Internal Audit - Counter Fraud Annual Report 2017/18
To consider the report of the Head of Finance.
The Head of Finance submitted a report (HF/76/18) to enable consideration to be given to the Counter Fraud Report 2017/18.
The Audit Lead introduced the report and gave an overview of the counter fraud arrangements in place to mitigate the risk of fraud within the Council. The report included information on national trends, assessed the effectiveness of the Council’s counter fraud arrangements and provided further information on those frauds which were summarised in the Internal Audit reports received by the Audit Committee on a regular basis during 2017/18. There was a significant inherent risk of fraud for all local authorities, but there was little evidence that fraud was currently a major problem in Wrexham, however, it was essential that the risk was regularly re-assessed. The Council had a zero tolerance approach to fraudulent activity and maintained an effective counter fraud culture which incorporated procedures which were in line with good practise, resilient and were currently considered to be proportionate to the risk.
During consideration of the report Members raised the following points in particular:
· Procurement fraud had been identified as the greatest fraud risk area and accounted for 56% of estimated Local Government fraud. Members sought an assurance that adequate counter fraud arrangements were in place to mitigate the risk within the Council.
· The Service Manager - Audit and Technical referred to the established counter fraud policy and procedures arrangements. The Council constantly reviewed national developments to maintain an up to date awareness of the type of fraud it may be exposed to and was linked to the National Anti-Fraud Network. In addition, articles and bulletins were placed in staff newsletters on a regular basis to raise staff awareness of potential fraudulent activity.
· Further information was requested on the two proven cases of fraud identified by the Council during 2017/18.
· Members commented upon the good work being undertaken by Council staff in identifying cases of benefit fraud, however, expressed concern on the lack of feedback on those cases referred by the Council to the Department for Work and Pensions Fraud and Error Service (FES).
· In response, the Head of Finance commented that in accordance with the national Service Level Agreement all benefit fraud cases were referred to FES for them to administer appropriate sanctions. There has been an improvement in the level of feedback obtained and the Council now receive quarterly returns from FES outlining their performance. These returns showed that of the 102 cases referred to FES during 2017/18, five had resulted in prosecutions and two administrative penalties had been issued.
· The Head of Finance commented that there was a need to continue to review the effectiveness of the SLA agreement with DWP. He agreed to contact the FES Manger to discuss possible measures that could be undertaken to improve the quality of feedback received. In addition, future Counter Fraud reports submitted to the Audit Committee would contain a paragraph on the progress of benefit fraud cases referred to FES.
· With reference to the Counter Fraud Risk Scoring Matrix included in Appendix B, several Members commented that they were unable to follow the matrix scores for the assessment of several specific fraud risks. As an example, the matrix had assessed both Benefit Fraud (B3) and Assets and Stock Fraud (A3) as a moderate risk to the Council, however, during 2017/18 there had been 102 cases of Benefit Fraud referred by this Council to the DWP whilst there had been no recorded instances of Assets and Stock Fraud within the Council or throughout Wales.
· The Lead Auditor commented that the scoring matrix took account of various factors including weaknesses in the Council’s risk and control environment in addition to the number of recorded instances to estimate the risk. It was agreed that, if the matrix was to be used in future reports, an explanation of the factors taken into consideration when assessing the risk should be also included.
(i) That the report be noted be noted and the Audit Committee accepted the assurance evidence provided.
(ii) That the Head of Finance to contact the FES Manger to discuss possible measures that could be undertaken to improve the quality of feedback received with regard to Benefit Fraud referrals.