Source · Select Committees · Public Accounts Committee
Recommendation 25
25
Accepted
Central government currently lacks oversight of local authorities' fraud and corruption risk management.
Conclusion
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
Government Response 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.
Government Response
Accepted
HM Government
Accepted
7.1 The government agrees with the Committee’s recommendation Recommendation implemented 7.2 With respect to fraud against local government, it is the responsibility of each council’s Chief Financial Officer to put in place appropriate arrangements to support the proper administration of their financial affairs, as well as an internal audit system to ensure that effective and sound financial controls are in place. This is a core principle of local government’s overall accountability system and includes tackling fraud and safeguarding public money. 7.3 Nonetheless, the Department for Levelling Up, Housing and Communities (DLUHC) accepts responsibility for the sector’s wider accountability framework. DLUHC has published new, statutory Best Value guidance for consultation, and sought to provide guidance and advice on how these can be delivered in a manner that minimises the risk of fraud and error. 7.4 In 2020, DLUHC published a review into procurement fraud in local government, which included a series of case studies to demonstrate where councils have acted against procurement fraud to enable councils to learn from one another, as well as highlighting possible measures that councils could implement to strengthen their resilience to procurement fraud. 7.5 In addition, DLUHC and the PSFA are working together to better understand local government fraud. Supported by the PSFA, DLUHC is leading a Fraud Risk Assessment exercise across a number of funds administered by local authorities. It aims to understand better the counter fraud challenges faced by these local authority funds and identify thematic fraud risks. The outputs from the Fraud Risk Assessment exercise will be used to identify where further government action might be required to support local authorities. 7.6 The government agrees with the Committee’s recommendation. Recommendation implemented 7.7 The PSFA works directly with ministerial departments and public bodies (bodies publicly funded to deliver public or government services), as set out in the PSFA mandate. 7.8 Whilst implementing arrangements and controls to tackle fraud and safeguard public money is the responsibility of each council's Chief Financial Officer, the PSFA also shares practices and makes available standards to the wider public sector, including local government. In addition, local government counter fraud professionals can join the Counter Fraud Profession. 7.9 When requested, the PSFA also supports assurance processes on selected schemes delivered through local authorities. For example, the PSFA provided expert advice and counter fraud services to the recent energy support schemes, to understand and minimise potential fraud loss. 7.10 The PSFA also runs the National Fraud Initiative (NFI). This is a highly successful counter fraud data matching exercise. Between April 2020 and March 2022 this enabled participating organisations to prevent and detect/recover £443 million fraud and error across the UK. Data for the NFI is provided by over 1,100 participating organisations from the public and private sectors, including local authorities