## Counter Fraud 2020 Annual Report

For all your assurance needs 

Page 2-4 
Fraud Investigations 2019/20 
Page 5-6 
Proactive 
Work 2019/20 
Referrals 
Investigations - Headlines  
Investigations - Outcomes 


Page 7 
Lincolnshire Counter Fraud Partnership 
Proactive Work  
Fraud Risk Register 
 
Page 8 
Effectiveness  
Page 9 
Moving Forward  
Page 10-16 
Appendices 
Appendix 1 - Counter Fraud Plan 2019/20 

## Lucy Pledge  -  Head Of Audit And Risk Lucy .Pledge@Lincolnshire.Gov.Uk Dianne Downs - Audit Team Leader Dianne.Downs@Lincolnshire.Gov.Uk

This report has been prepared solely for the use of Members and Management of Lincolnshire County Council. Details may be made available to specified external organisations, including external auditors, but otherw ise the report should not be used or referred to in w hole or in part w ithout prior consent.  No responsibility to any third party is accepted as the report has not been prepared, and is not intended for any other purpose. 

  
The matters raised in this report are only those that came to our attention during the course of our w ork - there may be w eaknesses in governance, risk management and the system of internal control that w e are not aw are of because they did not form part of our w ork programme, w ere excluded from the scope of individual audit engagements or w ere not bought to our attention.  The opinion is based solely the w ork undertaken as part of the agreed internal audit plan. 

## Introduction

Key Messages 
 
The purpose of the Annual Report is to provide assurance to the Audit Committee on the effectiveness of the Council's arrangements in countering fraud and corruption.  
The report also informs the committee of performance against the 2019/20 Counter Fraud Work Plan and the outcomes of proactive  fraud work and investigations.  

## Percentage Of Plan Complete

We are pleased to have delivered  87% of the tasks included within the 
2019/20 Counter Fraud Work Plan (see Appendix B). We have maintained a high level of delivery consistent with the previous 2 years.   

## £114K Reco V Ered In 2019/20

We were able to recover over £114k 
during 2019/20 from our proactive 
counter fraud work and 
investigations.   
                                  Page 149

 

## £1.56M Attempted Fraud Stopped

 
We have done extensive work to raise awareness of bank mandate fraud in recent years and have built up good lines of communication with service areas and Serco colleagues. In June 2019 a significant fraud attempt was identified by a member of staff. Vigilance was key in preventing this fraud from being successful 
 

## Fraud Referrals

The most notable increase in 2019/20 related to timesheet and expenses frauds. These tend to be low level but we monitor trends and correlations and are working with specific director and service areas to address issues identified. 

After a spike in social care related cases in 
2018/19, the number of cases referred to us in 
2019/20 stabilised to a more 'normal' level.  We were able to conclude a long running social care investigation and were successful in securing a significant recovery  
The chart also demonstrates that the proportion of frauds relating to procurement and schools have remained consistent in 2019/20. We have delivered extensive pro-active work in both areas in recent years.  

## 19

fraud 

## Referrals


## Investigation - Headlines We Have Achieved Some Significant Results During 2019/20 From Our Investigation Work.

During 2019/20 we concluded a case relating to deprivation of capital in which a property was not declared - therefore resulting in overpayment over a sustained period. In accordance with the zero tolerance approach in the Counter Fraud Policy, we referred this for criminal proceedings - this did not go ahead but we were able to recover £83k through civil means. 

## 

We were required to investigate allegations that an employee has been falsifying details within their 
timesheets submitted. 
Our investigation resulted in the individual being dismissed from their role and the subsequent recovery of monies fraudulently obtained (£1.2k) 

## Procurement Fraud

We continue to investigate a case relating to a significant suspected purchasing card fraud.   
 
The individual has been dismissed from their role 
and we are currently gathering details and 
evidence in liaison with Lincolnshire Police and 
the Crown Prosecution Service. 

## Fraud Recoveries Fraud Recoveries

Whilst recoveries are not the only measure of success or effectiveness, we are pleased to have recovered £114k through a variety of routes during 2019/20.  Any amounts recovered can be ploughed back into providing vital services for those most in need of them.  

## Investigation - Outcomes

In accordance with our Counter Fraud Policy and zero tolerance approach to fraud we seek to take sanctions against those who commit fraud at or against the Council - this is shown by the dismissal of 2 employees following disciplinary procedures.  Where we find sufficient evidence of a fraud taking place, we try to ensure maximum sanction via Action Fraud or Police.  In 2019/20 we referred 4 cases to law enforcement authorities.  3 cases led to no further action but one significant case continues to be investigated by Lincolnshire Police. . 

Another key element of the Counter Fraud Policy is Redress - this requires us to be rigorous in our pursuit to recover money lost through fraud. In 2019/20 we were able to recover over £86k from 3 investigations conducted.   
 
This demonstrates our commitment to using various routes to claw back amounts lost and ensuring this money can be reinvested into providing key services for the people of Lincolnshire. 

## Proactive Work

A proactive approach is a key factor in any counter fraud efforts. This reinforces the aims of our service laid out within our Counter Fraud Policy.  We protect our resources through our proactive principles of Deterrence, Prevention and Detection. 

## Proactive Work - Achievements In 2019/20 National Fraud Initiative

We have almost completed our review of the data matches identified in the 2018/19 exercise. We were able to enhance our review using data analysis techniques - this contributed to another successful process with over £25k in overpayments DETECTED and recovered. We are now making preparations for the 2020/21 exercise.  

Fraud Awareness 
Our fraud awareness e-learning package has continued its success in 2019/20 with 1555 employees now completing it. We 
have also rolled it to school employees. We have also continued 
to enhance fraud awareness on numerous fronts with general and targeted awareness campaigns. It was pleasing that our 
Business Support colleagues were able to directly PREVENT a 
major bank mandate fraud attempt in June 2019 through vigilance derived from our fraud awareness work. 

## Fraud Risk Register

We updated the Fraud Risk Register in 2019/20. We gather 
intelligence throughout the year to inform this and it allows us to 
focus on our DETERRENT proactive work priorities. We will be 
using this process to guide our post Coronavirus virus counter fraud efforts.  

## Proactive Exercises

We have been involved in a joint proactive review of Contract 
Management with the Council's Commercial Team in 2019/20.  
We have also continued our regular reviews of payroll transactions - this DETECTED overpayments of £2.7k. We have 
also worked closely with our Information Assurance Team to 
enhance knowledge of cyber fraud threats. 
Data Analysis 
We have continued to enhance our data analysis capabilities and 
used it effectively to DETECT amounts recovered and data trends. We have also transferred our analytic knowledge to the 
audit and risk teams within our wider service. 

## Midland Fraud Group

We lead this regional group of counter fraud professionals and organise regular meetings to share intelligence.  Knowledge sharing during the Coronavirus has proved invaluable in formulating an urgent response to DETERRING the increased threats facing local authorities.  

## Fraud Risk Register

We updated the Fraud Risk Register in 2019/20.  Fraud risk identification is essential to understanding our exposure to the fraud threats we face.  We continually update the information and intelligence so we have an accurate picture of the current status of each risk area. We were pleased to agree a downgrade in the rating of Cyber Fraud - moved to Amber from Red in view of improvements in the response to this threat. 

 
Fraudsters will seek to exploit the uncertainty created by major and unexpected events - the current Coronavirus issue is no exception. We have used this process to log all known information on the prevalent fraud risks raised by this situation.  This has helped formulate our prompt response to warn and inform employees and the public of fraud and scams.  It will also help guide our proactive efforts to detect potential fraud against the Council.  

## Impact Lincolnshire Counter Fraud Partnership Key Outcomes In 2019/20

£1.65m revenue savings for LCC since 
Revenue 
2015 (Council Tax related and business rates) 
Business case developed for an Invest to 
Generation 
Save project - this highlights scope to 
deliver Council Tax recoveries of  £10.5m 
Tailored fraud awareness sessions 
Fraud 
delivered to members 
 
Improved fraud Awareness e-learning 
Awareness 
 
platform delivered 
Other Proactive Work  
 
Fraud 
resilience 
and fraud 
proofing 
Regular liaison and sharing of information on: Scams Alerts Fraud cases 

2019/20 saw the LCFP develop a business case that sets out a revenue proposal taking a proactive approach to council tax fraud and error. Changing the approach to Council Tax Single Person Discounts (SPDs), delivered in partnership with all District Councils in Lincolnshire will have potential to deliver revenue of over £10m (gross) over a 5 year period. This will contribute to more money for local service delivery. 

 
Lincolnshire Finance Officers have also agreed to consider a longer term funding commitment (3-5 years) for LCFP.  This will provide better medium term planning and allow LCFP to identify and support cross-cutting counter fraud related projects that would benefit all partners and explore more cost effective delivery models to deliver partnership Value for Money The annual cost of the Counter Fraud & Investigation Team is calculated at £237k. There are tangible benefits delivered by the team that demonstrates how effective our work is.  Fraud recoveries are probably the clearest indicator - the level of recoveries (£114k) in 2019/20 was very encouraging and shows we are effective in ensuring redress is taken where we identify fraud.  We also recovered amounts through both our investigation and counter fraud work and across several cases and approaches - this provides more evidence of effectiveness.  However, recoveries can be subject to many factors including timing and nature of cases so cannot be the only comparison.  
 
We were able to prevent a sizeable fraud from taking place in 2019/20 when a Business Support employee showed awareness to recognise fraud red flags when supposedly contacted by a contractor.  We have delivered regular work with this team and this directly helped prevent this fraud happening - again showing the tangible benefits our work brings. There are also areas where benefits cannot be measured.  
The volume and range of our fraud prevention work and our promotion of it acts a deterrent - therefore stops fraud attempts from occurring at Lincolnshire County Council. 

We cannot place a value on this but the amount of losses would be much higher without the team's contribution to countering fraud. 

 
We publicise the range of work we undertake and the successes we deliver - this is designed to make potential fraudsters reluctant to target the Council as they believe that attempts will be identified and strong action taken. We maintain regular contact with our Midland Fraud Group colleagues and undertake basic benchmarking activity with them - this provides valuable insight and our results always compare favourably with other teams across the region.  

## Annual Cost Of Team £237K

2019/20 Recoveries  
 

## £114K Large Fraud Stopped

 
£1.56m 

## Many Other Frauds

stopped before they happen We also participate in the annual CIPFA Fraud and Corruption Tracker survey - the 2019 results estimated that £253m of fraud was detected and prevented by local authorities.  The report provides valuable insight into trends and statistics on fraud activity across similar councils.  This enables us us to align our work to ensure we are aware and responding in the correct areas. 

 
These factors demonstrate that the team provides a proportionate approach to mitigate fraud risks and delivers a Value for Money service. 

Coronavirus The unprecedented crisis created by the COVID-19 outbreak crisis has  
brought many challenges.  It is a fast changing and developing situation that has required a rapid yet coherent response.  
 
Unfortunately, fraudsters seek to take advantage of such major issues - they exploit confusion and vulnerability where individual decision making  
may be affected. We were able to ensure a prompt and joined up response to ensure employees, our partners and the wider public were aware of the raised threat of fraud - messages were mainly around the current risks of supplier fraud and cyber attacks such as phishing scams. Moving forward, we have been gathering intelligence and information (from national and local sources) regarding potential fraud risks relating to the changed scenario in which the Council finds itself.  This information is acting as a guide to those specific service areas and transactions most vulnerable to fraud at this time and we are revising our plans accordingly to ensure our response remains effective. 

Recognition 
Following our team's success in the Government Counter Fraud 
Awards 2019 for our fraud awareness for schools campaign, we have been invited to make presentations at national conferences to provide 
insight into our work. We were invited to present at several events including the Cabinet 
Office Counter Fraud Conference in February 2020 and the Inside 
Government Conference in June 2019. This demonstrates how Lincolnshire County Council has become established as a nationally 
respected authority in the counter fraud community. 
Fighting Fraud and Corruption Locally 2020… 
..is the Local Government Counter Fraud Strategy and is aimed specifically towards councils and their fraud fighting efforts. The FFCL sets the approach local authorities should take to transform counter fraud and corruption performance as well as offering major recommendations for local authorities and other stakeholders - it looks at current issues, risks and good practice  
 
The Strategy is due for renewal in 2020 and Lincolnshire County Council have been approached by CIFAS to deliver the guidance aimed at schools to help them to prevent fraud.  We have vast experience in dealing with school fraud and this represents a good opportunity to share knowledge with other local authorities and establish our position as an exemplar authority. Our current plans are aligned to FFCL 2016-19 and we report against its 5 core principles. We will continue to reflect the national strategy priorities when we review our own policies later in 2020 to ensure they remain compatible. We will report back on progress to the Committee in November 2020. 

## Nature Of Work Indicative Scope Progress Specific Step (From Cipfa Code Of Practice) Cipfa Code Of Practice - Key Principle A : Acknowledge Responsibility

Audit Committee 
reporting Engagement,  
training and fraud 
awareness 
  
Engagement with Public Sector 
Partners in 
Lincolnshire 

A1 - Acknowledge the threat of fraud and corruption A2 - Acknowledge the importance of a culture that is resilient to the threats of fraud and corruption 
  
A3 - Governing Body acknowledges its responsibility for the management of its fraud and corruption risks 
  
A4 - Governing Body sets a specific goal of ensuring and maintaining its resilience to fraud and corruption 

Annual and progress 
reports of counter fraud activity to Audit 
Committee:  
- Annual Report on 
delivery of  2018/19 Counter Fraud Work 
Plan 
- Fraud Risk 
Assessment - 2019 
update 
- Counter Fraud 
Progress report 2019-
20  
- Annual Whistleblowing Report 
- Annual Counter Fraud 
Work Plan  
Annual and progress 
reports completed as scheduled: 
 
Completed 
 
Completed 
 
Completed 
 
Completed Completed Outstanding 
Completed - report 
presented in January 
2020 Completed Briefing sessions - 
training for members and 
senior management 
Continued development 
of fraud resilience 
through the Lincolnshire 
Counter Fraud 
Partnership (LCFP). 
Delivery of reports to Lincolnshire Finance 
Officers Group Participation in Safer 
Lincolnshire 
Partnership's  (SLP) 
Serious and Organised Crime - Fraud Group 
(current focus on 
vulnerable adults) 

## Cipfa Code Of Practice - Key Principle B : Identify Risks

Research and 
intelligence gathering to highlight emerging 
risks 
Benchmarking activity 
 
 
Update fraud risk profile 
Analysis and 
publication of fraud losses 

## B1 - Fraud Risks Are Routinely Considered As Part Of Risk Management Arrangements B2 - The Organisation Identifies The Risks Of Fraud And Corruption B3 - The Organisation Publishes Estimates Of Fraud Loss To Aid Evaluation Of Fraud Risk Exposures B4 - The Organisation Evaluates The Harm To Its Aims And Objectives    ****

Participation in: 
•
Midlands Fraud Group 
•
work with FFCL 
Board (Fighting Fraud & Corruption 
Locally) 
•
CIPFA Counter Fraud Centre 
•
follow up of NAFN 
alerts and horizon 
scanning for relevant legislative changes 
  
Annual review and update of the Council's 
Fraud Risk register Participation in CIPFA 
Fraud and Corruption 
Tracker (CFaCT) Annual Survey  
  
Audit Committee 
reporting 
Monitoring and review of: 
 
•
Investigations 
•
Whistleblowing 
reports 
•
CFaCT annual report 
•
National picture to 
identify trends and 
feed into Fraud Risk  
Completed 
 
Completed Completed - Survey 
submitted 
 
Completed - Reports 
presented 
Completed 
 
Completed - Data analysis being used 
where required 
       Assessment 
 
Data analysis and Risk assessment: 
 
•
Used to prioritise and facilitate counter 
fraud proactive 
exercises

## Specific Step (From Cipfa Code Of Practice) Cipfa Code Of Practice - Key Principle C : Develop A Strategy

C1 - Governing Body formally adopts a counter fraud and corruption strategy to address identified risks 
 
Counter Fraud Strategy Review and refresh policy documents C2 - Strategy includes the organisation's use of joint working or partnership approaches C3 - The strategy includes both proactive and responsive approaches: 

Refresh & Promote 
Counter Fraud Strategy Review and updates of 
Policies including: 
 
•
Counter Fraud / 
Bribery & Corruption 
Policy  

  
•
Fraud Response 
Plan 
  
•
Fraud 
Communication 
Strategy  
  
•
Money Laundering 
Policy (ML) 
Outstanding Outstanding 
 
Outstanding 


Completed 


Draft produced and 
under consultation 

## (From Cipfa Code Of Practice) Cipfa Code Of Practice - Key Principle D : Provide Resources

Lincolnshire Counter 
Fraud Partnership 
Midlands Fraud Group Collaboration with and 
support to Internal 
Auditors at Assurance 
Lincolnshire 
  
Manage pool of Conduct Investigators Website updates 

D1 - Annual assessment whether level of resource invested to countering fraud and corruption is proportionate to the level of risk D2 - The organisation utilises an appropriate mix of experienced and skilled staff 
  
 
D3 - The organisation grants counter fraud staff unhindered access to its employees D4 - The organisation has protocols in place to facilitate joint working and data and intelligence sharing  

Completed 
Completed 
 
Completed 


Completed 
Completed - 
Meetings arranged 
and delivered 
Development and 
delivery of annual 
counter fraud work plan 
Fraud advice across 
LCC services areas and to strategic partners 
  
Management of 
Lincolnshire Authorities 
Whistleblowing Facility 
  
Ongoing participation with SLP Serious 
Organised Crime - 
Fraud Group 
Engagement with 
national and regional 
best practice groups including co-ordination 
and Chairing of 2 x 
Midland Fraud Group Meetings  

## Cipfa Code Of Practice - Key Principle D : Provide Resources

Use of pooled funding contributions from Lincolnshire's District Councils and Lincolnshire Police for provision of support to the Lincolnshire Counter Fraud Partnership, including: 
•
Delivery of 3 
Lincolnshire Counter Fraud Partnership meetings 

  
•
Support for Lincolnshire Districts 
Councils to reduce 
fraud losses in Council Tax and 
Business Rate 
collection 
•
Joint awareness 
activity 
 
•
Support for 
eLearning module 

Completed 
Completed - 1 
delivered but 
approach being 
revisited  
 
Completed 
Completed Completed Completed Continuing professional 
Development and 
training for Counter Fraud & Investigations 
Team 

## Cipfa Code Of Practice - Key Principle E : Take Action

•
National Fraud Initiative 2018/19 
  
•
Proactive counter 
fraud exercises 
  
•
Data analysis 
  
•
Investigations - 
whistleblowing 
referrals 
  
•
Investigations - 
fraud 
  
•
Applications of 
sanctions 
  
•
Seeking redress  
  
•
Advice  
  
•
Promotion of 
counter fraud 
activity 
•
Organisational 
learning 
  
•
Reports to Audit 
Committee 
E1 - The organisation has put in place a policy framework which supports the implementation of the Counter Fraud Strategy 
  
E2 - Plans and operations are aligned to the strategy E3 - Making effective use of initiatives to detect and prevent fraud, such as data matching or intelligence sharing 
  
E4 - Providing for independent assurance over fraud risk management, strategy and activities 
 
E5 - Report to the Governing Body at least annually on performance against the counter fraud strategy and the effectiveness of the strategy. Conclusions are featured within the Annual Governance report   
  
* Note also Specific Step - C3 
 

Completion of ongoing data analysis exercise 
and investigation of 
payroll outliers Follow up and 
investigation of data 
matches identified through National Fraud 
Initiative 2018/19 
Delivery of 
Communications Plan promotion and publicity 
through various 
publications and media 
channels including internal communications 
of: 
  
•
fraud prevention 
measures 
•
fraud awareness - updates, risk, red 
flags, scams etc. 
•
investigation 
outcomes 
•
policy and 
expectations 
 
Proactive procurement 
fraud exercises and use 
of data analytics: 
•
off contract 
purchasing 
•
purchasing card (P-
Card) transactions 
Completed Completed 
Completed Completed 
Completed  
 
Pro-active work - 
research & scoping for contract monitoring 
practice audits and 

## Cipfa Code Of Practice - Key Principle E : Take Action

 
Quarterly liaison 
meetings with Information Governance 
Teams - pro-active cyber 
security review 
 
Risk review and activity 
planning - fraud in Adult Social care 
  
Investigations arising from whistleblowing 
reports and frauds 
identified 
Production of 
management reports and action plans to aid 
organisational learning - 
learning points Applications of sanctions 
- civil, disciplinary and 
criminal 
Seeking redress where 
successful prosecutions are achieved 
  
Provision of advice on 
fraud risks and mitigating controls