Fraud and Error Contents

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3Responding to fraud and error

25.Each government department has a responsibility to minimise fraud and error, put it right and report on it.70 HM Treasury told us it expects policy to be developed with fraud risk considered at the development and design stage.71 The NAO concluded that deterrence and prevention are often more cost-effective for tackling fraud and error than detection, correction and pursuit and that a cost-effective control environment, where the department is doing everything it reasonably can to minimise fraud and error, leads to the lowest level of fraud and error compatible with the policy intent.72 DWP told us one of its key lessons from the COVID-19 response was the importance of design in terms of trying to avoid fraud and error coming into the system in the first place.73

26.The Cabinet Office told us that the Counter Fraud Function is aiming to introduce a minimum standard for fraud risk assessments across government.74 But it is also still working to increase awareness of the Counter Fraud Function.75 For example, consultation with the Function’s central team of experts is at the discretion of each department, though Cabinet Office recognised some departments will be able to draw on their own internal counter fraud expertise.76 BEIS told us that despite the increased risk of fraud and error compared to its usual operations it did not consult the Function when designing the Bounce Back Loan Scheme. However BEIS did not think any additional counter fraud expertise or analysis would have changed its position given Ministers had already made the decision to tolerate the increased risk to ensure speedy delivery.77

27.The Cabinet Office told us that in emergency situations like the pandemic response it is important to get support out to communities and individuals who need it, and how you balance accessibility and control is one of the areas counter-fraud professionals and other professionals in policy, finance and risk management all look at.78 We previously concluded that BEIS’ focus on speed of delivery for the Bounce Back Loan Scheme has exposed the taxpayer to potentially huge losses.79 BEIS told us this decision was a “difficult trade off”.80 In written evidence Cifas told us that even allowing for time pressures when the support schemes were first introduced, administering public sector bodies have in many instances continued to receive minimal consultation on preventing during subsequent rounds of funding.81 We recently heard from the Department for Digital, Culture, Media and Sport on its efforts to prevent fraud within the Culture Recovery Fund. DCMS attributed the Fund’s low level of fraud to its upfront due diligence process, though recognised this increased the time it took to distribute funding to recipients.82

28.We asked DWP how it balanced the need to protect taxpayers’ money with the speed and accessibility of support schemes. DWP told us that Universal Credit was a good example of balancing these needs as applications normally rely on people coming into the jobcentre for ID checks which was no longer possible. DWP told us it had to find other ways of verifying information which were “less satisfactory”, but over time was able to find new techniques, using data and remote methods. DWP explained that those early cases where payments were made without having satisfactory data were flagged for review and it now has a team of 1,400 people methodically going through those cases, one by one, to put them right.83

Consequences of fraud and error

29.Departments need to ensure that they detect fraud and error and recover overpayments wherever possible.84 HM Treasury told us it is up to departments to undertake an assessment of how feasible it is to recover funds lost to fraud and error. DWP told us it has a “lot of different ways of recovering debt”.85 For example DWP explained that debt recovery from vulnerable individuals through the Breathing Space Scheme is by a reduction of benefits and there is a cap in place where this reduction would cause hardship.86 Cabinet Office told us that it has started making moves towards increasing the commonality of sanctions applied by departments and has an “aspiration” to open up powers and sanctions to allow other parts of government to access them as part of their counter-fraud arrangements.87

30.We asked DWP and HMRC about the different departmental responses to similar fraudulent actions, such as concealment of earnings. HMRC told us it has a policy of using criminal investigations in only the most serious cases, where it is the necessary response and where it will have a real deterrent effect, or where the taxpayer has taken certain actions that only criminal investigation will enable HMRC to get to the bottom of, such as when information is beyond the reach of its civil powers.88 HMRC explained it focuses instead on disrupting criminal activity to make it unprofitable.89 DWP explained that in 2017 it increased the threshold for fraud that it would pursue through the criminal process as opposed to the civil process and it increasingly uses administrative penalties, rather than full-scale prosecution, because it wants to focus criminal investigations on serious organised fraud.90 DWP told us one of the big investments DWP has been making is to make it easier for people to inform the department of a change, for example through online prompts in systems which are making some difference in sweeping up errors caused by a failure to notify of a change of circumstance.91

31.We asked BEIS about plans to recover loans made as part of the Bounce Back Loan Scheme. BEIS told us that in the first instance, it is the banks responsibility to manage recovery in line with their usual processes.92 BEIS explained that it is planning to work with the police to carry out criminal investigations, and pursue a civil recoveries programme where potential frauds impact multiple banks...93 BEIS told us it has also taken on police support for enforcement of the most organised, serious, highly criminal cases of fraud in the local authority grant schemes, though local authorities remain responsible for the low-level recoveries process.94