Efficiency without deficiency:Tackling fraud and error in the public sector
Sanjay Mackintosh – Cabinet OfficeJonathan Lloyd-White – HMRC
UNCLASSIFIED
Overview• Context• Benefits, credits and revenue fraud• Cross-cutting fraud and error
• Procurement• Grants• Payroll and insider-enabled fraud
UNCLASSIFIED
Fraud in the public sector - context
Fraud in the public sector
Fraud Loss
Tax £15bn
Benefits & tax credits £1.5bn
Procurement £2.4bn
Grants £515m
Payroll £329m
HMG Counter Fraud Taskforce• Established October 2010• Ministerial and senior officials group
– Francis Maude MP – Minister for the Cabinet Office (Chair)– Lord Freud – Minister for Welfare Reform (DWP)– David Gauke MP – Exchequer Secretary (HMT)– James Brokenshire – Minister for Crime and Security (HO)
What has the taskforce done so far?• Overseen eight pilot projects across government that
saved £12m and will save £1.5bn by 2014/15• Set up cross-government network of Counter Fraud
Champions• Cross-government fraud alerts system• Fraud, error and debt metrics on departmental quarterly
data summaries• Civil service learning – counter fraud e-learning tool• Identified cross-cutting issues – procurement, grants and
payroll/insider-enabled fraud
Interim report – June 2011• Collaboration across public
services
• Properly assess risk and quantify losses
• Focus on prevention
• Establish a zero tolerance culture
Benefits, Credits and Revenue Error and Fraud
Size of the prize and approachBenefits & Credits• 6 million customers – £327bn paid
annually• Complex policy – 160 moving parts
– 1 million new claims– 8 million changes of circumstance– 6 million renewals
• 1,800 staff working on error and fraud• 8.9% error and fraud rate in 2008/09
reduced to 7.4% in 2009/10 - £2bn over last two years
Benefits & Credits – The New Strategy• Customer Understanding – knowledge of risk
categories and losses drive design of services • Right first time – shift from “Pay now, check later” to
clear strategy of “Check first, then pay”• Measure – proxy in-year targets informed by real
time data to engage staff and drive redeployment• Professionalism – campaigns on risk groups based
on data mining and analytics
Tax Compliance• Approximately 4.5 million businesses
and 31 million individual customers• Estimated £16bn tax gap attributable to
fraud & error• 25,000 staff in Enforcement &
Compliance working on spectrum of non-compliance rising to 28,000 by 2014/15.
Tax Compliance• Risk driven strategy – risking done at national level
based on data analytics• Increased coverage - significant re-investment of
staffing over next three years• Connect - Continued investment in our data
matching and analysis tool• Campaigns & Taskforces – focused activity to
tackle specific populations and risks
Tax Credits Error and Fraud StrategyPREVENT
Fraud & Error Assessment Risk Tool (FEAST) – Screening tool for new tax credit applications – finds
risks that would be extremely difficult to detect using
manual intervention;
High Risk Changes of Circumstances - Working in
partnership with Contact Centre colleagues allows us
to challenge customer information when they try to
make changes to their awards.
High Risk Renewals – our chance to correct previous
year awards whilst putting current year claims on
correct footing. Based on feedback and lessons
learned, moved towards a more targeted risk-based
approach based on Risk Groups.
MAINTAIN
•Pilot with Credit Reference Agencies on Undeclared
Partner
•20k Tax Credit claims with some evidence of an
Undeclared Partner.
•CRAs ranked the cases into high, medium low risk.
•Red – letter issued to customers where we have
specific information or data from the CRA that
strongly suggests there is a high risk of and
Undeclared Partner.
• Amber – letter issued where we have
information from the CRA which suggests there
maybe a risk of an Undeclared Partner
Driving effective interventions with data• Matching data from 26 separate systems - Connect• Approximately 1 billion matched data items• £45m invested over last three years - £1.3bn in tax yield• Top-end data analytics used to address whole spectrum of
risks • High volume-low value error, to sophisticated on-line organised
criminal attacks or complex corporate tax affairs• Driving focused taskforce activity on evasion – scrap metals in
Scotland• Driving focused campaigns on populations – Medics, Offshore,
Plumber
Ongoing investment• Data/capacity – growing storage, processing capability and user
numbers• Text mining – ability to mine unstructured text based information• In-house academy for data analytics – keeping people up to
pace with technology• ‘Upstream Transaction Risking’• Credit Reference Agency trials – using third party data to check
declared income• Predictive analytics – spotting behavioural trends to separate
error from deliberate evasion
Cross-Cutting Fraud and Error – New Opportunities
Procurement fraud
£2.4bn lost in the public sector each year
Pre-contract award fraud – cartel activity, corruption, collusion
Post-contract award fraud – false payments, duplicate invoicing
HO/DfT – detected £4m and £0.5m in overpayments using spend analytics
Counter fraud training and awareness for public procurement specialists in the public sector
Undertake cross-govt analysis on spend through accounts payable systems to detect fraudulent or erroneous payments
Spend analysis audits - £100m may have been paid across government
Procurement fraud training – CiPS have partnered with CIPFA to provide a course, but more courses should be run for public bodies
Grant fraud
£515m lost to fraud in the public sector each year
Grants expenditure not fully understood – cross-cutting fraud threats even less well understood
Applying for grants no different from applying for benefits or tax credits – fraud and error risks is the same
Deeper analysis of grants administration across government – identify how much is paid out, to whom, what processes are used, fraud/error risks
Deploy use of data analytics to detect grant fraud and error at application stage as well as post-payment
Piloting prevention/ detection screening tools with government departments who issue grants
Insider-enabled fraud
£329m lost to fraud in payroll and recruitment, but unknown how much fraud is ‘insider-enabled’
PwC estimate 39% of economic crime in public sector is enabled by staff within organisations
Analysts believe insider threat grows during recession – risk is highest now
Staff fraud database – record staff dismissed for insider-enabled fraud and allow public bodies to use this as a pre-employment tool
Training and awareness for public servants
Whistleblowing/fraud reporting line
Insider-enabled fraud database – possibly outsource this
Whistleblowing function – individual services within departments or single cross-government reporting tool
Summary• Tax and benefit fraud and error is well understood – has
the investment to match• Other cross-cutting issues need to be better understood
and solved – could be bigger than what we already know
• New opportunities for supplier engagement – work with us to understand the problems and develop solutions
• Engage with counter fraud champions across government
Contact [email protected]
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