Background to the report

Since the start of the COVID-19 pandemic, government has recorded a higher level of fraud in the accounts we audit. This reflects the nature of the government’s response to the pandemic, including the rapid implementation of large new spending and loan programmes that came with an unusually high risk of fraud.

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This report sets out the recent trends from our audits and reports, reviews how well-placed government is to understand and tackle fraud and corruption across government and sets out insights from our work and engagement with experts on what more government can do to better prevent fraud and corruption.

The report follows our previous work which found government did not have a good understanding of fraud before the pandemic. In our 2016 Fraud landscape review, we found a large disparity between the level of fraud and error that the UK government reports and the level reported in other countries and the private sector. We also found there were few incentives for departments to record and report the true scale of potential fraud; a lack of data or metrics to evaluate performance in detecting and preventing fraud; and mixed capability across departments to tackle fraud.

Scope of the report

This report focuses on fraud and corruption against government and therefore the taxpayer.

Fraud is an act of deception carried out for personal gain or to cause a loss to another party. It may be committed internally by staff or externally by suppliers, contractors or members of the public.

For the purpose of this report, corruption, which includes bribery, is the abuse of a public or private office for financial gain or the avoidance of personal loss.

Both can lead to the loss of taxpayer money (such as benefit or tax fraud) or an inefficient allocation of resources (such as falsely claiming a loan even if intending to pay it back).

We also include regulatory fraud – the abuse of government systems and processes where the victim may be a member of the public (such as fraudulently claiming probate) or the public at large (such as environmental crimes or falsely claiming a licence).

As auditors, our role in respect to fraud and corruption is to obtain reasonable assurance that the financial statements are free of material misstatement or irregularity, whether caused by fraud or error, and to report on the extent to which the audit was considered capable of detecting fraud.

In our value-for-money audits we may also consider whether bodies we audit have appropriate controls in place to prevent, detect and investigate fraud and corruption. We do not investigate individual cases ourselves. The bodies we audit are responsible for detecting and investigating fraud and corruption cases, which they may do in collaboration with the police.

Conclusions

Fraud and corruption have for many years diverted billions of pounds a year from public finances to criminals. Government’s vulnerability to fraud inevitably rose as a result of its response to the COVID-19 pandemic, as it spent more on things inherently at risk of fraud and set up new programmes quickly.

But there were ways in which public bodies could have better managed the fraud risk without impairing their emergency response. There is a risk that people come to perceive higher levels of fraud against taxpayers as normal and tolerated.

There is also a risk that the UK is becoming perceived as more corrupt than it was before the pandemic. Such perceptions could affect public confidence in the integrity of public services.

Government has made some progress since we last reported in 2016. It has established the Government Counter Fraud Function (GCFF) and the Government Counter Fraud Profession (GCFP). More recently it established the Public Sector Fraud Authority (PSFA) to improve its understanding of fraud attacks against government and to improve the standards of the counter-fraud function and profession.

However, outside of tax and welfare, government still lacks robust assessments of where and what its fraud risks are, and most public bodies cannot demonstrate that they have counter-fraud resources commensurate with the risk.

The creation of the PSFA presents the opportunity for a renewed focus on fraud and corruption. The PSFA will need to be influential across government if it is to achieve the required changes in culture, preventive approach and robust assessment of risks.

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Publication details

Press release

View press release (30 Mar 2023)

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