Agenda item

Report of the Strategic Director, Corporate Resources

The Committee received a report which provided an update on activity undertaken since 1 April 2017 by the Internal Audit and Risk Service in relation to the work of the Corporate Fraud Team.

 

The Government’s latest figures state that fraud costs local authorities an estimated £2.1 billion a year and the Council’s Audit and Standards Committee is responsible for monitoring the arrangements the Council has put in place to mitigate the risk of fraud and corruption.

 

The Committee were informed that two dedicated fraud officers were appointed in April 2017 and following a period of training are now Accredited Counter Fraud Specialists (ACFS) with CIPFA. The team are managed by a Senior Audit and Risk Officer.

 

The Corporate Fraud Officers will carry out proactive anti-fraud and corruption work, targeting the areas which have been identified nationally as being at a high risk of fraud, and include:

 

·         Council tax discounts and exemptions

·         Council tax benefits

·         Non-domestic rates relief

·         Blue badge scheme misuse

·         Procurement fraud, including links to organised crime

·         Tenancy fraud (domestic and commercial)

·         Direct payments

·         Insurance fraud

 

Other work includes carrying out fraud investigations, delivering training to increase awareness throughout the Council, maintaining and communicating the Council’s Counter Fraud and Corruption arrangements and the provision on increased support to management to prevent and detect fraud.

 

The Committee were advised that an updated Counter Fraud and Corruption Strategy, Counter Fraud and Corruption Policy, and Fraud Response Plan was agreed by Audit and Standards Committee on 29 July 2018, and approved by Council on 22 March 2018.

 

In order to support management pro-actively in the prevention and identification of potential fraud and irregularity, the Corporate Fraud Team are members of the following regional and national bodies:

 

·         National Anti-Fraud Network (NAFN)

·         North East Fraud Forum (NEFF)

·         North East Tenancy Fraud Forum (NETFF)

·         CIPFA’s Counter Fraud Centre

·         CIPFA Better Governance Forum (BGF)

·         North East Regional Investigation Officers Group (NERIOG)

 

A counter fraud communication and awareness strategy is currently being developed with the Communications Team to publicise the work of the Corporate Fraud Team, and to show the Council’s commitment to preventing and reporting fraud and corruption. The strategy will include publications in the Team Brief, Council News, Council webpage, social media and detail examples of any proactive exercises and the outcomes of any successful prosecutions.

 

A summary of the counter fraud awareness initiatives progressed to date were reported to Committee:

 

·         Development of a dedicated fraud webpage with an online fraud reporting form, email mailbox and telephone line.

·         Counter Fraud and Corruption Arrangements agreed by Cabinet and Council in March 2018.

·         Employee Bulletin issued to Members and employees to direct them to read and adhere to these arrangements.

·         Developing a Fraud Risk Register.

·         Regular alerts and warnings are received from NAFN regarding a range of frauds and scams against Councils and schools. All warnings are monitored by the Corporate Fraud Officers and communicated to the relevant service areas.

·         Attendance at NEFF workshops and seminars, receiving warnings of scams and alerts and utilising good practice.

·         Attendance at quarterly meetings of the NETFF, accessing good practice, information and guidance relating to tenancy fraud and developing a network of key operational contacts.

·         Participation in a regional tenancy fraud awareness week in November 2017 to coincide with International Fraud Awareness week.

·         Attendance at quarterly NERIOG to share best practice, share training costs, review how fraud is tackled regionally and general corporate fraud discussions.

·         Utilisation of the forums available within the CIPFA Counter Fraud Centre to identify best practice.

·         Completion of CIPFA Counter Fraud Benchmarking, CIPFA Fraud and Corruption Tracker and CIPFA Code of Practice on Managing the Risk of Fraud and Corruption Assessment Tool. These returns have been used to detect any areas of improvement and to identify future development work required.

·         Working with Durham County Council to implement a fraud management system which will be maintained for all reported cases of fraud and irregularity and also implement a regional data hub to allow for regional data matching activities.

 

The Committee were advised that the Fraud Response Plan, which underpins the Counter Fraud and Corruption Strategy, requires that cases of attempted, suspected or proven corporate fraud or irregularities must be reported to the Corporate Fraud Team when they are identified or raised.

 

Work is ongoing to develop a fraud management system to record all suspected cases of fraud and irregularity reported whether or not the matter is investigated by the Corporate Fraud Team. The maintenance of these records will be essential to monitor the impact of fraud, on and within the Council, as a measure of the effectiveness of the Counter Fraud and Corruption Strategy. Once implemented, the fraud investigation activity will be reported to this Committee.

 

The Committee were also advised that records will be monitored to identify any potential trends and/or potential weaknesses in the control environment that may require further action or attention.

 

Any control weaknesses that are identified, will be reported through recommendations in Service Internal Audit reports. Any emerging patterns will help inform the Audit Plan and potential proactive fraud work in the future.

 

Progress on any live investigations are also reported to the Internal Control Group on a monthly basis.

 

The Committee were advised that Corporate Fraud Officers are currently working with Legal and Democratic Services on a Right to Buy investigation that it is anticipated will be taken for prosecution with regard to a fraudulent claim of £77,900 discount. If proven, the Council could have claim to recover the property and other monies under the Proceeds of Crime Act. Updates on this investigation will be reported to a future meeting of this Committee.

 

Officers reported that the Corporate Fraud Team identified two initial areas to focus as proactive counter fraud reviews. These are non-domestic rates relief and blue badge scheme misuse.

 

An exercise is currently underway to identify cases of potential Business Rates Charitable Relief fraud. This review involves checking Business Rates accounts which are receiving both mandatory and discretionary charitable relief.

 

In terms of blue badge, the Corporate Fraud Team is working with Parking Services to agree a targeted proactive exercise during 2018/19. Parking Services have now included a ‘How to report suspected fraud’ section on their webpage which directs users to the Corporate Fraud webpage.

 

As part of the continuous development of the Corporate Fraud Team and raising awareness and building working relationships with key contacts, Corporate Fraud Officers are conducting introductory meetings with senior managers in high risk areas to establish what fraud arrangements are in place and where the Team may be able to assist in the future and provided added value.

 

A standard counter fraud objective for testing is now included within appropriate internal audits in the 2018/19 audit plan to ensure that senior managers are aware of their responsibilities in relation to detecting and preventing fraud within their areas of responsibilities.

 

The National Fraud Initiative (NFI) is an exercise that matches electronic data within and between public and private sector bodies to prevent and detect fraud.

 

Work continues on the NFI data matching results released in January 2017 for the 15 data sets included in the NFI exercise. The data covers payroll, pensions, trade creditors’ payment history and standing data, housing (current tenants) and right to buy, housing waiting lists, housing benefits, council tax, electoral register, student loans, private supported care home residents, transport passes and permits (including residents’ parking, blue badges and concessionary travel), insurance claimants, licences (market trader, taxi driver and personal licences to supply alcohol) and personal budget direct payments.

 

A total of 8,788 matches were identified, of which 1,957 were ‘recommended’ matches which have been prioritised for investigation. All ‘recommended’ matches should be investigated by the end of March 2018. Of the recommended matches relevant to the Council, two are currently outstanding which relate to Council Tax and are currently being reviewed.

In terms of outcomes from the matches investigated, there are currently three overpayments being recovered. Transactions for £42,000 and £11,000 as a result of duplicate creditor payments and another for £1,000 as a result if a deceased pensioner overpayment have been identified which are recoverable.

 

The next NFI exercise is due to start during 2018/19 with data being submitted to the Cabinet Office in October 2018.

 

The review of the Council Tax Single Persons Discount (SPD) for 2017/18 has resulted in the discount being removed from accounts to the value of £585,502.

 

The Committee were informed that the self-assessment of good practice and the terms of reference for this committee will be coming to the next meeting for discussion.

 

Members also requested that in future a ten-minute spot be set aside at each meeting for senior/middle managers to be invited along to tell the committee what issues they face in their area and where the work of the audit and standards committee fits in to the wider council structure. On the back of this the committee would also like to hear how these managers manage risks in their own area.

 

The committee were also informed that Standards issues will be re-introduced to the agenda on a regular basis in the future.

 

The Committee wished to place upon record its praise to the staff in the council’s resilience and emergency planning team for the way they have handled the recent fire evacuation at Regent Court flats.

 

RESOLVED -	i)	That the information be noted.
	ii)	That middle/senior managers be invited to attend each future meeting to provide an update on risks they face in their area.
	iii)	That standards issues be re-introduced to future agendas.
	iv)	That thanks of the Committee be placed upon record to the Council’s Resilience and Emergency Planning team for the way they dealt with the recent fire evacuation at Regent Court Flats.