Fraud Awareness Session - March 2016

Aims and Objectives• To assess your understanding of what is a

fraudulent act • To understand what is fraud, how it can arise

and why it is important that organisations take action to mitigate the on-going threat of fraud

• To raise awareness of the work undertaken by Internal Audit

• To re-affirm Members’ Role in Council good governance

A strong Ethical Culture• Zero Tolerance to all forms of fraud.• Embedded suite of Counter fraud

Policies/Procedures designed to promote high ethical standards:-i) Constitution, Financial Regulations and Procurement

Regulations;ii) Members and officers Codes of Conduct;iii) Confidential Reporting (Whistle Blowing Policy);iv) Counter Fraud, Corruption & Bribery Strategy and

guidance notes and Anti-Money laundering Policy;v) Effective Internal Audit Service.

Why does Fraud Matter?The annual fraud loss in the UK is estimated to be £52 billion. This includes losses of £20.5 billion in the public sector

Public Sector Fraud

£20.5bn

PubTax - £14bnlic Sector Fraud

£20.5bnCentral Government - £2.5bn

Local Government - £2.1bn

Benefits - £1.9bn

Can we afford to ignore Fraud?That ‘lost’ £20.5 billion couldfund 700,000 public sector staff !!

Fraud can also lead to...

• Reputational damage• Distrust • Poor morale• Higher taxes• More expensive public services• Funding for terrorism, drug gangs,

child exploitation etc

Are these Fraudulent Acts?Which of the following would you consider to be a fraudulent act?1. Working for another employer whilst off sick?2. Inflating your working hours?3. Over-claiming mileage and subsistence on

travel expenses?4. Purchasing goods via the Council’s ordering

procedures for own personal use?5. Falsifying existence of qualifications on job

application forms?

What is Fraud?•“…a criminal activity where deception is used for

• personal gain or to cause a loss.”

There are three main ways of committing fraud, established by the Fraud Act 2006

Fraud by...

False representation Failure to disclose information Abuse of position

Types of Fraud• The most common reported economic crime is asset

misappropriation.

• Other Types of Fraud include:-Abuse of Position;Recruitment Fraud;Procurement Fraud / Supply Chain Fraud;Bribery / Corruption;Cyber-Fraud / Cyber-Crime;

Fraud Happens…?• when the perpetrator spots an opportunity, has a motivation to

commit fraud and feels able to justify their actions.

Motivation

OpportunityJustification

!Fraud Risk

The Fraud Triangle

• Pressure for results• Financial motives• Revenge

• I’ve earned it• No-one will

suffer• It’s a one-off

• Controls not functioning

• Staff changes / losses

• Tolerance

How Does Fraud Come to Light?

Internal & External Audit

Staff changes

Whistleblowing

Confessions

Technology

Accidentally

Some of the Warning Signs of Fraud

Suppliers & contractors...• requesting payment for goods before delivery• placing tender bids much higher or lower than others• submitting invoices on non-headed paper• notifying that their bank details have changed

Colleagues... • being disdainful of procedures and controls • having a sudden change of lifestyle, or unexplained wealth• appearing withdrawn at work• reluctant to take holiday or a promotion• changing their work practices without authorisation

Fraud or Error?• It is important that we do distinguish between fraud and

error.

• Errors – Errors such as carelessness and /or incompetence resulting in records being in a state making it difficult to establish whether all assets can be accounted for, can be reduced by providing staff with knowledge, training, instructions and clear objectives.

Fraud In the News

What is Corruption and Bribery?

• Corruption is the deliberate misuse of your position for direct or indirect personal gain. This includes offering, giving, requesting or accepting a bribe or reward which influences your actions or the actions of someone else.

• The general criminal offences regarding bribery are defined by the Bribery Act 2010 and include:

Personal offences – Bribing another person; Receiving a bribe; and Bribery of foreign public officials

Corporate Offence – Failure to prevent bribery

Managing the risk of Fraud & Corruption

• CIPFA Code of Practice - 5 key principles:-

1. Acknowledge the responsibility of the governing body for countering fraud and corruption;

2. Identify the fraud and corruption risks;3. Develop an appropriate counter fraud and corruption

strategy;4. Provide resources (to implement the strategy);5. Take action (in response to fraud and corruption).

CIPFA Code of PracticeAcknowledge Identify

RisksDevelop a Strategy

Provide Resources

Take Action

Recognise the Threat of Fraud

Anti Fraud Culture

Governance reports and Audit Committee Role

Embedded within Risk Management

Evaluation of Fraud risk exposure.

Publish estimates of fraud losses

Adopt Counter Fraud & Corruption Strategy

Proactive and Responsive Approach

Responsibility & accountability

Appropriatelevel of resources and skills

Joint working/data sharing

Governance framework which supports counter Fraudand Corruption strategy

Audit Committee Responsibilities

Recent National DevelopmentsDCLG letter to all Local Authority Leaders• Local Government Counter Fraud &

Corruption Strategy• Procurement Fraud• Debt Solutions – a joint venture• Non-benefit threat alert – City of London

Police