UK is the only country in the world to have a standard on fraud risk assessment. The standard means that all risk assessments across government are comparable and it is clear to what quality they are conducted. The technical advances were 16 Qq 50–51, 61 17 Qq 54, 61, 72 18 Q 44 19 Q 61 20 C&AG’s Report, para 2.5 21 Q 72 22 C&AG’s Report, para 1.17 and Figure 3 23 Q 58; C&AG’s Report, Figure 3 24 C&AG’s Report, para 1.16 25 C&AG Report, Figures 1 and 6; Fraud and error in the benefit system: financial year 2022 to 2023 estimates 26 C&AG’s Report, para 1.12–1.15 27 C&AG’s Report, para 1.15–1.16 12 Tackling fraud and corruption against government made possible through counter-fraud practitioners working as a function.28 PSFA told us that the reason all assessments conducted since the start of the COVID-19 pandemic were deemed to be unreliable was the scale and complexity of the schemes, which in tandem with the inherent difficulties associated with fraud measurement, resulted in shortcomings against the fraud measurement standard. For example, the Department of Health and Social Care’s assessment of the level of fraud in its procurement of PPE was not based on a fully random sample and could not be extrapolated.29 We asked PSFA about the reliability of the MoD’s estimate that 4.8% of its annual procurement spend is fraudulent. PSFA explained that MoD, in the absence of a random sampling exercise, had to rely on benchmarks from academic research, and therefore its estimate does not come with a high level of confidence. The most
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Government response AI summary
The government explicitly rejects the implied recommendation, stating it will not publish a separate strategic intelligence report or information that could increase fraud threats. Instead, the PSFA will create a "High-Risk Fraud Portfolio" and continue to publish annual Fraud Landscape Reports, while supporting departments in …
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HM Treasury
11
Conclusion
Sixty-Ninth Report - Tackling fraud and…
Rejected
HM Treasury told us that to improve government’s fraud measurement capability, the number of fraud measurement experts will be doubling from 99 to about 180 across government.31 PSFA told us that it would not advocate departments to conduct fraud measurement exercises in all the areas where there are currently gaps …
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HM Treasury told us that to improve government’s fraud measurement capability, the number of fraud measurement experts will be doubling from 99 to about 180 across government.31 PSFA told us that it would not advocate departments to conduct fraud measurement exercises in all the areas where there are currently gaps because that would be too expensive and complicated.32 For example, DWP and HM Revenue & Customs (HMRC) spend £22 million each year on measuring fraud and error in the welfare and tax systems.33 PSFA told us that it will mainly focus its efforts on fraud risk assessments and outcomes from counter-fraud work to prevent and detect fraud.34 We asked PSFA about the conflation of fraud and error, and what plans, if any, it had to separate them as they are different concepts with different public perceptions. PSFA explained that differentiating between fraud and error requires an assessment of intent, which is not always practical to undertake in large scale fraud measurement exercises. It told us that when public bodies have “established vulnerabilities, the response that we may use would not look just at error or fraud” because both often require the same preventive approach.35 Professionalisation of government’s counter-fraud workforce
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Government response AI summary
The government explicitly rejects the implied recommendation to separate fraud and error due to cost and practicality, stating it is left to departmental discretion. It reasserts its focus on a "High-Risk Fraud Portfolio" and continued publication of annual reports, while declining to publish information that …
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HM Treasury
20
Conclusion
Sixty-Ninth Report - Tackling fraud and…
Rejected
Departments have detected an increasing amount of fraud and error outside of tax and welfare expenditure. Cabinet Office has reported that since 2014–15 departments have detected £0.9 billion of fraud.65 It is not, however, possible to tell whether the increase in detected fraud relates to better detection or increased occurrences …
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Departments have detected an increasing amount of fraud and error outside of tax and welfare expenditure. Cabinet Office has reported that since 2014–15 departments have detected £0.9 billion of fraud.65 It is not, however, possible to tell whether the increase in detected fraud relates to better detection or increased occurrences of fraud.66 PSFA told us that government’s investment in analytical tools and the National Fraud Initiative have contributed to the increasing levels of detected fraud.67 We asked PSFA why government was only detecting a small proportion of the estimated levels of fraud and error outside the tax and welfare systems. In 2020–21, departments and their arm’s-length bodies had detected £243 million of fraud, excluding tax and welfare fraud, while the PSFA had reported between £3.5 billion and £29.1 billion of fraud and error in the same year. PSFA acknowledged the need to investigate the reasons behind the gap between the estimates of fraud and error, and the levels of detected fraud.68
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Government response AI summary
The government disagrees, stating that while PSFA is developing a High-Risk Fraud Portfolio and will continue publishing annual Fraud Landscape Reports and conducting fraud measurement exercises, it will not publish a separate strategic intelligence report. Disaggregating fraud and error is deemed cost-intensive and discretionary for …
Read full response →
HM Treasury