NAO issues safety advice as fraud costs public sector £21bn each year

New fraud and error avoidance guidelines have been provided in a blogpost on the National Audit Office (NAO) website after it was estimated that the problem costs the public sector £20.6bn each year.

The NAO’s Fraud Landscape review, published last month, quotes figures from April 2013 showing that the country loses £2.6bn to fraud against central government, £2.1bn to fraud against local government, £14bn to tax and vehicle excise fraud and £1.9bn to benefit and tax credit fraud.

Internal fraud can relate to travel and expenses, theft of assets, staff reporting absences, and change of supplier details for payments, whereas external fraud can involve identity documents, grant payments and external contracts.

The blogpost authors, audit experts Richard Baynham and Ee-Ling Then, say:  “The scale of losses and the potential hardships illustrate the importance of this issue. Yet our Landscape report shows that across the public sector the extent of fraud being identified is significantly less than the estimated total level of fraud taking place.

“This is partly because fraud is challenging, time-consuming and costly to detect and measure. And with a lack of information about the impact of counter-fraud activities, it can be hard for organisations to show the benefits of the expenditure on preventing, detecting and addressing the problems.”

Increasing reliance on ICT systems risks making personal data more vulnerable, the audit experts said. Non-deliberate error is also a serious problem – in 2013-14 £4.6bn was overpaid in tax, tax credit and benefit claims and £1.6bn was underpaid.

Baynham and Then’s advice to organisations on preventing fraud and error include gaining a better understanding of how they work and developing ways to measure when they occur.

The NAO blog post can be viewed here.

In the latest edition of PSE, information management expert David Haynes wrote on the collapse of the transatlantic ‘Safe Harbour’ data privacy rules and Bel Temel, payments manager for the London Borough of Bexley, explained how the council is combating invoice fraud.


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