Agenda item

Fraud Briefing

Report of the Director of Finance & Resources


The Audit Manager – Fraud, gave a detailed presentation on fraud, bribery and theft. Key issues discussed included the cost of local government fraud; what constituted fraud and bribery offences; when fraud was likely to occur; who committed fraud; red flag indicators for possible fraud; strategies to reduce the risk of fraud; what the County Council was doing to combat fraud losses; performance against the CIPFA Code of Practice; staff awareness and proactive work planned.


In response to a question from a Committee Member reassurances were provided that there were staff in place to support fraud investigations and that the Audit Manager could approach the Chief Internal Auditor if more resources were required.


A Member queried if fraud within the County Council was growing or declining? The Audit Manager explained that fraud was not particularly high.  There were high profile risks however, for example fraudsters were known to send letters to Councils posing as known suppliers asking for the supplier’s bank details to be updated to fraudulent accounts. In these scenarios once money had been transferred to an incorrect account it could not be recovered. The County Council paid attention to cases from elsewhere as fraud methods were always evolving. Eleven cases had been identified this year none of which had resulted in financial loss to the Council. In one case a P-Card had had to be cancelled. The losses were low and there was work being undertaken to raise awareness. In response to further questions the Audit Manager referred to the pro-active work undertaken to consider P-Card fraud. Transaction amounts were examined and spend data analysed. P-Card usage was compared with, for example, periods of sickness absence from work. Split transactions were also identified. If there was a concern that fraud could have taken place the member of staff would be contacted and the transaction queried. This was a good deterrence to fraud.


A Member referred to the need to ensure value for money and the potential for fraud in the tendering process and queried the amount of undetected fraud?  The Audit Manager reassured the Committee that the Internal Audit team had offered to input into the new procurement policy. Procurement guidelines ensured that where there was a new contract, fraud and corruption were considered. If there was a large supplier the Council would ask the supplier to confirm that they had a whistle blowing policy and that they promoted work against, for example, fraud. Procurement had been considered in the past and a similar exercise was likely to be repeated this year on a different set of contracts and this would query if there was appropriate selection processes in place.


The Head of Financial Strategy and Support explained that there were long established procurement procedures. Procurement Teams had to sign conflict of interest forms and large contracts would be considered by a panel. A single Officer could not take a decision in isolation. Certain contracts were subject to both internal and external audit. Cartels had been identified in the Public Sector in the past and the appropriate action had been taken.  Under the transparency code, payments over a certain amount had to be published on the Council’s Website. The Council could not be complacent, but as EU tendering regulations were so tight, there would have to be sophisticated collusion to prevent the County Council getting value for money.


It was queried how Councillors could raise any concerns regarding fraud and the Chief Internal Auditor confirmed that the Internal Audit Team could be informed of any financial concerns straight away through the reporting line and through an online reporting form which would be going live shortly.


In response to a further question regarding liaison with District/Borough Council colleagues, the Chief Internal Auditor confirmed that the issue of fraud was discussed at a subgroup of the Midland Counties Chief Internal Auditors Group and at the Staffordshire Internal Auditors Group.


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