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www.ipf.co.ukThe Counter Fraud Stream is supported by:

www.ipf.co.uk/governanceCIPFA BETTER GOVERNANCE FORUM

CIPFA Better Governance ForumFraud in the Public Sector

A Practitioners Overview

CIPFA Scottish Student’s Society Presentation

Scottish Parliament Building, Edinburgh

15 September 2005

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“Total elimination of fraud is unlikely ever to be achieved, but it is important for momentum to be maintained, and good practices developed and shared”

Sir John Bourn, Comptroller & Auditor General NAO

Gus O’Donnell, Permanent Secretary HM Treasury

(NAO & HM Treasury, 2004)

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Some Quotes

The economic cost to the UK is estimated at £14 Billion per annum (NCIS, 2003)

Typically organizations lose 6% of annual revenue to occupational fraud (ACFE, 2004)

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Some Quotes

Total reported fraud in the UK has more than doubled from £331m in 2003 to £756m in 2004

The number of £50K + cases have only increased from 211 (2003) to 229 (2004)

“Fraudsters are playing for higher stakes” (BDO Stoy Hayward, 2005)

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40% of fraud goes undetected (Davia, cited Ernst & Young, 2003)

“I only wanted to make enough money to be honest” A fraudster (Quoted to Levi, 2003)

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Fraud Investigators

9000 Public Sector Fraud Investigators (Levi, 2003)

5000 in DWP (Now Jobcentre Plus) alone 463 Counter Fraud Specialists in the NHS (CFSMS, 2004)

160,000+ Police Officers BUT < 700 work in a ‘Fraud Squad’ (Scott-Joynt, 2005)

City of London Police – “Lead Force” for fraud in the South East (Joint working with commerce)

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Recognition that reactive fraud work has been a “Bottomless Pit” (Ch. Supt. Nigel Mawer, SCD6, Metropolitan

Police)

Operation ST£RLING – New proactive initiative to tackle fraud through the use of the Proceeds of Crime Act 2002 – “Play the man not the ball”

Asset Recovery Agency – Additional powers to implement the relevant taxation to income, profits or gains from criminal activity (All UK inc. Scotland)

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Types of Fraud in the Public Sector – Any Ideas? Benefit/Social Security Fraud Tax Fraud – Direct & Indirect Fraud Against the NHS Procurement Fraud Internal Fraud Identity Fraud Etc Etc

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HM Treasury report Internal Government Department fraud losses of £3.9 million (2003 – 2004) (HM Treasury, 2004)

Down from £4.3 million in 2002 – 2003

But is that the real figure?

19 bodies provided ‘Nil’ returns – Can that really be true?

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External Fraud – A Taster

Year Ended 31 March 2003 – Estimated overpayment to NHS Dentists due to Fraud, Error and Unnecessary Treatment = £78 million (5% of Total Fees Paid) (Dental Practice Board, 2003)

In 2003/04 the Inland Revenue identified an additional £4.6 billion due from false tax returns & non-compliance (Inland Revenue, 2004)

National Fraud Initiative identified £83 million of fraud in Pensions, Housing Benefit & Council Housing (2002/03)

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In 1997 Patient Prescription Charge Evasion cost the NHS an estimated £70 - £100 million annually (NHS Executive, 1997)

In Northern Ireland, in 1998, 80,000 more patients were found registered with GPs than the resident population (NIAO, 1998)

After a ‘robust’ Risk Measurement Exercise the Patient Fraud figure was found to be nearer £171 million. In 2004 this had been reduced to £87 million (49%) (CFSMS, 2004)(CFSMS, 2004)

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NHS Fraud – England & Wales

In December 1998 the Dept. of Health published Countering Fraud in the NHS (Department of Health, 1998)

This set out the strategy and framework for tackling NHS fraud

Since that date there has been a financial benefit to the NHS totalling £478 million – A continuing 13:1 return on the budgetary investment (CFSMS, 2004)

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NHS Fraud – England & Wales

216 successful prosecutions 97% success prosecution rate 275 successful civil legal and disciplinary cases Local investment by NHS organisations to counter

fraud has increased by 785% (Est.)

940,000+ NHS staff and professionals are now covered by Counter Fraud Charter agreements

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NHS – 7 Generic Areas

Creation of an Anti-fraud Culture

Maximum Deterrence of fraud

Successful Prevention of fraud which cannot be deterred

Prompt Detection of fraud which cannot be prevented

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NHS – 7 Generic Areas

Professional Investigation of detected fraud

Effective Sanctions, including appropriate legal action, against people committing fraud

Effective methods for seeking Redress in respect of money defrauded

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© Peter Dorrington SAS 2004© Peter Dorrington SAS 2004

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Implementation

Anti-fraud Culture – Charters, FAPs, Training to HR & Finance Directors

Deterrence – CFSMS (England & Wales) strives to publicise its cases (1064 positive media articles to 2004)

Prevention – Ongoing Risk Measurement exercises to discover the effect of anti-fraud recommendations & procedure changes

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Implementation

Detection & Investigation – Professional CF Specialists, Memorandum of Understanding with ACPO & use of CPS/DWP Solicitors

Sanctions – Criminal, Civil Court, Disciplinary & Regulatory – Use of ‘Parallel Sanctions’ supported by Case Law

Redress – Will always seek to recover monies defrauded (+ Investigation Costs)

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Difficulties

Getting the Message Over To:- 235 Trusts 300 Primary Care Trusts 28 Strategic Health Authorities 66 Other NHS Trusts All with different procurement and standing financial

instructions Over 1.3 million direct employees (Personnel Today, 2004) - Plus

self-employed dentists, pharmacists, optometrists

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Examples of NHS Fraud – Time Sheets Rhian Slaymaker – Senior Nurse defrauded the

NHS out of £36,000, over 3 years, by forging overtime details for bank work

Money used to fund exotic overseas holidays “ I Got away with it and it became a habit” Sentenced to 9 months imprisonment

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Examples of NHS Fraud – Pecuniary Advantage Martha Kirkwood-Rhinds – False qualifications to

obtain job as radiographer after failing the required BSc. Guilty plea and awaiting sentence

Valerie Cook – Failed to complete nurse training but lied to obtain NHS work – Discovered after 15 years (9 months imprisonment – Suspended)

Dr Henry Akpata – Qualified as a doctor in Nigeria but failed the Royal College of Obstetricians & Gynaecologists exams. Jailed 12 months for posing as a gynaecologist and working throughout the UK. Also claimed for £80,000 of work not carried out

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Paul Baker – NHS Payments Supervisor

stole £400,000 over a 3 year period. He received 3 years imprisonment

Investigators also seized his property, car and Gucci watch under the Proceeds of Crime Act

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Examples of NHS Fraud – Contractors Dentist Mogjan Azari pleaded guilty, on 3

February 2005, to NHS fraud and allowing an unqualified person, Omid Amidi-Mazaheri, to practice as a dentist at her surgery. They received 12 months and 24 months imprisonment respectively

£88,000 repaid to NHS Suspended by PCT GDC Hearing to follow

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Operation Immanuel

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Parallel Sanctions – ‘Doctor Dodger’ (Daily Mirror)

Michael Hodges – GP who faked deafness for a year to claim NHS pay whilst ‘sick’

Actually conducting private health checks for BUPA, Tesco & MoD – Earning £100K +

Falsely claimed £29,500 salary for wife as receptionist 12 months Imprisonment Costs & Compensation to NHS of £122,500 Struck off by GMC May 2005 – “Serious Abuse of

Position of Trust”

Examples of NHS Fraud – Contractors

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Examples of NHS Fraud – Patients Hampshire woman used 33 false identities to obtain over

20,000 co-proxamol tablets from GPs that she duped – All for personal use

Surrey man registered at 20 GP surgeries, using 6 aliases, to obtain co-proxamol (12 months probation)

Jason Jenkins and Jane McCormack sentenced to 2 years imprisonment for submitting ‘six bin bags’ worth of false travel claims netting £300K over 30 months

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Public Sector Joint Working

Informal Economy – Grabiner Report (Grabiner, 2000)

Social Security Fraud Act 2001 Anti-terrorism, Crime & Security Act 2001 (s19) Gangmasters (Licensing) Act 2004 Joint Fashion Industry Team – HMRC, DWP,

HSE etc Joint Shadow Economy Teams

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Examples of Internal Fraud

Tax Inspector Richard Baker created false self-assessment records to generate 44 tax rebates, totalling £300K, in bank accounts he controlled – 3 ½ years imprisonment & Confiscation hearing awaited

Revenue Officer Errol Mark – 80 false tax repayments totalling £185K – 4 years imprisonment & £114K Confiscation Order

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Theft – Royal Mint worker Kevin Edwards received 220 hours community service after admitting stealing £1,149 in coins over a 2 week period

When arrested he had 19 x £2 coins in his right shoe and 21 x £2 coins in his left shoe

Fellow worker Jeffrey Price received 120 hours community service after 5 x £1 coins & 2 x 50p pieces were found concealed in his clothing

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Director of Social Policy at the Post Office, and former champion ice dancer, Gary Irvin used a ‘front’ company to siphon £1.3 million of charity donations, made to a PO fund, into his own bank account

He received 4 years imprisonment Irvin’s deception was discovered accidentally by

an office temp and reported

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Examples of External Fraud

Individual Learning Accounts – Introduced September 2000 by the Dept. for Education & Skills to widen participation in learning through financial assistance

Withdrawn with immediate effect 23 November 2001 on police advice – believed fraudulent claims could run into “tens of millions” (NAO, 2002)

By August 2002 700 (out of 9000) providers were being checked

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Examples of External Fraud

The DfES Special Investigations Unit were investigating 133 of these – recipients of £67 million of suspicious claims

98 of the 133 cases were referred to the police In May 2005 the members of one bogus provider

were jailed for a total of 9 ½ years for stealing £2 million

Other cases are pending

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What can we learn?

Attempt to measure fraud losses

What are the risk areas? Important to work jointly

with other agencies using legal gateways

Share good practice Learn from discovered

frauds

Put measures in place to prevent further occurrence

Publicise successful cases as a deterrent

Seek redress in all appropriate cases

An anti-fraud culture, promoted at CEO level, should be encouraged

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References

Association of Certified Fraud Examiners (2004). 2004 Report to the Nation on Occupational Fraud and Abuse. Austin, Tx: ACFE. http://www.cfenet.com/pdfs/2004RttN.pdf

BDO Stoy Hayward (2005). Fraud explosion: White collar crime doubles in a year. London: BDO Stoy Hayward, Fraudtrack 2 Survey - Spring

CFSMS (2004). Countering Fraud in the NHS: Protecting Resources for Patients – 1999 – 2004 Performance Statistics. London: NHS Counter Fraud and Security Management Service.

Davia, H. (2000). Fraud 101: Techniques and Strategies for Detection. Chichester: John Wiley & Sons Dental Practice Board for England and Wales (2003). Annual Report & Accounts 2002/2003. Eastbourne: Dental

Practice Board. http://www.dpb.nhs.uk/archives/annualreview/ar_accounts02_03.pdf Ernst & Young (2003). Fraud: The Unmanaged Risk: 8th Global Survey. Ernst & Young. Grabiner, L (2000). The Informal Economy. London: HM Treasury

http://www.hm-treasury.gov.uk/media/DE3/8E/74.pdf HM Treasury (2004). 2003 – 2004 Fraud Report: An analysis of reported fraud in Government Departments. London:

HM Treasuryhttp://www.hm-treasury.gov.uk/media/85A/5C/Fraud_Report_2003-04-170105.pdf

Inland Revenue (2004). Annual Report and Accounts for the year ended 31 st March 2004. London: Inland Revenue. http://www.hmrc.gov.uk/pdfs/report2004.pdf

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References

Levi, M. (2003). Organised and financial crime. In T Newburn (Ed.) Handbook of Policing. Cullompton: Willan Publishing.

National Audit Office (2002). Individual Learning Accounts HC 1235 Session 2001-2002 25 October 2002. London: NAO http://www.nao.org.uk/publications/nao_reports/01-02/01021235.pdf

National Audit Office & HM Treasury (2004). Good practice in tackling external fraud. London: NAO/HM Treasury. http://www.nao.org.uk/guidance/Tackling_External_Fraud.pdf

National Criminal Intelligence Service (2003). United Kingdom Threat Assessment of Serious and Organised Crime. London: NCIS. http://www.ncis.co.uk/ukta/2003/threat05.asp

NHS Executive (1997). Prescription Fraud in England & Wales: An Efficiency Scrutiny. London: NHS Executive.

Northern Ireland Audit Office (1998). Controls to Prevent and Detect Fraud in Family Practitioner Service Payments. HC 917, Session 1997-1998. London: HMSO.

Personnel Today (2004, August 10). Facing NHS problems head-on Scott-Joynt, J. (2005, May 5). Police seek new tactics to fight fraud. BBC News

http://news.bbc.co.uk/1/hi/business/4485743.stm Smith, R. (2005, May 16). How stolen ambulance kit is being offered on ebay. Evening Standard

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Useful Websites

Assets Recovery Agency http://www.assetsrecovery.gov.uk/ Association of Certified Fraud Examiners http://www.cfenet.com/home.asp Association of Chief Police Officers – Fraud Reduction http://www.uk-fraud.info/index.html Audit Commission (National Fraud Initiative) http://www.audit-commission.gov.uk/nfi/index.asp CIPFA Better Governance Forum www.ipf.co.uk/governance City of London Police (Economic Crime) http://www.cityoflondon.police.uk/economic-crime/economic-crime.html Fraud Advisory Panel http://www.fraudadvisorypanel.org/newsite/index.htm Government News Network http://www.gnn.gov.uk/ Home Office – Identity Theft Fraud Steering Committee http://www.identity-theft.org.uk/index.html Institute of Counter Fraud Specialists http://www.icfs.org.uk/ NHS Counter Fraud and Security Management Service www.cfsms.nhs.uk Metropolitan Police Fraud Alert (Operation Sterling) http://www.met.police.uk/fraudalert/ National Audit Office http://www.nao.org.uk/home.htm National Criminal Intelligence Service http://www.ncis.co.uk/ NewsNow (Fraud News Feed) http://www.newsnow.co.uk/newsfeed/?name=Fraud Serious Fraud Office http://www.sfo.gov.uk/

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ANY QUESTIONS?

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Steve McKenzie Counter Fraud and Security

AdviserCIPFA

Better Governance Forume-mail:

[email protected] Mob: 07767 893345 Tel: 01733 327852

ipf cipfa / adsw social work network

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