Protecting the public purse from grant fraud

11-12-2020

By Rob Whiteman, CIPFA CEO

It seems strange to say so, but in many ways, the pandemic has brought people together. In the spring, we saw neighbours come together every Thursday night to thank and celebrate health and care staff through Clap for Carers. Thousands upon thousands signed up to be a part of the government’s volunteer army. In more recent months, the government’s decision not to extend free school meals for vulnerable children over half term and Christmas prompted councils, businesses and communities to step in to fill the breach. At individual, organisational and sub-national levels alike, we have seen inspiring displays of compassion, kindness and community spirit. If only that were all we’d seen.

As much as we’d love to be able to say that the pandemic has been the great unifier of our generation, that would ignore the fact that many have taken advantage of the chaos and uncertainty to line their own pockets. In September, HMRC told the Public Accounts Committee that up to £3.5bn in Coronavirus Job Retention Scheme payments may have been claimed fraudulently or paid out in error. The bank advising government on the Bounce Back Loan Scheme twice raised concerns that the scheme was at "very high risk of fraud" from "organised crime". And over 100 councils have identified more than £8m in fraud to the National Anti-Fraud Network. It is clear that we have seen the worst in people as well as the best.

Criminals taking advantage of uncertainty to commit fraud in the public sector is by no means a new phenomenon. However, the sheer amount of public money now being given out at pace in the form of discretionary grants means that grant fraud has been, and will continue to be, a particular risk to the public purse.

Unsurprisingly, the focus from government has been on getting funds out of the door to the businesses and people that needed them most. While this was necessitated by the crisis, the reduced emphasis on control and weakening scrutiny means that we have seen an increase in the success rate of fraud in the last year.

However, this period of increased risk has also represented an opportunity to improve the public sector’s approach to tackling fraud. During CIPFA’s annual conference in October, Neil Green, deputy director for counter fraud and investigation at the Government Internal Audit Agency, highlighted that increased collaboration between UK local government and the Department for Business, Energy and Industrial Strategy (BEIS) had resulted in an increased focus on fraud prevention, rather than simply detection and prosecution.

The need for a greater focus on prevention is an issue that we at CIPFA have been emphasising to the sector for some time. For a long time, the approach to fraud in local government has been largely reactive. While fraud investigation still has its place in a robust fraud strategy, a detection-first approach to addressing the issue, more often than not, represents an attempt to close the gate once the horse has already bolted. It requires substantial time and resource to pursue and investigate potential incidents, with no guarantee that those funds will be recovered successfully.

While preventative measures mitigate against this, they come with their own challenges. Many local authorities have highlighted that making the business case for greater investment in prevention is particularly difficult in the absence of established, proven methodologies to quantify savings that would result from prevention activities.

We accept the challenges in making that case – the move to focus on prevention will need close management, strong risk assessment, and room to evolve. But most of all, it will require courageous local authority leaders to strike out and pioneer these approaches to share best practice with the sector at large.

We at CIPFA will continue to support local authorities and the public sector more widely in this mission, because we are clear that a prevention-first approach represents the biggest opportunity for tackling public sector fraud and protecting the public purse.

This article first appeared in Business Reporter.

Webchat is available Monday to Friday, 09:00 - 17:00 (excluding UK bank holidays).