Recommendations & Conclusions
31 items
2
Recommendation
Ninth Report - Fraud and Error
Accepted in Part
Government’s focus on the long-standing fraud and error risks it understands, risks large amounts of fraud and error being unidentified or untackled elsewhere. Efforts to tackle fraud and error in the tax and benefits system come under regular scrutiny. While we regularly scrutinise and challenge HMRC and DWP on their …
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Government’s focus on the long-standing fraud and error risks it understands, risks large amounts of fraud and error being unidentified or untackled elsewhere. Efforts to tackle fraud and error in the tax and benefits system come under regular scrutiny. While we regularly scrutinise and challenge HMRC and DWP on their approach, both departments have a well-established approach. However, fraud and error threaten many other areas of the public purse with fraud and error going unmeasured in around £503 billion of expenditure each year. Cabinet Office estimates that the rest of government was already losing between £2.5 billion and £25 billion a year as a result of fraud and error before the COVID-19 schemes were introduced. Part of the challenge government faces is the sheer diversity of risks, with fraud and error impacting everything from grants and procurement to income collection. As part of its Global Fraud Risk Assessment, the Cabinet Office Counter Fraud Function identified a large number of COVID-19 schemes as potentially at high risk of fraud but believes scheme owners need to do more work to fully quantify those risks. The Function recognises that it needs to do more work to understand the broader fraud and error picture outside the remit of DWP and HMRC. 6 Fraud and Error Recommendation: HM Treasury and Cabinet Office should, within six months, work with all Departments to build on the existing Global Fraud Risk Assessment and identify and publish all the fraud and error risks to public money across government and commit to updating this publication annually.
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Government response AI summary
The government agrees to identify and update fraud and error risks across government annually, setting an implementation date of February 2022. However, it rejects publishing individual fraud and error risks at a detailed level due to concerns about increasing overall fraud risk, instead committing to …
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HM Treasury
3
Recommendation
Ninth Report - Fraud and Error
Accepted
Departments’ lack of urgency to robustly measure fraud and error hinders their ability to direct their counter fraud and error efforts. The robust measurement of fraud and error is a crucial aspect of any counter fraud response because it shows where controls need to be improved and effort directed. BEIS, …
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Departments’ lack of urgency to robustly measure fraud and error hinders their ability to direct their counter fraud and error efforts. The robust measurement of fraud and error is a crucial aspect of any counter fraud response because it shows where controls need to be improved and effort directed. BEIS, DWP and HMRC have committed to producing an estimate of fraud and error for some of their COVID-19 schemes and publishing this in their annual report and accounts. But we are concerned that this work is not being given the priority it deserves and comes too late to direct efforts to minimise fraud and error in the schemes. HMRC does not expect to have a statistically valid estimate of fraud and error in the Coronavirus Job Retention Scheme until December 2021, around 22 months after it was first introduced. HMRC also does not intend to measure the rate of fraud and error in the Self-Employed Income Support Scheme and Eat Out To Help out schemes. DWP cannot say when it will set a target for reducing fraud, citing that COVID-19 has changed its traditional mix of cases within the benefits system. BEIS does not expect its fraud sampling exercise on the Bounce Back Loan Scheme to complete until the end of May 2021, 12 months after the scheme opened for applications. Other departments, that have not had as much scrutiny of their fraud and error risk, have not made public commitments to measure the extent of fraud and error in their COVID-19 schemes. Recommendation: HM Treasury should, within three months, strengthen current reporting requirements and ensure that all departments measure and report on the risks of fraud and error within each of their COVID-19 support schemes. This should include: • the estimated value of fraud and error within their COVID-19 response, • how identified risks of fraud and error are being addressed, and • any planned action to recover taxpayer money lost to fraud and error, including timescales. HMRC and BEIS should write to the Committee wit
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Government response AI summary
The government accepts the recommendation and sets a November 2021 target, stating that HM Treasury has mandated enhanced reporting requirements for departments on COVID-19 support scheme funds within their annual reports and accounts, and the Government Financial Reporting Manual (FReM) now requires detailed risk explanations …
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HM Treasury
4
Recommendation
Ninth Report - Fraud and Error
Accepted
Departments do not make enough use of counter fraud expertise when designing new initiatives to ensure they minimise losses to the taxpayer. One of the key lessons from government’s response to the pandemic is the need to balance speed of implementation and accessibility of support schemes with efforts to prevent …
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Departments do not make enough use of counter fraud expertise when designing new initiatives to ensure they minimise losses to the taxpayer. One of the key lessons from government’s response to the pandemic is the need to balance speed of implementation and accessibility of support schemes with efforts to prevent fraud and protect taxpayers’ money. Despite it being two years since it was established, Cabinet Office’s work to increase the awareness of the new Counter Fraud Function is still at an early stage. Departments consulting it is still optional, meaning it lacks authority despite its expertise. BEIS, for example, did not consult the Counter Fraud Function when designing the Bounce Back Loan Scheme despite the increased risk Fraud and Error 7 of fraud and error compared to its usual operations. Designing schemes in a way that prevents fraud and error is essential if losses to the taxpayer are to be minimised. The Counter Fraud Function is working to introduce a minimum standard for fraud risk assessments across government. Transparency about these risk assessments is vital if decision makers, including Parliament, are to understand the implications of these design choices. Recommendation: HM Treasury and Cabinet Office should, within six months, introduce mandatory fraud impact assessments that require formal sign off from the Counter Fraud Function for all Government Major Project Portfolio programmes and for all other schemes that departments identify as having a moderate to high risk of fraud or error. A summary of these assessments should be published.
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Government response AI summary
The government accepts the recommendation and aims to implement it by February 2022, committing to introduce mandatory Fraud Impact Assessments with formal sign-off for major spend initiatives. Guidance is being developed, and Managing Public Money will be amended to require these assessments for major projects, …
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HM Treasury
5
Recommendation
Ninth Report - Fraud and Error
Accepted
HM Treasury and Cabinet Office do not know whether departments are adequately resourced to tackle fraud and error. There are currently 16,000 members of the Counter Fraud Function within the public sector, with 77% of counter fraud professionals working in DWP or HMRC. Although Cabinet Office understands where counter fraud …
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HM Treasury and Cabinet Office do not know whether departments are adequately resourced to tackle fraud and error. There are currently 16,000 members of the Counter Fraud Function within the public sector, with 77% of counter fraud professionals working in DWP or HMRC. Although Cabinet Office understands where counter fraud resources are deployed across the rest of government, it admits it does not yet know whether the capabilities are all in the right place. Cabinet Office has begun work to strengthen departments’ capabilities in response to increased fraud and error risk from COVID-19 support schemes. Where departments have additional funding to build their counter fraud capacity, this has not been made available in a timely manner. For example, it is unacceptable that it took HM Treasury 12 months to approve the funding for HMRC’s Taxpayer Protection Taskforce despite knowing since March 2020 that the fraud risks for CJRS and SEISS were heightened. Though all the government professions have a role to play in minimising fraud it is imperative that government does more to ensure trained counter fraud professionals are deployed where they are most needed. Recommendation: HM Treasury and Cabinet Office should write to the Committee within three months setting out how they will work with departments to build their counter fraud capacity and ensure that each Department’s resourcing is properly aligned with its risk exposure.
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Government response AI summary
The government accepts the recommendation and commits to writing to the Committee by November 2021. This letter will detail how they will work with departments and across the system to build counter fraud capacity and capability.
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HM Treasury
6
Recommendation
Ninth Report - Fraud and Error
Accepted
Gaps in transparency and information sharing between departments is hindering efforts to prevent, detect and correct fraud and error. Timely data sharing can be used to prevent fraud by data matching, improve detection of fraud by sharing intelligence, and enable recovery in cross-government schemes. Increasing the use of these methods …
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Gaps in transparency and information sharing between departments is hindering efforts to prevent, detect and correct fraud and error. Timely data sharing can be used to prevent fraud by data matching, improve detection of fraud by sharing intelligence, and enable recovery in cross-government schemes. Increasing the use of these methods is a priority for the Cabinet Office Counter Fraud Function, although such arrangements will take time and care to establish due to data protection requirements. We were pleased to hear examples of departments collaborating and sharing data during the pandemic to improve government’s overall response. For example, BEIS used data held by HMRC to retrospectively check applications for the Bounce Back Loan Scheme. However, other opportunities to prevent fraud in real time were missed, and well-established industry data sources were overlooked. Publishing business beneficiaries of COVID-19 support schemes provides transparency and the opportunity for whistle blowers and others to report suspicious claims. But the data HMRC published on employers claiming CJRS from December 2020 onwards has insufficient detail to allow proper public scrutiny and 8 Fraud and Error BEIS will not commit to publishing details of COVID-19 loan recipients. Going forward, increased data sharing could enable DWP to identify changes in claimant eligibility for benefits and enable changes to be applied across all benefits before a payment is made, preventing errors from occurring and reducing the need for recovery. Recommendation: Cabinet Office should write to the Committee within six months detailing how it has worked with departments to identify and address gaps in real time data sharing. HM Treasury should, within six months, set out the transparency principles it expects for government support schemes, including the presumption that the business beneficiaries of government support schemes will be published.
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Government response AI summary
The government agrees to the recommendation for the Cabinet Office to write to the Committee by November 2021, detailing its work with departments to address gaps and improve real-time data sharing.
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HM Treasury
7
Recommendation
Ninth Report - Fraud and Error
Not Addressed
HMRC, DWP and BEIS are unable to justify the inconsistencies in their approaches to the consequences of fraud and error for different groups of debtors. Departments need to take steps to detect, pursue and recover the billions of pounds of fraud and error overpayments it has lost during the COVID-19 …
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HMRC, DWP and BEIS are unable to justify the inconsistencies in their approaches to the consequences of fraud and error for different groups of debtors. Departments need to take steps to detect, pursue and recover the billions of pounds of fraud and error overpayments it has lost during the COVID-19 pandemic. However, we are concerned that Departments are taking different approaches to dealing with the consequences of fraud or errors of a similar nature, such as failing to disclose a change in circumstances. DWP applies a financial threshold when deciding whether to pursue criminal sanctions, whereas HMRC will only pursue criminal proceedings for the most serious crimes, focusing instead on disrupting criminal activity to make it unprofitable. Although BEIS is working with the police on criminal sanctions for loan scheme fraud, it maintains it is up to the bank to follow usual recovery procedures in the first instance. These differences in approaches results in penalties appearing unfair and inconsistent to the public. DWP is investing in making it easier for people inform it of changes in circumstances, for example through more online prompts in systems, rather than assuming fraudulent intent. We welcome the Cabinet Office’s commitment to, through the Counter Fraud Function, improving the consistency of sanctions applied for fraud and whether enforcement and recovery powers can be expanded across government. Recommendation: HMRC and DWP should write to the Committee within three months setting out how they will identify and address inconsistencies of sanctions for frauds that are similar in nature. BEIS should write to the Committee within three months setting out details of steps it will take to assess whether the recovery efforts of banks are reasonable, and the steps it will take to recover taxpayers’ money if deficiencies are identified. Fraud and Error 9 1 Government’s understanding of fraud and error risks and the resources needed to tackle them
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Government response AI summary
The government's response is irrelevant, referencing reports on the English Rail System rather than addressing the recommendation for HMRC, DWP, and BEIS to detail how they will address fraud sanction inconsistencies and recovery efforts.
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HM Treasury
1
Conclusion
Ninth Report - Fraud and Error
Acknowledged
On the basis of a report by the Comptroller and Auditor General, we took evidence from Cabinet Office, the Department for Business, Energy and Industrial Strategy (BEIS), the Department for Work and Pensions (DWP), HM Revenue & Customs (HMRC) and HM Treasury about fraud and error.1
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On the basis of a report by the Comptroller and Auditor General, we took evidence from Cabinet Office, the Department for Business, Energy and Industrial Strategy (BEIS), the Department for Work and Pensions (DWP), HM Revenue & Customs (HMRC) and HM Treasury about fraud and error.1
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Government response AI summary
The government acknowledges the committee's introductory statement, confirming it received evidence from the listed departments and that this document constitutes the government's response to the report.
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HM Treasury
8
Conclusion
Ninth Report - Fraud and Error
Accepted
Fraud and error within Universal Credit rose by £3.8 billion to an all-time high of £5.5 billion between April 2020 and March 2021. DWP told us it that during lockdown it found opportunities for innovation by adapting traditional controls, such as face-to-face meetings with claimants, for remote working. As an …
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Fraud and error within Universal Credit rose by £3.8 billion to an all-time high of £5.5 billion between April 2020 and March 2021. DWP told us it that during lockdown it found opportunities for innovation by adapting traditional controls, such as face-to-face meetings with claimants, for remote working. As an example, DWP described how from June 2020 it introduced enhanced biographical questions from June 2020 to verify identity over the phone, leading to fewer cases referred to its fraud checking service.22 We have previously reported that HMRC has carried out fewer compliance investigations since lockdown began in March 2020, as it had to prioritise the implementation of COVID-19 support schemes and be responsive to the needs of taxpayers struggling with the impacts of the pandemic. The number of completed civil compliance checks fell from 62,000 in the first quarter of 2019–20 to 40,000 in the first quarter of 2020–21. HMRC estimates up to £3.5 billion of furlough payments made by 16 August 2020 may have been fraudulent or paid in error.23 Understanding of fraud and error across government
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Government response AI summary
The government states that departments already take a risk-based approach to fraud and error, in line with best practice advocated by the Government Counter Fraud Function and supported by existing standards and guidance.
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HM Treasury
9
Conclusion
Ninth Report - Fraud and Error
Accepted
We have regularly reported on HMRC’s and DWP’s efforts to tackle fraud and error in the tax and benefit systems. DWP’s accounts have been qualified every year since 1988–89 due to material levels of overpayments and underpayments in benefits expenditure.24 In our report on their 2019–20 accounts we concluded that …
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We have regularly reported on HMRC’s and DWP’s efforts to tackle fraud and error in the tax and benefit systems. DWP’s accounts have been qualified every year since 1988–89 due to material levels of overpayments and underpayments in benefits expenditure.24 In our report on their 2019–20 accounts we concluded that while DWP is good at understanding the types of fraud and error in the benefits system it is unable to demonstrate the cost- effectiveness of its counter fraud and error controls. We also reiterated our intention to hold DWP to account for improving its performance, aided by the fraud and error targets it has agreed to set.25 We have previously criticised HMRC for basic errors in financial forecasting including its uncertainty around what its estimate of fraud and error from tax credits should be and delays in producing a more rigorous estimate of the level of fraud and error associated with the Research & Development relief.26 We have previously concluded HMRC’s COVID-19 support schemes have led to a major reprioritisation of its resources and it has needed to reduce compliance activity while under lockdown. This has adversely affected HMRC’s core compliance activities and led to a backlog of investigations.27 19 Committee of Public Accounts, Covid 19: Local government finance, Fourth Report of 2021-22, HC 239, 4 June
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Government response AI summary
The government states that departments already take a risk-based approach to fraud and error, which aligns with best practice advocated by the Government Counter Fraud Function.
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HM Treasury
10
Recommendation
Ninth Report - Fraud and Error
Accepted in Part
We asked Cabinet Office about fraud and error risks outside the tax and benefits system. Cabinet Office told us that the diversity of risks is “very, very large”, because government spends £850 billion and collects around £800 billion in income. It explained that this covers all the different grants, procurement, …
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We asked Cabinet Office about fraud and error risks outside the tax and benefits system. Cabinet Office told us that the diversity of risks is “very, very large”, because government spends £850 billion and collects around £800 billion in income. It explained that this covers all the different grants, procurement, and services that the public sector offers, which have a range of different fraud risks.28 Cabinet Office explained that the COVID-19 response has changed the fraud risk profile for many departments who are now exposed to higher levels of risk and loss than they had experienced previously.29 It acknowledged that it still needs to do more work to understand the broader fraud and error picture outside the remit of DWP and HMRC.30
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Government response AI summary
The government agrees to build on the Global Fraud Risk Assessment (GFRA) and update it annually, but will not publish fraud risks at the requested level of detail, instead providing internal government access.
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HM Treasury
11
Recommendation
Ninth Report - Fraud and Error
Accepted in Part
The Counter Fraud Function undertook a Global Fraud Risk Assessment across 206 COVID-19 response schemes, with an estimated total value of £387 billion. It risk-assessed 16 of these schemes as having a high or very high fraud risk, representing 57% (£219 billion) of the £387 billion.31 As part of this …
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The Counter Fraud Function undertook a Global Fraud Risk Assessment across 206 COVID-19 response schemes, with an estimated total value of £387 billion. It risk-assessed 16 of these schemes as having a high or very high fraud risk, representing 57% (£219 billion) of the £387 billion.31 As part of this Global Fraud Risk Assessment, the Counter Fraud Function identified four COVID-19 response schemes as having the highest risk of fraud and error: a) Universal Credit, as DWP accepts that a doubling of the caseload and relaxing controls will lead to a further increase in fraud and error levels. There is uncertainty around exactly how much fraud and error will rise but NAO believes that the increase is likely to be substantial. b) Coronavirus Job Retention Scheme, as HMRC’s planning assumption estimated fraud and error losses of 5% to 10% of scheme expenditure. c) The Bounce Back Loan Scheme, as BEIS and the British Business Bank have estimated between 35% and 60% of the loans may not be repaid due to fraud or credit issues. d) Coronavirus Response Fund - Funding for the NHS: Procurement of medical equipment (including additional ventilators), as there is a high risk of fraud in procurement of personal protective equipment.
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Government response AI summary
The government agrees to build on and annually update the Global Fraud Risk Assessment (GFRA) with a target implementation date of February 2022, and will provide access to it across government, but rejects publishing fraud risks at a detailed level due to concerns about increasing …
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HM Treasury
12
Conclusion
Ninth Report - Fraud and Error
Not Addressed
It also assessed a large number of other COVID-19 schemes as potentially at high risk of fraud but believed scheme owners needed to do more work to fully quantify those risks.32 Counter fraud resources across government
Government response AI summary
The government response provided addresses a different PAC recommendation regarding the identification and publication of fraud risks, rather than the committee's specific conclusion about high-risk COVID-19 schemes and the need for scheme owners to quantify those risks.
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HM Treasury
13
Recommendation
Ninth Report - Fraud and Error
Accepted
We asked HM Treasury and Cabinet Office about the capability and capacity of counter fraud resources across the public sector. Cabinet Office explained that traditionally Departments have decided individually what level of capability they need, but as fraud is a quickly evolving and complex crime this approach is not optimal.33 …
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We asked HM Treasury and Cabinet Office about the capability and capacity of counter fraud resources across the public sector. Cabinet Office explained that traditionally Departments have decided individually what level of capability they need, but as fraud is a quickly evolving and complex crime this approach is not optimal.33 Cabinet Office told us that there are currently 16,000 members of the Counter Fraud Function, and 91% of these individuals work for HMRC and DWP on tax and welfare as these are government’s highest 28 Q 17 29 Letter from Mark Cheeseman page 3 30 Q 72; Letter from Mark Cheeseman page 2 31 C&AG’s Guide, page 4 32 C&AG Guide, page 5 33 Q 31 Fraud and Error 13 areas of known loss. The Government Counter Fraud Profession has 6,823 members from 42 organisations across central and local government and policing.34 Cabinet Office told us that 77% of these professionals work in DWP or HMRC.35
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Government response AI summary
The government accepts the recommendation, committing to write to the Committee by November 2021 to detail how it will work with departments to build counter-fraud capacity, leveraging the Spending Review process and the Government Counter Fraud Profession.
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HM Treasury
14
Recommendation
Ninth Report - Fraud and Error
Accepted
We asked whether counter fraud expertise is adequately deployed across the rest of government. Cabinet Office provided information on where counter fraud expertise is deployed across the rest of government but it is clear that some of the major departments have relatively few counter fraud resources.36 Cabinet Office told us …
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We asked whether counter fraud expertise is adequately deployed across the rest of government. Cabinet Office provided information on where counter fraud expertise is deployed across the rest of government but it is clear that some of the major departments have relatively few counter fraud resources.36 Cabinet Office told us that because the Counter Fraud Profession does not have a structure to assess people individually, it is “not yet able to give a view” on whether the capabilities are all in the right place. However, it is “confident” that the Counter Fraud Function is developing the structures to show where the different types of counter fraud capability are.37
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Government response AI summary
The government accepts the recommendation and commits to writing to the Committee in November 2021 to detail how it will work with departments to build counter-fraud capacity and capability, and will review departmental capacity after the Spending Review 2021.
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HM Treasury
15
Conclusion
Ninth Report - Fraud and Error
Deferred
HM Treasury told us it has ongoing dialogue with departments and supports the funding of counter fraud activity if it is cost effective. We asked HM Treasury why it took 12 months to approve the £100 million funding for a Taxpayer Protection Taskforce within HMRC. HM Treasury told us it …
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HM Treasury told us it has ongoing dialogue with departments and supports the funding of counter fraud activity if it is cost effective. We asked HM Treasury why it took 12 months to approve the £100 million funding for a Taxpayer Protection Taskforce within HMRC. HM Treasury told us it wanted to see the assessment of the potential benefits that should accrue, and to be assured that the money is going to be directed in the right place, though was keen to assure us that throughout the 12 months there was “active discussion” around the funding required. HMRC told us it did not wait until March 2021 to deploy counter fraud and error resources on CJRS and SEISS, but the additional investment enabled it to open a further 20,000 one-to-one investigations on top of the 10,000 that it had already opened, as well as more criminal investigations.38
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Government response AI summary
The government responded by outlining the existing Spending Review process for departmental fraud funding and committed that HM Treasury and the Counter Fraud Function will review counter fraud capacity following the 2021 Spending Review.
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HM Treasury
16
Conclusion
Ninth Report - Fraud and Error
Accepted
HM Treasury told us that other government functions have a critical role in helping with fraud risk. It told us the Finance and Commercial Functions must operate as an effective second line of defence in advising and supporting fraud risk. It suggested that the combination of these functions operating under …
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HM Treasury told us that other government functions have a critical role in helping with fraud risk. It told us the Finance and Commercial Functions must operate as an effective second line of defence in advising and supporting fraud risk. It suggested that the combination of these functions operating under the expert of guidance of the Counter Fraud Function “ultimately has the bigger impact” in tackling fraud and error.39 HM Treasury also highlighted that the Counter Fraud Function is “fairly immature” compared with some of the older functions so it is important that government keeps up the professionalism and assessment work currently under way.40 34 Letter from Mark Cheeseman 35 Q 23; C&AG Guide, page 6 36 Letter from Mark Cheeseman, page 2 37 Q 31 38 Q 44 39 Q 18 40 Q 34 14 Fraud and Error 2 Measuring and reporting on fraud and error
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Government response AI summary
The government committed to writing to the Committee in November 2021, detailing how it will work with departments and across the system to build counter fraud capacity and capability, including close collaboration with the Government Counter Fraud Profession.
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HM Treasury
17
Conclusion
Ninth Report - Fraud and Error
Not Addressed
The Counter Fraud Function describes fraud as a hidden crime which you must find before you can fight.41 The government’s counter-fraud functional strategy states an aim to be the most transparent government globally in dealing with public sector fraud.42 Cabinet Office told us it aims to put as much focus …
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The Counter Fraud Function describes fraud as a hidden crime which you must find before you can fight.41 The government’s counter-fraud functional strategy states an aim to be the most transparent government globally in dealing with public sector fraud.42 Cabinet Office told us it aims to put as much focus into the areas where there are low levels of detected fraud, and low levels of investment in counter fraud, as it does those areas where there are known to be higher levels of loss.43 It publishes an annual Fraud Landscape report every year, which reports on the detected fraud levels across government.44
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Government response AI summary
The government's response focused on its plans to increase the use of real-time application checks and improve data sharing across departments, without directly addressing the committee's conclusion about transparency and annual fraud reporting.
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HM Treasury
18
Conclusion
Ninth Report - Fraud and Error
Accepted
HM Treasury’s guide to Managing Public Money states that that every department should measure and estimate the scale of fraud and error and disclose this in its Annual Report were material.45 The NAO identified the proper measurement of fraud and error as a crucial because it shows departments where controls …
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HM Treasury’s guide to Managing Public Money states that that every department should measure and estimate the scale of fraud and error and disclose this in its Annual Report were material.45 The NAO identified the proper measurement of fraud and error as a crucial because it shows departments where controls need to be improved and counter fraud efforts directed.46 We asked HMRC when it expects to have an estimate of fraud and error in the Coronavirus Job Retention Scheme. HMRC told us it does not expect to have a statistically valid estimate until December 2021 as the planned random sampling exercise “will take time to complete” though the evaluation framework for the CJRS was published in December 2020.47 HMRC clarified in a written response to us that it does not intend to measure the rate of fraud and error in the Self-Employed Income Support Scheme and Eat Out To Help Out schemes and will instead use a “blended approach” bringing in a wide range of available evidence.48
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Government response AI summary
The government agrees and states HMRC plans to publish detailed provisional assessments for each scheme in its annual report and accounts in autumn 2021, along with a technical note on the methodology.
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HM Treasury
19
Recommendation
Ninth Report - Fraud and Error
Accepted
We asked about DWP’s progress in developing a target for fraud and error. We have previously recommended that DWP analyse the extent to which fraud and error in the system was temporary because of the pandemic and what was due to longer term structural issues.49 DWP explained that COVID-19 has …
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We asked about DWP’s progress in developing a target for fraud and error. We have previously recommended that DWP analyse the extent to which fraud and error in the system was temporary because of the pandemic and what was due to longer term structural issues.49 DWP explained that COVID-19 has changed the traditional mix of cases within the benefits system as there are now an increased proportion of claimants who are self- employed or who have capital. DWP’s expectation is that this has changed the risk of fraud and error in the system, and as a result DWP could not tell us when it will set a target for reducing fraud. DWP explained that it wanted to wait to update baseline data before it committed a target to ensure it is meaningful but reaffirmed its commitment to providing us with this information in due course.50
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Government response AI summary
The government agrees to the committee's recommendation, stating DWP is developing options for setting a fraud and error target and will write to the Committee with an update by December 2021.
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HM Treasury
20
Recommendation
Ninth Report - Fraud and Error
Accepted
We asked BEIS about efforts to estimate the level of fraud and error in the Bounce Back Loan Scheme. BEIS told us it has commissioned PwC to undertake a sampling exercise to come up with a specific estimate of fraud which it expects to be completed in May 2021. BEIS …
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We asked BEIS about efforts to estimate the level of fraud and error in the Bounce Back Loan Scheme. BEIS told us it has commissioned PwC to undertake a sampling exercise to come up with a specific estimate of fraud which it expects to be completed in May 2021. BEIS explained that this exercise is taking time as it pulls together a lot of data sources to identify high-risk loans and that working through GDPR consequences, for 41 Government Counter Fraud Function, Cross-Government Fraud Landscape Bulletin 2019-20, February 2021 42 C&AG Guide’s, page 7 43 Letter from Mark Cheeseman, page 1–2 44 Q 33; Cabinet Office, Cross-Government Fraud Landscape Annual Report 2019, February 2020 45 C&AG Guide’s, page 7 46 C&AG Guide’s, page 12-13 47 Q 54 48 Letter from Jim Harra, 7 May 2021 49 Committee of Public Accounts, Department for Work and Pensions Accounts 2019–20, Twenty-Sixth Report of Session 2019–21, HC 681, 18 November 2020 50 Qq 57- 59 Fraud and Error 15 example, “takes care and effort and needs to be done right”. BEIS told us that the interim work performed to date demonstrated that the number of loans that it can pick out as being “absolutely fraud” is “really quite small” and that working through the subtleties that sit behind each application is “not an easy job”.51
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Government response AI summary
The government agrees with the recommendation and has a target implementation date of November 2021. It details ongoing work with PwC to estimate fraud in the Bounce Back Loan Scheme and CBILS, and explains that work to assess fraud and error in grant schemes is …
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HM Treasury
21
Recommendation
Ninth Report - Fraud and Error
Accepted
We asked about what needed to be done to improve the consistency of fraud and error reporting across the public sector. Cabinet Office told us that the introduction of the Functional Standards, a set of minimum criteria for dealing with fraud, is an important tool to increasing consistency of approach.52 …
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We asked about what needed to be done to improve the consistency of fraud and error reporting across the public sector. Cabinet Office told us that the introduction of the Functional Standards, a set of minimum criteria for dealing with fraud, is an important tool to increasing consistency of approach.52 It has also agreed a common definition of fraud and a common typology with all Departments reporting against this.53 Cabinet Office told us that the COVID-19 response has left many departments more exposed to higher levels of risk and loss than previously, but we are not aware of any other departments that have made public commitments to measure the extent of fraud and error in their COVID-19 schemes.54 Data sharing
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Government response AI summary
The government accepts the recommendation, committing to continue working with departments to increase real-time application checks and writing to the Committee by November 2021 to detail progress and future actions on real-time data sharing.
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HM Treasury
22
Conclusion
Ninth Report - Fraud and Error
Accepted
Cabinet Office and DWP told us that timely data sharing can be used to prevent fraud by data matching, improve detection of fraud by sharing intelligence, and enable recovery in cross-government schemes.55 The Digital Economy Act 2017 permits data-matching for the purposes of fraud and error.56 Cabinet Office told us …
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Cabinet Office and DWP told us that timely data sharing can be used to prevent fraud by data matching, improve detection of fraud by sharing intelligence, and enable recovery in cross-government schemes.55 The Digital Economy Act 2017 permits data-matching for the purposes of fraud and error.56 Cabinet Office told us that data analytics is a priority for the Counter Fraud Function which has worked with public bodies to deliver 38 data pilots with an impact of over £90 million to date.57 The Counter Fraud Function is also working to establish closer relationships with the Serious Fraud Office, City of London police, and the National Crime Agency. In addition, it told us that an explicit part of the Function’s strategy is to link up to the cyber and security sides of the Counter Fraud Profession to learn more about different avenues of fraud.58
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Government response AI summary
The government agrees with the recommendation to address gaps in real-time data sharing, stating it will continue to expand real-time application checks and will write to the Committee by November 2021 with details of progress and future actions.
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HM Treasury
23
Recommendation
Ninth Report - Fraud and Error
Rejected
In written evidence Cifas, the UK’s largest cross-sector fraud sharing organisation, told us there should be transparency around the businesses that have been in receipt of COVID-19 support scheme funds, and, in its submission to us, the Fraud Advisory Panel agreed that transparency around fraud and error is “imperative” to …
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In written evidence Cifas, the UK’s largest cross-sector fraud sharing organisation, told us there should be transparency around the businesses that have been in receipt of COVID-19 support scheme funds, and, in its submission to us, the Fraud Advisory Panel agreed that transparency around fraud and error is “imperative” to maintain public trust and confidence.59 The Counter Fraud Function has said it wants to help ensure the UK is the most transparent government globally in how it deals with public sector fraud.60 In December 2020 we recommended that HMRC list details of companies who received support through the CJRS scheme to try and reduce the opportunity for fraud to occur.61 HMRC published details of employers claiming CJRS from December 2020 onwards, but told us there are “limits” as to what details it holds and can publish. HMRC explained that the publication of this information was “really just for public transparency of how 51 Q 69 52 Letter from Mark Cheeseman, page 3 53 Q 77 54 Letter from Mark Cheeseman, page 2 55 Qq 86, 87, 91 56 Fraud Advisory Panel submission, page 6 57 Qq 87,91; Letter from Mark Cheeseman page 3 58 Q 87 59 Cifas submission, page 3; Fraud Advisory Panel submission, page 5 60 C&AG’s Guide, page 4 61 Committee of Public Accounts, Covid-19: Support for jobs, Thirty-Fourth Report of Session 2019–21, HC 920, 20 December 2020 16 Fraud and Error public money is being spent”.62 HMRC told us it was not reliant on the public sharing of information to manage fraud risk as it was not an integral part of the fraud management process, although it welcomed any useful information as a result of doing so.63 In response to a parliamentary question about the list of companies offered coronavirus business interruption loans, BEIS stated it was seeing if it could “publish something soon”.64 In written evidence the Fraud Advisory Panel told us publishing data on loan recipients would have been useful as it could have assisted with the early identification
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Government response AI summary
The government explicitly disagrees with the recommendation to set out new transparency principles for government support schemes, including a presumption of publishing business beneficiaries. It cites a duty to protect the privacy of small businesses and clarifies that information is published where required, with facilities …
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HM Treasury
24
Conclusion
Ninth Report - Fraud and Error
Accepted
In written evidence Cifas told us that it believed government’s failure to mandate industry standard fraud significantly contributed to the vast scale of fraud in COVID-19 support schemes.66 BEIS told us that it “found cross-Whitehall collaboration incredibly useful” on the Bounce Back Loan Scheme and local authority grant schemes. It …
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In written evidence Cifas told us that it believed government’s failure to mandate industry standard fraud significantly contributed to the vast scale of fraud in COVID-19 support schemes.66 BEIS told us that it “found cross-Whitehall collaboration incredibly useful” on the Bounce Back Loan Scheme and local authority grant schemes. It used data held by HMRC to retrospectively check applications for the Bounce Back Loan Scheme which helped banks spot potentially fraudulent applications.67 DWP told us that going forward increased data sharing could enable it to identify changes in claimant’s eligibility for benefits and enable changes to be applied across all benefits before a payment is made, preventing errors from occurring and reducing the need for recovery. DWP told us this “ideal” could be achieved using PAYE system data to automatically adjust universal credit payments.68 DWP also explained that it is considering the use of additional powers, for example data sharing with banks, which would have to be done in collaboration across government.69 62 Qq 78-79 63 Q 80 64 UK Steel Production: Greensill Capital, Volume 691: debated on Thursday 25 March 2021 65 Fraud Advisory Panel submission, page 6 66 Cifas submission, page 2. 67 Q 48 68 Q 86 69 Q 50 Fraud and Error 17 3 Responding to fraud and error
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Government response AI summary
The government agrees with the associated recommendation to address gaps in real-time data sharing, committing to increase the use and expansion of real-time application checks through the GCFF and to write to the Committee by November 2021 detailing progress and future actions.
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HM Treasury
25
Conclusion
Ninth Report - Fraud and Error
Accepted
Each government department has a responsibility to minimise fraud and error, put it right and report on it.70 HM Treasury told us it expects policy to be developed with fraud risk considered at the development and design stage.71 The NAO concluded that deterrence and prevention are often more cost-effective for …
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Each government department has a responsibility to minimise fraud and error, put it right and report on it.70 HM Treasury told us it expects policy to be developed with fraud risk considered at the development and design stage.71 The NAO concluded that deterrence and prevention are often more cost-effective for tackling fraud and error than detection, correction and pursuit and that a cost-effective control environment, where the department is doing everything it reasonably can to minimise fraud and error, leads to the lowest level of fraud and error compatible with the policy intent.72 DWP told us one of its key lessons from the COVID-19 response was the importance of design in terms of trying to avoid fraud and error coming into the system in the first place.73
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Government response AI summary
The government agrees with the associated recommendation, committing to introduce mandatory Fraud Impact Assessments (FIAs) for major projects and high-risk schemes with formal sign-off from the Counter Fraud Function by February 2022. It will amend "Managing Public Money" guidance and develop policy official guidance to …
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HM Treasury
26
Conclusion
Ninth Report - Fraud and Error
Accepted
The Cabinet Office told us that the Counter Fraud Function is aiming to introduce a minimum standard for fraud risk assessments across government.74 But it is also still working to increase awareness of the Counter Fraud Function.75 For example, consultation with the Function’s central team of experts is at the …
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The Cabinet Office told us that the Counter Fraud Function is aiming to introduce a minimum standard for fraud risk assessments across government.74 But it is also still working to increase awareness of the Counter Fraud Function.75 For example, consultation with the Function’s central team of experts is at the discretion of each department, though Cabinet Office recognised some departments will be able to draw on their own internal counter fraud expertise.76 BEIS told us that despite the increased risk of fraud and error compared to its usual operations it did not consult the Function when designing the Bounce Back Loan Scheme. However BEIS did not think any additional counter fraud expertise or analysis would have changed its position given Ministers had already made the decision to tolerate the increased risk to ensure speedy delivery.77
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Government response AI summary
The government agrees with the associated recommendation, committing to introduce mandatory Fraud Impact Assessments (FIAs) for major projects and high-risk schemes with formal sign-off from the Counter Fraud Function by February 2022. It will amend "Managing Public Money" guidance and develop policy official guidance to …
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HM Treasury
27
Conclusion
Ninth Report - Fraud and Error
Accepted
The Cabinet Office told us that in emergency situations like the pandemic response it is important to get support out to communities and individuals who need it, and how you balance accessibility and control is one of the areas counter-fraud professionals and other professionals in policy, finance and risk management …
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The Cabinet Office told us that in emergency situations like the pandemic response it is important to get support out to communities and individuals who need it, and how you balance accessibility and control is one of the areas counter-fraud professionals and other professionals in policy, finance and risk management all look at.78 We previously concluded that BEIS’ focus on speed of delivery for the Bounce Back Loan Scheme has exposed the taxpayer to potentially huge losses.79 BEIS told us this decision was a “difficult trade off”.80 In written evidence Cifas told us that even allowing for time pressures when the support schemes were first introduced, administering public sector bodies have in many instances continued to receive minimal consultation on preventing during subsequent rounds of funding.81 We recently heard from the Department for Digital, Culture, Media and Sport on its efforts to prevent fraud within the Culture Recovery Fund. DCMS attributed the Fund’s low level of fraud to its upfront due diligence process, though recognised this increased the time it took to distribute funding to recipients.82 70 C&AG’s Guide, page 7 71 Q 33 72 C&AG’s Guide page 8 73 Q 50 74 Q 52 75 Q 40 76 Q 67 77 Q 66 78 Q 68 79 Committee of Public Accounts, Covid-19: Bounce Back Loan Scheme, Thirty-Third Report of Session 2019–21, HC 687, 16 December 2020 80 Q 52 81 Cifas submission page 2 82 Oral evidence, COVID-19: Culture Recovery Fund, HC 1291, 26 April 2021, Q 76 18 Fraud and Error
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Government response AI summary
The government states that departments already take a risk-based approach to fraud and error, in line with best practice advocated by the Government Counter Fraud Function and supported by existing standards and guidance, implying this addresses the balance between accessibility and control.
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HM Treasury
28
Conclusion
Ninth Report - Fraud and Error
Not Addressed
We asked DWP how it balanced the need to protect taxpayers’ money with the speed and accessibility of support schemes. DWP told us that Universal Credit was a good example of balancing these needs as applications normally rely on people coming into the jobcentre for ID checks which was no …
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We asked DWP how it balanced the need to protect taxpayers’ money with the speed and accessibility of support schemes. DWP told us that Universal Credit was a good example of balancing these needs as applications normally rely on people coming into the jobcentre for ID checks which was no longer possible. DWP told us it had to find other ways of verifying information which were “less satisfactory”, but over time was able to find new techniques, using data and remote methods. DWP explained that those early cases where payments were made without having satisfactory data were flagged for review and it now has a team of 1,400 people methodically going through those cases, one by one, to put them right.83 Consequences of fraud and error
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Government response AI summary
The response provides a general statement about departments taking a risk-based approach to fraud and error, failing to address the specific DWP processes, verification issues, or the team reviewing past cases mentioned in the conclusion.
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HM Treasury
29
Recommendation
Ninth Report - Fraud and Error
Accepted
Departments need to ensure that they detect fraud and error and recover overpayments wherever possible.84 HM Treasury told us it is up to departments to undertake an assessment of how feasible it is to recover funds lost to fraud and error. DWP told us it has a “lot of different …
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Departments need to ensure that they detect fraud and error and recover overpayments wherever possible.84 HM Treasury told us it is up to departments to undertake an assessment of how feasible it is to recover funds lost to fraud and error. DWP told us it has a “lot of different ways of recovering debt”.85 For example DWP explained that debt recovery from vulnerable individuals through the Breathing Space Scheme is by a reduction of benefits and there is a cap in place where this reduction would cause hardship.86 Cabinet Office told us that it has started making moves towards increasing the commonality of sanctions applied by departments and has an “aspiration” to open up powers and sanctions to allow other parts of government to access them as part of their counter-fraud arrangements.87
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Government response AI summary
The government responds by stating that departments already take a risk-based approach to fraud and error, which aligns with best practice and is supported by relevant guidelines.
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HM Treasury
30
Conclusion
Ninth Report - Fraud and Error
Rejected
We asked DWP and HMRC about the different departmental responses to similar fraudulent actions, such as concealment of earnings. HMRC told us it has a policy of using criminal investigations in only the most serious cases, where it is the necessary response and where it will have a real deterrent …
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We asked DWP and HMRC about the different departmental responses to similar fraudulent actions, such as concealment of earnings. HMRC told us it has a policy of using criminal investigations in only the most serious cases, where it is the necessary response and where it will have a real deterrent effect, or where the taxpayer has taken certain actions that only criminal investigation will enable HMRC to get to the bottom of, such as when information is beyond the reach of its civil powers.88 HMRC explained it focuses instead on disrupting criminal activity to make it unprofitable.89 DWP explained that in 2017 it increased the threshold for fraud that it would pursue through the criminal process as opposed to the civil process and it increasingly uses administrative penalties, rather than full-scale prosecution, because it wants to focus criminal investigations on serious organised fraud.90 DWP told us one of the big investments DWP has been making is to make it easier for people to inform the department of a change, for example through online prompts in systems which are making some difference in sweeping up errors caused by a failure to notify of a change of circumstance.91
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Government response AI summary
The government rejected what it interpreted as a recommendation, disagreeing with the committee's implied criticism of different departmental responses to fraud and stating that DWP and HMRC strategies are closely aligned, while committing to keep practices under review.
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HM Treasury
31
Recommendation
Ninth Report - Fraud and Error
Accepted
We asked BEIS about plans to recover loans made as part of the Bounce Back Loan Scheme. BEIS told us that in the first instance, it is the banks responsibility to manage recovery in line with their usual processes.92 BEIS explained that it is planning to work with the police …
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We asked BEIS about plans to recover loans made as part of the Bounce Back Loan Scheme. BEIS told us that in the first instance, it is the banks responsibility to manage recovery in line with their usual processes.92 BEIS explained that it is planning to work with the police to carry out criminal investigations, and pursue a civil recoveries programme 83 Q 51 84 C&AG’s Guide page 7 85 Q 81 86 Qq 81, 83 87 Q 27 88 Q 25 89 Q 88 90 Q 25 91 Qq 85-86 92 Q 61 Fraud and Error 19 where potential frauds impact multiple banks...93 BEIS told us it has also taken on police support for enforcement of the most organised, serious, highly criminal cases of fraud in the local authority grant schemes, though local authorities remain responsible for the low- level recoveries process.94 93 Q 63 94 Q 70 20 Fraud and Error
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Government response AI summary
The government agrees with the recommendation and states that the British Business Bank reviews lender recovery efforts, with BEIS holding the Bank accountable through governance meetings and monitoring performance.
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HM Treasury