Departments ‘must act now’ to prevent fraud in future emergencies

“By the time an emergency has started, it is usually too late to take all the steps needed," NAO report warns
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Government must improve how it deals with fraud in emergency situations to protect taxpayers’ money, the UK’s spending watchdog has warned, in a report drawing on lessons from the height of the Covid pandemic.

The National Audit Office has urged the government to embed more “flexible” counter-fraud capability that can be deployed quickly in an emergency, pointing to its earlier discovery that the amount of fraud in departments nearly quadrupled after the emergence of Covid.

The report calls for robust planning now to lay the groundwork for future crises. 

“Emergency spending can carry a higher risk of fraud and impropriety, whether this is to support individuals and businesses or to purchase goods and services to support government’s emergency response,” the report says.

The report calls on the Public Sector Fraud Authority to come up with a plan so that should an emergency arise, it is in a position to lay out key counter-fraud priorities and know where people with the right skills are.

The PSFA should also ensure there are “strong bonds” across the government counter-fraud profession to enable it to form effective new teams in an emergency, and that it can influence their deployment, it says.

Among the challenges the report identifies for tackling fraud in turbulent times, it notes that the government currently has limited flexibility to move counter-fraud staff. As a result, some departments are reliant on external consultants or secondees from other organisations for expertise.

Writing for CSW today, Joshua Reddaway, the NAO’s director of counter fraud and corruption, and senior audit manager Lee Nicholson said: “Not everyone can be expert in all things. Government has some skilled counter-fraud staff, but they can’t be everywhere at all times. Planning can be done now as to how to best use these experts in a crisis. Central coordination of how those experts are deployed would really help.”

The report builds on an earlier NAO publication, which found the amount of fraud departments reported shot up from £5.5bn in 2018-19 and 2019-20 to £21bn in 2020-21 and 2021-22.

Just over a third of the £21bn – £7.3bn – was related to temporary Covid schemes, with most of the rest attributed to benefit fraud.

“The impact of actual or perceived impropriety may persist for some time after the emergency. This is true even if perceived impropriety is proven to be incorrect, undermining public trust,” the report says.

“By the time an emergency has started, it is usually too late to take all the steps needed to respond in a way that protects propriety.”

The recommendation is one of seven the NAO says will help the government to better protect taxpayers’ money in future crises.

Another is that government should be “clear on governance and rules” to enable public bodies to streamline their decision-making and governance processes in a ways “allow for robust oversight and are within normal public spending rules”.

The report also says that while prioritising is important in a crisis, departments must be clear about when they will return to their obligations. “Accounting officers cannot forgo responsibilities to protect propriety, and need a framework to make decisions on competing issues,” the report says.

Reddaway and Nicholson added: “In the rush of an emergency response there won’t always be time to do everything. Leaders will need to prioritise and make judgements. But when the dust settles, there will be follow-up work to pursue any incorrect payments.

“Being clear upfront that you’ll need to return to areas you intentionally deprioritised can send an important signal – that you’ll be back,” they said.

The report also recommends greater transparency about the recipients of grant funding and contracts in emergencies; that departments consider which inter-departmental data sharing arrangements that can be set up now to ensure they can access the data they need at short notice; and that government plans “how to buy in a seller’s market” as it has less leverage and may be working with unfamiliar suppliers in a crisis.

Read what Reddaway and Nicholson had to say about the report here

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