Transcript Fraud and Error

Efficiency without deficiency:
Tackling fraud and error in the public sector
Sanjay Mackintosh – Cabinet Office
Jonathan Lloyd-White – HMRC
UNCLASSIFIED
Overview
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Context
Benefits, credits and revenue fraud
Cross-cutting fraud and error
• Procurement
• Grants
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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
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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 approach
Benefits & 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 noncompliance 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 Strategy
PREVENT
MAINTAIN
Fraud & Error Assessment Risk Tool (FEAST) –
•Pilot with Credit Reference Agencies on Undeclared
Screening tool for new tax credit applications – finds
Partner
risks that would be extremely difficult to detect using
•20k Tax Credit claims with some evidence of an
manual intervention;
High Risk Changes of Circumstances - Working in
Undeclared Partner.
•CRAs ranked the cases into high, medium low risk.
partnership with Contact Centre colleagues allows us
to challenge customer information when they try to
•Red – letter issued to customers where we have
make changes to their awards.
specific information or data from the CRA that
High Risk Renewals – our chance to correct previous
year awards whilst putting current year claims on
strongly suggests there is a high risk of and
Undeclared Partner.
correct footing. Based on feedback and lessons
• Amber – letter issued where we have
learned, moved towards a more targeted risk-based
information from the CRA which suggests there
approach based on Risk Groups.
maybe a risk of an Undeclared Partner
Driving effective interventions with data
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Matching data from 26 separate systems - Connect
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High volume-low value error, to sophisticated on-line organised
criminal attacks or complex corporate tax affairs
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Driving focused taskforce activity on evasion – scrap metals in
Scotland
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Driving focused campaigns on populations – Medics, Offshore,
Plumber
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
Ongoing investment
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Data/capacity – growing storage, processing capability and
user numbers
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Text mining – ability to mine unstructured text based
information
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In-house academy for data analytics – keeping people up to
pace with technology
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‘Upstream Transaction Risking’
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Predictive analytics – spotting behavioural trends to separate
error from deliberate evasion
Credit Reference Agency trials – using third party data to
check declared income
Cross-Cutting Fraud and
Error – New Opportunities
Procurement fraud
What we
know
£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
What we
need to do
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
Opportunities
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
What we
know
£515m lost to fraud in the
public sector each year
Grants expenditure not
fully understood – crosscutting 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
What we
need to do
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
Opportunities
Piloting prevention/
detection screening tools
with government
departments who issue
grants
Insider-enabled fraud
What we
know
£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
What we
need to do
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
Opportunities
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 us
[email protected]