National Fraud Initiative – podcast transcript

Simon:  We’re here today talking to Dave Beveridge, senior manager at Audit Scotland about Audit Scotland’s latest report National Fraud Initiative in Scotland 2006/07.  Dave, what’s this report about?

Dave:  The National Fraud Initiative helps councils, health boards and other bodies such as the public pensions agency identify fraud and error that might be taking place in their financial systems.  By way of example this can include pensions paid in respect of people who’ve died or housing and council tax benefits that are being paid to people who are not entitled to them.  The bodies provide the information for NFI as part of their external audits. The information is compared using data matching techniques to identify circumstances and inconsistencies that might indicate fraud or error although there’s no presumption that a match is a fraud.  These examples are then passed back to the bodies which investigate them and report the outcomes to us.  

Simon: And what have you found with this particular report?

Dave: The 2006/07 NFI in Scotland has, so far, helped identify around £9.7 million of overpayments whether fraud or error and significant forward savings.  Since we started this back a number of years ago the cumulative value of the exercise is now around £37 million which is clearly substantial.  Forward savings are an estimate of overpayments, mainly pension payments that would have continued to be made into the future if they hadn’t been identified through the exercise.  

Simon: What does this actually mean for the tax-payer?

Dave:  It means two things really.  Either these amounts can be spent in future providing services for the public or it means that honest individuals pay less through their taxes to fund amounts that others are obtaining either dishonestly or being paid in error by bodies.  

Simon:  Who exactly is it that actually takes part in the NFI?

Dave:  The exercise now covers more than 70 public bodies in Scotland.  These include councils, police authorities, fire and rescue authorities, the Scottish Public Pensions Agency, the Student Awards Agency and, for the first time in the 2006 exercise, the health boards in Scotland.  It’s also important to recognise that Audit Scotland works with the Audit Commission in England in this exercise.  Their facilities, systems and their expertise provide the means to process the data efficiently and very importantly securely and to provide matches back to the participating bodies to investigate.

Simon: You mentioned before the figure of about £9.7 million. How much of that is actually cash that’s been recovered and how much is anticipated savings from future loses that have been prevented?  

Dave: Bodies have told us through what they’ve recorded in the NFI application about £2.8 million in housing benefits overpayments are now being recovered.  There may also be further recoveries, for example, in pension overpayments or from late housing benefit savings that were reported to us from the 2004/05 exercise although the amounts in these cases are not so certain.  However, future incorrect pension payments of £3.9 million will also not now be made.  I’d like to say that people sometimes get the impression that these forward savings aren’t real savings but in fact there’s probably more certainty to the benefits of forward savings than the recovery of past overpayments.  

Simon: The last time you did this exercise you identified £15 million in savings and this time you’re talking around about £10 million.  Does that mean that the exercise hasn’t been as effective this time?

Dave:  Not at all.  We’re not really surprised by the reduction this time round and we feel that this represents a success in itself because of the deterrent effect of NFI.  Most of the public bodies involved also took part in the NFI two years ago so they’ve been able to tighten up their controls and to try and reduce the frauds and errors that are actually taking place.  As well as that most of the significant problems that were picked up in this exercise should for most part have occurred between October 2004 and October 2006 when we collected data and run for two years at the most.  Errors and frauds in the first major NFI exercise in 04/05 may have gone on for much longer than that.  It’s also possible that the profile NFI attracted last time, as I say, has deterred some fraudsters.  It should also be recognised that a significant part of the reduction is related to the Scottish Public Pensions Agency where progress within their NFI investigations has been slower than expected.  SPPA’s auditors also had some significant reservations about the arrangements made by the agency to tackle the NFI work although we acknowledge this was partly related to problems with resourcing the work due to other priorities in the agency.

Simon: So what happens now?

Dave:  Bodies will continue to investigate their cases until the next NFI commences which is in October later this year.  They’ll also seek to recover overpayments as we’ve said already where they can and progress those cases where reports have been submitted to the Procurator Fiscal.  The next NFI in Scotland exercise will largely be similar in scope to the 06/07 exercise.  However, we’d like to say that Audit Scotland is in discussion with the Scottish Government about extending our powers for this data-matching work and that we think that’s vitally important if Scotland isn’t to fall behind the rest of the UK in this particular area. Her Majesty’s Inspectorate of Constabulary made a similar recommendation in a thematic inspection of serious fraud that was also published earlier this week. These powers would allow us, for example, to work with other UK audit agencies to match data across our respective national boundaries and also make it easier for Audit Scotland to extend the exercise into other data sets and into other bodies in Scotland.

Simon:  OK Dave, thanks very much for your time.