Fraud is a serious and growing problem across all sectors and can have devastating consequences for the victims, both individuals and organisations. Part of the difficulty with tackling it is that it’s a crime that takes many forms and is constantly adapting to avoid detection. Its sophistication is growing as technology improves, spreading whenever exploitable gaps in a system are found. Today, cybercrime is an increasing threat, as last year’s Wannacry ransomware attack on, among other organisations, the NHS, reminded us. The response to this type of crime therefore must be equally flexible and sophisticated.
For the public sector, which already has the challenges of absorbing funding cuts, finding efficiencies and managing increasing demand, fraud can have a very real impact on the ability to provide public services. And there is a 'damned if you do and damned if you don’t' public relations conundrum about detecting fraud.
The true scale of loss to the public purse is hard to accurately assess. According to the Annual Fraud Indicator 2013, which provides the last set of government sanctioned estimates, fraud costs the public sector at least £20.6bn annually. Within that there were a multitude of crimes, from tax and benefit fraud to corrupt procurement practices, and payroll fraud.
Conducting criminal and disciplinary investigations, handling data protection and human rights issues, developing fraud risk assessment strategies, alongside a long list of other competencies required of the modern counter fraud professional, is a significant undertaking for even a large, well-resourced organisation. Which is why CIPFA has been focusing increasing resources in its counter fraud capabilities to support members’ organisations.
Recognising this growing risk, CIPFA set up the Counter Fraud Centre (CCFC) in 2014 in order to equip the public sector with the knowledge and skills to stamp out fraud. As well as running a number of training courses and qualifications including a fraud risk management qualification and a whistleblowing e-learning course, it has produced the Code of Practice on Managing the Risk of Fraud and Corruption, the local government counter fraud strategy Fighting Fraud and Corruption Locally, and each year produces a survey tracking the extent of fraud hitting public bodies, CFaCT. Added to this is a long list of resources for public sector fraud teams; for example, the local government counter fraud assessment tool and fraud reviews.
Key to its success has been the wide network of organisations the Centre has worked with over recent years. Since its conception, a core theme for the Centre has been the sharing of information to help identify fraud and improve protection. This has included close alignment with government stakeholders, such as the National Audit Office (NAO), the National Crime Agency (NCA) and the Local Government Association (LGA), as well as private sector partners, such as BAE, Moore Stephens and Mazars.
This concerted counter fraud collaboration has helped form two conclusions. First, fraud must be treated as a strategic, management-level issue, rather than left solely to the back office. Secondly, working together, combining resources and sharing data is much more effective at combating a crime that crosses organisational and geographical boundaries.
CCFC’s response to this has been the design of new public sector counter fraud offers, the counter fraud hubs, where tackling fraud is treated as a collective effort, engaging a level of sophistication to match today’s fraud. The first example of this, now built and about to go live, is the London Counter Fraud Hub (LCFH), a data-sharing and analytics solution, which is being led by Ealing Council and London councils, and run by CIPFA, together with a number of partners. Recognising that a fraud does not often conform to borough boundaries, the LCFH’s purpose is to use data, stretching right across the capital, to pinpoint fraud through the analysis of multiple datasets. Over the course of the last year, CIPFA has been moving through the pilot phase (with Ealing, Camden, Islington and Croydon), testing the concept in three areas: single-person discount council tax (SPD), housing tenancy and business rates.
Having generated a higher than anticipated number of alerts across each of the three fraud types, the LCFH is now preparing to enter its operational phase, where it begins catching frauds happening throughout the city and ensuring public money is redirected to where it is most needed.
And while the LCFH is only now approaching the point of going live, the CCFC team is already in several conversations with public bodies around the country that are eager to develop similar counter fraud hubs in their own regions.
This article first appeared in Public Finance.