MANAGING THE RISK OF FRAUD ‘A Standard Approach’ Presented by: Joe Laidler & Tracy Barnett ALARM Conference November 2007

Fraud Review Fighting 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 support 100% Recommendations 25 The National Audit Office and the Audit Commission should audit public bodies on the strength of their ant- fraud controls. Consultation support 100% Audit Commission

Extent of Fraud in the Public Sector £7.1 billion in 2005/6 Some 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: Agree Strongly AgreeAgree Slightly Disagree Slightly DisagreeDisagree 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?

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?

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: Tracy Barnett (Director of ALARM) Head of Internal Audit London Borough of Camden Town Hall, Argyle Street, London, WC1 8NG Tel: