Agenda Item No. 8

The Vale of Glamorgan Council

Audit Committee: 28th November 2017

Operational Manager - Audit (as the Head of Audit)

Counter Fraud Framework - Fraud Risk Assessment

Purpose of the Report

1. To present to Members the results of the Counter Fraud Framework review (incorporating the Fraud Risk Assessment) which assesses how well the Council acknowledges the risk of fraud and how it prevents, detects and pursues monies or assets obtained fraudulently.

Recommendation

THAT the Committee considers the content of the review and assessment as attached at Appendix A and B which identifies the actions to be taken moving forward.

Reason for the Recommendation

To facilitate the monitoring of the Council's Internal Audit Shared Service and to ensure it remains compliant with the Public Sector Internal Audit Standards.

Background

2. The challenge presented by fraud to Councils is significant. As stated in "The Local Government Counter Fraud and Corruption Strategy 2016-19" (usually known as Fighting Fraud and Corruption Locally), it is estimated that fraud costs councils around £2.1 billion each year. Some reports produced by other organisations suggest that this figure could actually be higher. Fraud is an intentional act or omission designed to deceive others, resulting in the victim suffering a loss and / or the perpetrator achieving a gain
3. The impact of fraud should never be underestimated. Fraud leaves the council with less to spend on services for residents and costs taxpayers money. Fraud against a local council is not a victimless crime. There is not only the lost/stolen money to consider but also the:

• Loss of working time, with officers putting things right and liaising with police and lawyers;
• Cost of the investigation and any subsequent court costs;
• Increased insurance premiums;
• Reduced or poor service for residents;
• Political impact;
• Reputational damage for individuals or the council as a whole; and
• Poor staff morale leading to poor performance and / or fraud.

4. There are many other "activities" that may fall under the overarching definition of fraud and are indeed types of fraud, the most common of these include: Corruption; Bribery; theft and money laundering.

Relevant Issues and Options

5. According to the CIPFA Fraud and Corruption Tracker 2016, the areas posing the highest fraud risk for councils are below (this list is not exhaustive):

• Council Tax Fraud - intentionally giving incorrect or misleading information;
• Social Housing / Tenancy Fraud - the unlawful misuse of social housing;
• Procurement Fraud - supply chain, contract letting etc; and
• Adult Social Care and Direct Payments - overstatement of needs through false declaration, multiple claims across authorities, collusion with care agencies etc.

6. Public Service Organisations have a responsibility to embed effective standards for countering fraud, corruption and bribery. This supports good governance and demonstrates effective financial stewardship and strong public financial management.
7. A desktop review has been undertaken as part of the 2017/18 Audit Plan to provide both the Council's Corporate Management Team and Audit Committee with assurance on the robustness of the Council's Counter Fraud Framework including an assessment of fraud risk. The content of the review and assessment are attached at Appendix A and B.
8. The review identified that whilst the Council's current arrangements are good there are areas where the control framework could be improved. The main areas being:

The need for a comprehensive Fraud Response Plan;

Whether the resource is sufficiently robust to tackle fraud risks and investigate suspected and know fraud;

The lack of training across the Council specifically dedicated to the Fraud Framework;

The lack of a central register and therefore hindering the inability to identify trends.

Resource Implications (Financial and Employment)

9. None as a direct consequence of this report.

Sustainability and Climate Change Implications

10. None directly from this report.

Legal Implications (to Include Human Rights Implications)

11. None as a direct consequence of this report.

Crime and Disorder Implications

12. Pursuing initiatives to prevent, detect and deter crime is encompassed within the terms of reference under which the audit function operates.

Equal Opportunities Implications (to include Welsh Language issues)

13. None as a direct consequence of this report.

Corporate/Service Objectives

14. The work of audit is intended to assist in the achievement of all corporate and service objectives.

Policy Framework and Budget

15. The proposals in this report are in accordance with the policy framework and budget.

Consultation (including Ward Member Consultation)

16. No further consultation is proposed

Relevant Scrutiny Committee

17. Corporate Performance and Resources

Background Papers

Local Government Fraud Strategy

Contact Officer

Helen Smith - Operational Manager - Audit

Officers Consulted

None

Responsible Officer:

Carys Lord - Head of Finance / Section 151 Officer