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Audit Wales: public sector fraud needs to be taken seriously

12 August 2020: Audit Wales reports that fraud in the Welsh public sector could be costing up to £1bn a year.

Audit Wales has issued a report on public sector fraud in Wales, identifying seven key themes that public bodies need to focus on. It says counter-fraud arrangements need to be strengthened, particularly in local government.

According to Adrian Compton, Auditor General for Wales: “Many local authorities have invested so little in counter-fraud arrangements that they have only a few of the key components in place. While the position is generally much more robust across the NHS in Wales, there is still a challenging agenda to make counter-fraud fit for the next decade where globalisation and the advent of digital technology have created new risks, and opportunities, for the fraudsters.”

The seven key themes of the report are: 

  1. leadership and culture; 
  2. risk management and control frameworks; 
  3. policies and training; 
  4. capacity and expertise; 
  5. tools and data; 
  6. collaboration; and 
  7. reporting and scrutiny.

If these themes seem familiar, it’s because a report commissioned by the MHCLG into fraud in local government procurement contained similar topics and recommendations. This ICAEW article summarises that report.

Audit Wales comments that some public sector leaders are sceptical about the level of fraud within their organisations and are reluctant to invest in counter-fraud arrangements. The report highlights how prevalent fraud has become and recommends that a culture of anti-fraud behaviour should be embedded within all public bodies. It also says that having a co-ordinated and coherent leadership of counter-fraud across the Welsh public service will help.

National and organisation-specific intelligence should be used to inform comprehensive risk assessments. These risk assessments should be timely and of high quality – a good example of emerging risks being identified and shared across the Welsh public sector was the April fraud risk bulletin issued by the Welsh Government in response to the pandemic.

Training in how to detect and respond to fraud is vital. Clear policies and procedures need to be adopted by all public bodies, and cases need to be publicised, with robust messages given by leaders that this kind of activity will not be tolerated. Dedicated resources need to be allocated to counter-fraud work, with smaller bodies pooling resources to utilise appropriately skilled staff. Data analytics are a vital tool in the prevention and detection of fraud and need to be adopted to stay ahead of the fraudsters.

Proper use should be made of the Digital Economy Act to share data across different departments and public bodies. Fraud intelligence should be shared to establish a national picture of fraud, and this can be used to support targeted action to tackle fraud.

Audit Committees need to do more to fully engage in tackling fraud and in holding officials to account. The report suggests that other than within the NHS, many Audit Committees have not been proactive in recognising the increasing risk of fraud.

Alison Ring, director for public sector at ICAEW, said:

One of the positive outcomes of the pandemic is that fraud reports are being shared across borders and departments. The Welsh Government should continue to liaise with the UK Cabinet Office on improving the impact of local authority counter-fraud leads in implementing counter-fraud measures.

Unfortunately, fraudsters will exploit any opportunity, and public sector bodies need to identify risks, if not before, then at least at the same pace as the fraudsters. This can only come about if public sector bodies take fraud seriously and work together, sharing information to reduce the amount of public money lost to fraudsters and scammers.”