MANAGING THE RISK OF FRAUD

‘A Standard Approach’

Presented by: Joe Laidler & Tracy Barnett

ALARM Conference November 2007

Fraud ReviewFighting Fraud Together

Recommendations 24

Public authorities should reinvigorate fraud measurement and risk assessments in their financial processes in order to better assess the scale of fraud, risks faced from fraud, and losses to fraud.

Consultation support100%

Recommendations 25

The National Audit Office and the Audit Commission should audit public bodies on the strength of their ant-fraud controls.

Consultation support100%

Audit Commission

Extent of Fraud in the Public Sector

£7.1 billion in 2005/6Some Examples: - Housing Benefits £170m DVLA £129m Pharmaceutical/Dental (NHS) £68m Incapacity Benefit £80m Carer’s Allowance £40m Council Tax £40m

(Source: Nature, Extent & Economic Impact of Fraud in the UK – ACPO Report, Feb 2007)

Some Major Issues Relating to Public Sector Fraud

Anti Fraud Initiatives & Resources Working Relationships with Other

Internal/External Agencies Estimating the Losses Cost/Time of Investigations Police Expertise/Resources Attitude of Courts Impact on the ‘Public Purse’

Fraud – ‘A Key Business Risk’

Acceptance by the Organisation A Corporate Risk Need to Manage the Process Involvement of Risk Advisors Joint Working to Combat A ‘Standard Approach’

ALARM’s Approach

Action/Resources ‘Before’ Occurrence Linked to the Risk Management Standard Following the ‘Fraud Risk Cycle’ Importance of Sound Corporate Governance Local Reviews Telling the ‘Top Table’

Key Elements of Corporate Governance

Strategic Approach to Risk Management Culture – Universally Applied & Designed to

Deliver ‘Zero Tolerance’ of Fraud Anti-fraud & Corruption Framework Strong Systems of Internal Control Partnership Working

Not exclusive or mandatory : Geared to requirements of organisation

Fraud Risk Cycle

Identifying the Key Risk Areas

Some Essentials that will Always be Apparent where Fraud Occurs

A ‘Local Review’ of Operational Areas Indicators & Factors in the Review

Process

Other Key Review Areas

Impact of Fraud on Organisation Assessing the Scale/Likelihood of Fraud

Occurring Identifying Key Existing Controls Action Planning for Improvement

So how do you think

your organisation

compares against

the ALARM Fraud Standard?

In the questionnaire the answers should be marked as follows:

1 2 3 4 5 6

Agree Strongly

Agree Agree Slightly

Disagree Slightly

Disagree Disagree Strongly

My organisation…..1. Has strong political & senior management support for

those charged with managing the risk of fraud?2. Encourages a culture of ‘Zero Tolerance’ to fraud?3. Has published ‘Codes of Conduct’ for staff & training

programmes to embed an Anti-fraud Culture?4. Has a published Anti-Fraud & Corruption

Strategy/Fraud Response Plan that has been agreed at political & executive level?

5. Has a programme of ‘Fraud Awareness’ training that covers both elected members & all key staff?

0 10 20 30 40 50%

10%

28%

45%

3%

14%

0%

Agree Strongly

Agree

Agree Slightly

Disagree Slightly

Disagree

Disagree Strongly

.support to those charged with managing the risk of fraud?I believe there is strong political and senior management

0 10 20 30 40%

17%

35%

34%

7%

7%

0%

Agree Strongly

Agree

Agree Slightly

Disagree Slightly

Disagree

Disagree Strongly

."zero tolerance" to fraud?

The organisation encourages a culture of ALARM - Standard for Fraud...

0 10 20 30 40 50%

10%

45%

28%

7%

3%

7%

Agree Strongly

Agree

Agree Slightly

Disagree Slightly

Disagree

Disagree Strongly

.and training programmes to embed the requirements?

There are published Codes of Conduct for staff, officers

0 10 20 30 40%

38%

28%

17%

3%

7%

7%

Agree Strongly

Agree

Agree Slightly

Disagree Slightly

Disagree

Disagree Strongly

.political and executive level

Strategy/Fraud Response Plan that has been agreed at There is a published Anti-fraud and Corruption

0 10 20 30 40%

0%

13%

27%

30%

23%

7%

Agree Strongly

Agree

Agree Slightly

Disagree Slightly

Disagree

Disagree Strongly

.that covers both elected members and all key staff?There is a programme of "fraud awareness" training

My organisation…..

6. A widely publicised ‘Whistleblowing’ facility that maintains staff confidence & is provided in line with legislative requirements?

7. Employs appropriately trained staff to undertake anti-fraud work?

8. Documented key financial & operational procedures (including formal schemes of delegation)?

9. Supports key legislative requirements relevant to anti-fraud & corruption (e.g. Terrorism Act 2000, Proceeds of Crime Act 2002 [Money Laundering, etc])

10. Includes fraud within its risk management arrangements with key strategic & delivery partners?

0 10 20 30 40 50%

28%

45%

10%

0%

14%

3%

Agree Strongly

Agree

Agree Slightly

Disagree Slightly

Disagree

Disagree Strongly

.in line with legislative requirements?

that maintains staff confidence and is provided There is a widely publicised "Whistleblowing" facility

0 5 10 15 20 25 30%

18%

18%

25%

4%

21%

14%

Agree Strongly

Agree

Agree Slightly

Disagree Slightly

Disagree

Disagree Strongly

.professional staff to undertake anti-fraud work?My organisation employs appropriately trained

0 10 20 30 40%

33%

23%

37%

7%

0%

0%

Agree Strongly

Agree

Agree Slightly

Disagree Slightly

Disagree

Disagree Strongly

.formal schemes of delegation, are documented?

Key financial and operational procedures, including

0 10 20 30 40 50%

4%

19%

40%

15%

22%

0%

Agree Strongly

Agree

Agree Slightly

Disagree Slightly

Disagree

Disagree Strongly

.(i.e. Terrorism Act 2000, Proceeds of Crime Act 2002)?

requirements relevant to anti-fraud and corruption I am confident my organisation supports key legislative

0 10 20 30 40%

0%

10%

21%

24%

38%

7%

Agree Strongly

Agree

Agree Slightly

Disagree Slightly

Disagree

Disagree Strongly

.strategic and delivery partners?

arrangements between my organisation and key Fraud is included within the risk management

The Way Forward

Launch/Publication of the ALARM Standard for Risk Advisors

Implementation Suggestions Advice/Assistance Working with Partners/Other Agencies

Any Questions?

Contact Details:

Joe Laidler

Audit & Risk Management Consultant

JTL Associates

197 Buckingham Drive,

Luton, Beds, LU2 9RE

Tel: 07880 952590

joseph.laidler@ntlworld.com

Tracy Barnett (Director of ALARM)

Head of Internal Audit

London Borough of Camden

Town Hall,

Argyle Street, London, WC1 8NG

Tel: 020 7974 6031

tracy.barnett@camden.gov.uk