COUNTER FRAUD AND CORRUPTION
POLICY
1
Introduction
1.1
All organisations are at increasing risk of fraud and corruption.
Some commentators estimate that annual fraud losses to local
government in the UK could be £7.8 billion. It is therefore a
risk that the council cannot and should not ignore.
1.2
Any fraud committed against the council effectively constitutes a
theft of taxpayer’s money. It is unlawful and deprives the
council of resources which should be available to provide services
to the public. By putting in place effective measures to counter
the risk of fraud and corruption the council can reduce losses
which impact on service delivery as a contribution to the
achievement of overall council priorities.
1.3
This document sets out the council’s policy in relation to
fraud and corruption perpetrated against it, and its overall
arrangements for preventing and detecting fraud. It includes
the fraud and corruption prosecution policy contained in Annex
A. It forms part of the council’s overall policy
framework for combating fraud and corruption and should be read in
conjunction with the counter fraud strategy, constitution, the
financial regulations, contract procedure rules, the whistleblowing
policy, anti-money laundering policy, codes of conduct, and
disciplinary procedures.
2
Definitions and Scope
2.1 For the purpose of this
policy, the term fraud is used broadly to encompass:
·
acts which would fall under the definition in the Fraud Act
(2006)
·
anything which may be deemed fraudulent in accordance with the
generally held view of fraud as causing loss or making a gain at
the expense of someone by deception and dishonest means
·
any offences which fall under the Social
Security Administration Act (1992), Council Tax
Reduction Schemes Regulations (2013) and the Prevention of Social
Housing Fraud Act (2013)
·
any act of bribery or corruption including specific offences
covered by the Bribery Act (2010)
·
acts of theft
·
any other irregularity which is to the detriment of the council
whether financially or otherwise, or by which someone gains benefit
they are not entitled to.
2.2 This policy does not cover
fraud or corruption against third parties, except where there may
be an impact on the service provided by the council. In addition,
it does not cover other acts – for example offences involving
violence - which may affect the council, and which should in most
cases be reported directly to the police.
3
Principles
3.1 The council will not
tolerate fraud or corruption in the administration of its
responsibilities, whether perpetrated by members, officers,
customers of its services, third party organisations contracting
with it to provide goods and/or services, or other agencies with
which it has any business dealings. There is a basic expectation
that members, employees, and contractors’ staff will act with
integrity and with due regard to matters of probity and propriety,
the requirement to act lawfully and comply with all rules,
procedures and practices set out in legislation, the constitution,
the council’s policy framework, and all relevant professional
and other codes of practice.
3.2 The council will seek to
assess its exposure to risks of fraud and corruption. It will
prioritise resources available to prevent and deter fraud in order
to minimise this risk.
3.3 The council will consider
any allegation or suspicion of fraud seriously, from whatever
source, and if appropriate will undertake an investigation to
confirm whether fraud has occurred and determine the appropriate
outcome. Any investigation will be proportionate. The council
may refer any incident of suspected fraud to the police or other
agencies for investigation, if appropriate.
3.4 To act as a deterrent, the
council will take action in all cases where fraud (or an attempt to
commit fraud) is proved, in proportion to the act committed. This
may include prosecution, application of internal disciplinary
procedures, or any other action deemed appropriate to the offence
(for example referral to a professional body). Prosecution
decisions will be made in accordance with the fraud and corruption
prosecution policy (Annex A).
3.5 As a further deterrent, and
to minimise losses, the council will attempt to recover any losses
incurred through civil or legal action. In addition, the council
will seek to apply any appropriate fines or penalties, and recover
any costs incurred in investigating and prosecuting
cases.
4
Responsibilities
4.1 Overall responsibility for
counter fraud arrangements rests with the council’s Chief
Finance Officer (The Corporate Director Customer and Corporate
ServicesCorporate Finance & Commercial Procurement
Manager), on behalf of the
council. The CFO has a professional responsibility for ensuring the
council has appropriate measures for the prevention and detection
of fraud and corruption, which are reflected in legislation.
4.2 The
Audit and Governance Committee has responsibility for assessing the
effectiveness of the Council’s counter fraud arrangements
including the Whistleblowing policy and other relevant counter
fraud policies and plans.
4.3 The Council’s
Management Team (CMT) are collectively responsible for ensuring
that the council has effective counter fraud and corruption
procedures embedded across the organisation that comply with best
practice and good governance standards and requirements.
4.4 Veritau (who provide
internal audit and counter fraud services to the council) is
responsible for reviewing the council’s counter fraud and
corruption policies on a regular basis and recommending any
required changes to those policies. In addition, Veritau leads on
fraud prevention and detection issues for the council and is
responsible for investigating suspected cases of fraud or
corruption. The internal audit team carries out audit work to
ensure that systems of control are operating effectively, which
contributes to the reduction in opportunities for committing fraud.
The Head of Internal Audit is required to report their professional
opinion on the council’s control environment to members of
the Audit & Governance Committee on an annual basis in
accordance with proper practice.
4.5 All senior managers have a
responsibility for preventing and detecting fraud within their
service areas. This includes maintenance of effective systems of
internal control and ensuring that any weaknesses identified
through the work of internal audit or by other means are addressed
promptly.
4.6 The Monitoring Officer is
the council’s nominated officer for the purposes of the Money
Laundering Regulations (2007), and is responsible for reporting any
issues referred to them, in this capacity.
4.7 All staff have a general
responsibility to be aware of the possibility of fraud and
corruption, and to report any suspicions that they may have to
Veritau. Where appropriate, staff may use the whistleblowing policy
to raise concerns anonymously.
4.8 Officers within human
resources have a responsibility to support service departments in
undertaking any necessary pre-disciplinary investigation and
disciplinary process.
5
Overall Counter Fraud Arrangements
Introduction
5.1 The purpose of this section
is to set out the council’s overall framework for countering
the risk of fraud and corruption. While the council aims to follow
best practice in relation to counter fraud activity,
it recognises that new and emerging fraud risks will require a
dynamic approach to fraud prevention and detection.
Measurement
5.2 The council will assess the
potential risks and losses due to fraud and corruption, and will
use these to prioritise counter fraud activity, and review the
resources available to counter those risks. The review will include
an assessment of actual levels of fraud
and the effectiveness of counter fraud activity in reducing losses.
The outcome of this review will be reported to the Audit &
Governance Committee on an annual basis as part of the audit and
fraud planning cycle.
Culture
5.3 The council will promote a
culture whereby all staff, members, service users, and contractors
are aware that fraud or corruption in any form is unacceptable. To
do this, it will:
·
ensure that there are clear arrangements in place for reporting
suspicions about potential fraud or corruption, whether that be by
staff, council members, partners, stakeholders, contractors or
members of the public
·
investigate reported suspicions and where evidence of fraud or
corruption is found will prosecute where appropriate and take any
other action necessary in accordance with the financial
regulations, contract procedure rules, fraud and corruption
prosecution policy, disciplinary procedures, members code of
conduct, or any relevant legislation or guidance
·
ensure that the consequences of committing fraud and/or partaking
in corrupt practices are widely publicised.
Prevention and Detection
Controls
5.4 As part of its ongoing
operating procedures, the council seeks to ensure that proper
systems of internal control are in place. This includes controls to
directly prevent and detect fraud, such as separation of duties and
management review, along with other procedures such as vetting as
part of recruitment processes and systems for declaration of
interests and gifts and hospitality. The effectiveness of systems
of control are monitored and a formal report is made as part of the
process for preparing the annual governance statement. The council
maintains a system of internal audit to provide independent review
of control systems on an ongoing basis, in accordance with a risk
assessment.
5.5 Services will be encouraged
to consider the risk of fraud as part of the council’s risk
management process. Any information on risks identified will be
used to inform the annual review of counter fraud activity.
Proactive Work
5.6 The council will carry out
targeted project work (for example data matching exercises) to
identify fraud and corruption in known high risk areas. This work
will be carried out by Veritau as part of its annual workplan. Work
will be prioritised based on a risk assessment as part of the
annual review of counter fraud activity. Work may include joint
exercises with other agencies, including other local councils.
5.7 The council will take part
in projects led by other agencies such as the Cabinet Office and
the DWP to identify potential fraud e.g. the National Fraud
Initiative and HBMS
Data Matching Service. Resources will be allocated to
follow up all data matches, and will include support through the
internal audit and counter fraud teams to review potential control
issues and suspected fraud. Veritau will work with service
departments to ensure that they are aware of the need to include
notices to service users stating that any data held may be subject
to use for data matching purposes.
Relationships
5.8 The council has established
relationships with a number of other agencies. It will continue to
develop these relationships and develop new ones to further the
prevention and detection of fraud. Organisations which the council
will work with include:
·
the police
·
the courts
·
the Cabinet Office
·
the Department for Communities and Local
GovernmentMinistry
of Housing, Communities and Local Government
·
the Department for Works and Pensions
·
other councils
·
community groups.
5.9 Veritau will work with
council departments to ensure that systems for reporting and
investigating suspected fraud and corruption are robust.
Fraud Awareness Training
5.10 As part of its annual workplan, Veritau will
provide targeted fraud awareness training to specific groups of
staff, based on its annual risk assessment.
Investigation
5.11 All suspected cases of fraud, corruption,
theft or other irregularity will be investigated. The nature of
each investigation will depend on the circumstances of each case.
Veritau will act as a first port of call for any suspected fraud
and will provide advice on whether other agencies should be
notified (eg the police). Veritau will determine the extent of the
investigation to be carried out in consultation with the Chief
Finance Officer, service departments and human resources. Where
necessary, Veritau may refer cases to other agencies (for example
the police) at the discretion of the Head of Internal Audit. Figure
1 overleaf outlines the fraud referral and investigation
process.
5.12 All staff involved in the investigation of
fraud will be appropriately trained. They will be required to
comply with any relevant legislation and codes of practice. For
example the Police and Criminal Evidence Act (PACE), Regulation of
Investigatory Powers Act (RIPA), the Data Protection Act,
and the Criminal
Procedures Investigations Act (CPIA) and any relevant guidance from the Attorney
General. Investigators will take into account the
individual circumstances of anyone involved in an investigation and
adjustments to procedure will be made where necessary to ensure
that all parties are treated equitably (where it is appropriate and
reasonable to do so).
5.13 As part of the outcome of every
investigation, a review of any weaknesses in control will be made
and if necessary recommendations will be made to address any issues
identified. These will be set out in a formal report to the
managers of the service concerned, and will be followed up to
ensure the issues are addressed.
5.14 The Head of Internal Audit will ensure that
systems for investigating fraud are reviewed on an ongoing basis,
to ensure that they remain up to date and comply with good
practice.
Publicity
5.15 The council will publicise all successful
prosecutions undertaken either by itself or by partner
organisations, to act as a deterrent against future fraud.
5.16 In addition, where appropriate, targeted
publicity will be used to raise the awareness of fraud to staff,
members, the public, and other agencies. This will consist of both
internal and external publicity and will aim to:
·
raise awareness about potential fraud and ensure all stakeholders
are alert to the possibilities of fraud;
·
inform all stakeholders of the procedures to be followed if they
have suspicions of fraud;
·
ensure that all stakeholders are aware that the council will not
tolerate fraud and the consequences of committing fraud against
it.
Recovery of Monies
5.17 Where any loss has been incurred by the
council or additional costs have been incurred as a result of fraud
or corruption, the council will seek to recover these from the
individual or organisation concerned. This will help to ensure that
the financial impact of fraud on the council is minimised and act
as a deterrent. As a further deterrent, the council will seek to
levy any appropriate fines or penalties where it is possible and
desirable to do so.
5.18 Methods of recovery may include (but are not
limited to):
·
recovery from assets held by the organisation or individual (using
the Proceeds of Crime Act or any other relevant legislation)
·
bankruptcy where appropriate
·
recovery from future salary payments if an individual remains an
employee of the council
·
recovery of pension contributions from employees or members who are
members of the North Yorkshire Pension Fund.
6 Monitoring
& Review Arrangements
6.1 The arrangements set out in
this policy document will be reviewed on an annual basis as part of
the audit and fraud planning cycle and will include the fraud and
corruption prosecution policy (Annex A) and other related guidance.
Veritau will work with other departments to ensure that other
related guidance and policy (such as the whistleblowing policy) are
reviewed on a regular basis and any amendments or necessary changes
are reported to members for approval.
LAST REVIEWED
AND UPDATED: 8
February 201721
February 2021
Annex A
FRAUD AND CORRUPTION PROSECUTION
POLICY
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1
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Scope and Purpose
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1.1
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The fraud and
corruption prosecution policy forms part of the council’s
overall counter fraud and corruption arrangements. The policy
covers all acts, and/or attempted acts, of fraud or corruption
committed by officers or members of the council, or committed by
members of the public, or other organisations or their employees,
against the council.
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1.2
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The policy sets out
the circumstances in which the council will take legal action
against the perpetrators of fraud or corruption. It also sets out
the circumstances when it is appropriate to consider alternative
courses of action such as offering a caution. The policy does not
cover internal disciplinary procedures which are the subject of the
council’s separate disciplinary policy and procedures.
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1.3
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This policy should
be read in conjunction with the council’s constitution,
financial regulations, contract procedure rules, the counter fraud
and corruption policy and the strategy, the whistleblowing policy
and the council’s disciplinary policy and procedures.
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1.4
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The policy contains
specific guidelines for determining the most appropriate course of
action when fraud has been identified. Offences other than fraud
and corruption (for example those relevant to the enforcement of
regulations) are dealt with by the appropriate service departments
under other policies and relying on specific legal powers.
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2
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Principles
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2.1
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The council is
committed to deterring fraud and corruption. As part of its overall
strategy to do this the council will seek to take appropriate
action against anyone proven to have attempted and/or committed a
fraudulent or corrupt act against it. The council considers that
those guilty of serious fraud or corruption must take
responsibility for their actions before the courts.
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2.2
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The policy is
designed to ensure that the council acts fairly and consistently
when determining what action to take against the perpetrators of
fraud or corruption.
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2.3
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Staff and members
who are found to have committed fraud or corruption may be
prosecuted in addition to such other action(s) that the council may
decide to take, including disciplinary proceedings in the case of
staff and referral to the relevant officer or body in the case of
members. Any decision not to prosecute a member of staff for
fraud and corruption does not preclude remedial action being taken
by the relevant director(s) in accordance with the council’s
disciplinary procedures or other policies.
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2.4
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This Policy is also
designed to be consistent with council policies on equalities. The
council will be sensitive to the circumstances of each case and the
nature of the crime when considering whether to prosecute or
not.
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2.5
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The consistent
application of the policy will provide a means for ensuring that
those who have perpetrated fraud and corruption are appropriately
penalised. It will also act as a meaningful deterrent to
those who are contemplating committing fraud or corruption.
The council recognises the deterrent value of good publicity and
therefore information regarding successful prosecutions and
sanctions will be made public.
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2.6
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Any decision taken by an
authorised officer to prosecute an individual or to offer a formal
sanction will be recorded in writing. The reason for the
decision being taken will also be recorded.
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2.7
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Irrespective of the action
taken to prosecute the perpetrators of fraud and corruption, the
council will take whatever steps necessary to recover any losses
incurred, including taking action in the civil courts.
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3
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Prosecution
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3.1
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The policy is
intended to ensure the successful prosecution of offenders in
court. However, not every contravention of the law should be
considered for prosecution. The council will weigh the seriousness
of the offence (taking into account the harm done or the potential
for harm arising from the offence) with other relevant factors,
including the financial circumstances of the defendant, mitigating
circumstances and other public interest criteria. All cases will be
looked at individually and be considered on their own merit.
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3.2
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To consider a case
for prosecution the council must be satisfied that two tests have
been passed. Firstly, there must be sufficient evidence of
guilt to ensure conviction. This is called the evidential
test. Secondly, it must be in the public interest to proceed
– the public interest test.
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3.3
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To pass the
evidential test, authorised officers must be satisfied that there
is a realistic prospect of conviction based on the available
evidence (that is, there must be sufficient admissible, substantial
and reliable evidence to secure a conviction).
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3.4
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To pass the public
interest test, the authorised officer will balance, carefully and
fairly, the public interest criteria against the seriousness of the
offence. The public interest criteria include;
·
the likely sentence (if convicted);
·
any previous convictions and the conduct of the defendant;
·
whether there are grounds for believing the offence is likely to be
repeated;
·
the prevalence of the offence in the area;
·
whether the offence was committed as a result of a genuine mistake
or misunderstanding;
·
any undue delay between the offence taking place and/or being
detected and the date of the trial;
·
the likely effect that a prosecution will have on the
defendant;
·
whether the defendant has put right the loss or harm caused.
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3.5
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It will generally
be in the public interest to prosecute if one or more of the
following factors applies, subject to any mitigating
circumstances;
·
the actual or potential loss to the council was substantial;
·
the fraud has continued over a long period of time;
·
the fraud was calculated and deliberate;
·
the person has previously committed fraud against the council (even
if prosecution did not result) and/or there has been a history of
fraudulent activity;
·
the person was in a position of trust (for example, a member of
staff);
·
there has been an abuse of position or privilege;
·
the person has declined the offer of a caution or financial
penalty;
·
the case has involved the use of false identities and/or false or
forged documents.
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3.6
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Investigating officers and prosecutors will
review the appropriateness of pre-charge engagement where
prosecution is considered. This is likely to occur where such
engagement may lead the defendant to volunteer additional
information that may identify new lines of inquiry. Pre-charge
engagement may be instigated by the investigating officer, the
council prosecutor, the defendant’s representative or a
defendant themselves (if unrepresented).
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4
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Mitigating Factors
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4.1
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The following
mitigating factors will be taken into account when determining
whether to prosecute;
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4.2
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Voluntary Disclosure
A voluntary
disclosure occurs when an offender voluntarily reveals fraud about
which the council is otherwise unaware. If this happens, then
the fraud will be investigated but the offender will not be
prosecuted unless in exceptional circumstances. However, any
person colluding in the crime will still be prosecuted. A
disclosure is not voluntary if the:-
·
admission is not a complete disclosure of the fraud;
·
admission of the fraud is made only because discovery of the fraud
is likely, (for example, the offender knows the council is already
undertaking an investigation in this area and/or other counter
fraud activity);
·
offender only admits the facts when challenged or questioned;
·
offender supplies the correct facts when making a claim to Legal
Aid.
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4.3
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Ill Health or Disability
Where the perpetrator (and/or their partner)
is suffering from prolonged ill health or has a serious disability
or other incapacity then the offender will not normally be
prosecuted. Evidence from a GP or other doctor will be
requested if the condition is claimed to exist, unless it is
obvious to the investigator. It is also necessary to prove
that the person understood the rules governing the type of fraud
committed and was aware that their action is wrong. This may not be
possible where, for instance, the offender has serious learning
difficulties. However, simple ignorance of the law will not prevent
prosecution.
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4.4
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Social Factors
A wide range of
social factors may make a prosecution undesirable. The test is
whether the court will consider the prosecution undesirable, and go
on to reflect that in the sentence.
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4.5
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Exceptional Circumstances
In certain
exceptional circumstances the council may decide not to prosecute
an offender. Such circumstances include;
·
the inability to complete the investigation within a reasonable
period of time;
·
the prosecution would not be in the interests of the council;
·
circumstances beyond the control of the council make a prosecution
unattainable.
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5
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Alternatives to Prosecution
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5.1
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If some cases are considered strong enough
for prosecution but there are mitigating circumstances which cast a
doubt as to whether a prosecution is appropriate then the council
may consider the offer of a sanction instead. The two sanctions
available are;
·
a caution, or;
·
financial penalty.
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Simple Cautions
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5.2
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A simple caution is a
warning given in certain circumstances as an alternative to
prosecution, to a person who has committed an offence. All
cautions are recorded internally and kept for a period of six
years. Where a person offends again in the future then any previous
cautions will influence the decision on whether to prosecute or
not.
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5.3
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For less serious offences
a simple caution will normally be considered where all of the
following apply;
·
there is sufficient evidence to justify instituting criminal
proceedings;
·
the person has admitted the offence;
·
there is no significant public interest in prosecution;
·
it was a first offence, and;
·
a financial penalty is not considered to be appropriate.
Only in very exceptional circumstances will
a further caution be offered for a second or subsequent offence of
the same nature.
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5.4
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Cautions will be administered by the Head of
Internal Audit (or deputy), Assistant Director – Corporate Fraud, Counter Corporate Fraud Manager, or a
senior fraud
investigatorSenior
Corporate Fraud Investigator, on behalf of the
council. If a caution is offered but not accepted then the council
will usually consider the case for prosecution. In such cases
the court will be informed that the defendant was offered a penalty
but declined to accept it.
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Financial Penalties
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5.5
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The Council Tax Reduction
Schemes (Detection of Fraud and Enforcement) (England) Regulations
2013, permit a financial penalty to be offered to claimants as an
alternative to prosecution. The penalty is set at 50% of the
amount of the excess reduction, subject to a minimum of £100
and a maximum of £1000. Once a penalty is accepted, the
claimant has 14 days to change their mind.
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5.6
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Subject to the criteria
set out in the guidelines below, a financial penalty will normally
be offered by the council in the following circumstances;
·
the council believes that there is sufficient evidence to
prosecute;
·
it was a first offence or a previous offence was dealt with by way
of a caution, and;
·
in the opinion of the council, the circumstances of the case mean
it is not overwhelmingly suitable for prosecution, and;
·
the claimant has the means to repay both the overpayment and the
penalty, and;
·
there is a strong likelihood that both the excess reduction and the
penalty will be repaid.
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5.7
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It is important to note that the claimant
does not need to have admitted the offence for a financial penalty
to be offered. Financial penalties will be administered by the Head
of Internal Audit (or deputy), Assistant Director – Corporate
Fraud, Counter Corporate Fraud Manager or a
senior investigation
officerSenior
Corporate Fraud Investigator. If a financial penalty
is not accepted or is withdrawn then the council will usually
consider the case for prosecution. In such cases the court
will be informed that the defendant was offered a penalty but
declined to accept it.
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6
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Proceeds of Crime Act 2002
(POCA)
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6.1
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In addition to the actions set
out in this policy, the council reserves the right to refer all
suitable cases for financial investigation with a view to applying
to the courts for restraint and/or confiscation of identified
assets. A restraint order will prevent a person from dealing
with specific assets. A confiscation order enables the
council to recover its losses from assets which are found to be the
proceeds of crime.
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7
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Implementation Date
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7.1
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This revised policy
is effective from 8
February 201721
February 2021 and covers all decisions relating to
prosecutions and sanctions after this date.
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POLICY LAST REVIEWED AND
UPDATED 8
February 201721
February 2021
