Fraud is all around us. Wherever there’s money, there are also people actively working to manipulate systems and steal for their personal benefit. The public sector is not immune to this and equally vulnerable to economic crime. It is estimated that up to £49bn of public money is lost to fraud in the UK each year – money that should be spent on vital public services.
Though it may be impossible to fully eradicate fraudulent activity from society, it certainly is possible to implement measures to prevent financial crime from happening in the first place. While governments may choose to fight fraud in different ways, CIPFA believes that preventative strategies, strong governance and long-term planning are the most effective measures for countering fraud.
Understandably, for many ‘good governance’ is an abstract term and it is not always clear how to improve governance frameworks. The good news is this doesn’t have to be the case. Governance can be improved and strengthened through high levels of accountability, an organisational focus on ethics and effective long-term planning. Responsibilities must be clearly assigned and, not only must senior leadership have the necessary authority and adequate decision-making skills, but there must also be mechanisms in place to hold them to account.
An organisational culture underpinned by strong ethics, where individuals feel confident enough to raise anomalies or concerns via appropriate channels, is also key. It’s critical to keep the risk of new fraud in mind when developing new processes, to ensure that new delivery arrangements or organisational structures don’t inadvertently encourage unwanted behaviour. New structures and changing services will undoubtedly lead to new risks and increase the need for clarity of responsibilities. Long-term planning helps mitigate these risks, including consideration of how to manage fraud, bribery and corruption incidents by having a fraud management strategy and response plan in place.
A strong example of a public sector strategy focused on prevention and good governance is the recent NHS England Economic Crime Strategy. Announced in September 2019, the strategy places an NHS-wide focus on proactive counter-fraud measures to limit the diversion of public funds intended for patient care. Some of the prescribed measures include training and awareness programmes, fraud-proofing existing policies and procedures, proactive detection exercises and procedures and communicating successfully prosecuted cases to create a deterrence effect.
The new NHS plans also highlight the service’s approach to proactive data analytics, in an effort to better analyse, verify and validate transactions, with a particular focus on a key practice area with high rates of fraud – primary care contracting. Furthermore, the strategy emphasises the importance of culture and ethical principles at all levels of NHS organisations, as well as providing details of current and future plans to address fraud risk areas. The NHS England Economic Crime Plan highlights the importance of considering anti-fraud arrangements when designing governance structures, illustrating the synergy between the two.
As counter-fraud practitioners, CIPFA continues to stress that effective governance and preventative measures go hand in hand. In the case of NHS England, the structure of business operations is unique. Against the backdrop of this structural complexity, September’s strategy underlines the importance of accountability – a key factor that can often be overlooked. Although the outcomes and impact of the recent plan have yet to be realised, the NHS has put forward a comprehensive counter-fraud strategy that serves as a strong example for the rest of the public sector.
More information about CIPFA's preventative counter fraud solutions is available online: CIPFA Counter Fraud Centre.
This article first appeared in Public Finance.