Recommendation 7

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