Source · Select Committees · Public Accounts Committee
Recommendation 9
9
Rejected
Many departments lack reliable fraud measurement despite significant estimated losses
Conclusion
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
Government Response 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 departments.
Government Response
Rejected
HM Government
Rejected
2.1 The government disagrees with the Committee’s recommendation. 2.2 The PSFA recognises the value in having a strategic picture of the highest risk areas. In its Mandate, the PSFA committed to the creation of the High-Risk Fraud Portfolio. As this is built, it will provide a common understanding, and strategic intelligence picture, of the highest risk areas that can be shared across government. The government will seek to be transparent. However, it will not publish any information that could increase the fraud threat by showing how attacks could be executed. The PSFA will not publish a separate strategic intelligence report. 2.3 The PSFA will continue to publish annual Fraud Landscape Reports and bulletins. These outline the main risks and issues across government, including the levels of detected fraud (and corruption) and associated error in departments and public bodies (excluding tax and welfare, as these are published elsewhere). These levels are based on the best available evidence. The PSFA are working with departments to identify opportunities to improve the quality of data use in these estimates. 2.4 Fraud Measurement exercises will continue as a tool to understand fraud and error loss levels in areas of high risk. The PSFA will continue encouraging, and supporting, departments to do more targeted measurement through assurance, training and updating standards, including learning from our international partners. Disaggregating between fraud and error requires determining intent which is cost intensive and may not be the most effective use of counter-fraud resources, so is left to the discretion of individual departments.