AS Report – The National Fraud Initiative in Scotland 2024.
Renfrewshire Council · 4 November 2024
Back to Audit, Risk and Scrutiny Board — 4 November 2024 and its agenda
Text extracted from the council's PDF. Layout and reading order may differ from the original.
Page 1
1 ___________________________________________________________________ To: Audit, Risk and Scrutiny Board On: 4 November 2024 ___________________________________________________________________ Report by: Interim Chief Auditor ___________________________________________________________________ Heading: Audit Scotland Report – The National Fraud Initiative in Scotland 2024. ___________________________________________________________________ 1. Summary 1.1 Audit Scotland’s report on the National Fraud Initiative (NFI) 2022/23 was published in August 2024 and is attached at Appendix 1. 1.2 The report highlights that Scottish public bodies have recorded outcomes of £21.5 million arising from the 2022/23 exercise. The 2022/23 figure has increased by approximately £6.6 million since the last exercise and the increase has been across most data match areas. The NFI outcome figures include amounts for fraud and error detected as well as an estimate for those future losses that have been prevented. However it is not clear whether underlying levels of fraud have increased since the reports states that there have been improvements in the recording of the results by participating bodies and there has also been a change in the estimation methodologies which has contributed to higher outcomes in some areas. 1.3 Renfrewshire Council’s approach and outcomes for the 2022/23 exercise is attached at Appendix 2. 1.4 Our self-assessment of our arrangements in preparation for the 2024/25 exercise is also included in Appendix 3. ___________________________________________________________________
Page 2
2 2. Recommendations 2.1 It is recommended that the Audit, Risk and Scrutiny Board: • note the report from Audit Scotland, and • note Renfrewshire Council’s current arrangements, outcomes and self-assessment to support the 2024/2025 NFI exercise. _________________________________________________________ 3. Background 3.1 The NFI aims to detect and prevent fraud and error through a national data matching exercise across public bodies carried out by the Cabinet Office and overseen, in Scotland, by Audit Scotland, with the aim of identifying instances of possible fraud or error. Overpayments that are identified through the initiative allow public bodies to take appropriate action to recover the money. 3.2 The initiative, which is co-ordinated in this council by internal audit, operates biennially with the data downloaded and electronically matched in year one and the results issued, investigated and reported in year two. In relation to this report data was downloaded from our systems in September 2022 and uploaded onto the secure NFI web portal in October 2022, to be matched against other council data or other participant data. 3.3 The Audit Scotland report highlights 3 recommendations for councils to consider in relation to counter fraud activities and their response to the National Fraud Initiative. These are summarised below along with the current arrangements in Renfrewshire Council and any identified improvement actions: 1. Maximise the benefits All participants should ensure that an appropriate level of resource is available to deliver NFI follow-up activities in an efficient and effective manner, in line with local priorities. The Interim Chief Auditor co-ordinates the NFI exercise in Renfrewshire Council. Time is included in the counter fraud work and audit plan and there is regular engagement with services throughout the National Fraud Initiative. If any issues are identified in progressing the matches, these are highlighted to Senior Management for action. Revenues and Benefit services have included NFI match investigation in their work plan.
Page 3
3 2. Self-appraisal The NFI self-appraisal checklist is used as part of planning for the 2024/25 exercise. The Interim Chief Auditor completes the NFI self-appraisal checklist as part of the planning arrangements for each NFI exercise and the completed checklist for the 2024/25 exercise is attached in Appendix 3 of this Report. Only one improvement action has been identified and that is to include reference to the National Fraud Initiative in the Council’s Code of Corporate Governance. 3. Follow-Up Activity Arrangements Participants should put in place arrangements for monitoring follow-up activity, and where it is necessary seek to understand reasons for low or nil outcomes. Internal Audit is responsible for co-ordinating the exercise and regularly review outcomes. Where any control issues are identified, meetings are held with the appropriate parties to highlight them and determine any action required. Processes followed to investigate matches are also reviewed where low and nil outcomes are recorded. 3.4 The Council has made financial savings of £401,199 as a result of investigative work on the 2022/2023 NFI matches and further future estimated savings of £810,056 have also been noted. Non-financial outcomes relate to 2 housing properties being recovered, 11 housing applications being amended or cancelled and 152 blue badges being cancelled. ___________________________________________________________________
Page 4
4 Implications of the Report 1. Financial - The Council has in place arrangements to recover any financial overpayments identified through the National Fraud Initiative. 2. HR & Organisational Development - None 3. Community Planning – Wealthier and fairer – The National Fraud Initiative (NFI) exercises make a significant contribution to the security of public sector finances by confirming that services are provided to the correct people and by eliminating fraud and error. 4. Legal – None 5. Property/Assets - None 6. Information Technology - None 7. Equality & Human Rights - None 8. Health & Safety - None 9. Procurement - None 10. Risk – Priority is given to investigating matches with a higher risk of fraud and error. 11. Privacy Impact – There is a requirement to take best reasonable attempts to notify people of the NFI exercise as part of the preparation for the exercise. This requirement has been complied with. 12. Cosla Policy Position – None 13. Climate Risk – None 14. Children’s Rights - None ___________________________________________________________________ Author: Karen Campbell, Interim Chief Auditor
Page 5
Prepared by Audit Scotland August 2024 The National Fraud Initiative in Scotland 2024
Page 6
2The National Fraud Initiative in Scotland 2024 Contents Key messages 3 Recommendations 4 1. Introduction 5 2. Overall outcomes 7 3. NFI delivery 11 4. Specific match areas 14 5. Pilot exercises and future developments 25 Appendix 26 Accessibility You can find out more and read this report using assistive technology on our website www.audit.scot/accessibility. Audit team The core audit team consisted of: Tim Bridle, under the direction of Cornilius Chikwama.
Page 7
3Key messages Key messages Key messages Key messages 1 Fraud against the public sector costs the taxpayer money and can undermine both confidence in government and the delivery of public services. The proactive detection and prevention of fraud using the National Fraud Initiative (NFI) remains vitally important to public sector financial management as public bodies continue to recover from Covid-19 and to deal with the impact of the cost-of-living crisis. 2 NFI savings and outcomes have increased from £14.9 million in 2020/21 to £21.5 million in 2022/23, with increases across most data match areas. However, savings from council tax single person discounts are slightly reduced and additional outcomes in some areas are attributable to changes in estimation methodologies. Overall, it is not clear whether underlying levels of fraud have increased since 2020/21. 3 NFI governance and follow-up arrangements remained sound for most participating bodies over the period covered by the 2022/23 exercise. However, when compared to previous exercises, slightly fewer bodies have been assessed by their auditors as having fully satisfactory arrangements, and there remains scope for some bodies to follow up on data matches more effectively.
Page 8
4Recommendations Recommendations Participating bodies should: • Ensure that an appropriate level of resource is available to deliver NFI follow-up activities in an efficient and effective manner, in line with local priorities. • Use the NFI Self-Appraisal Checklist as part of planning for the 2024/25 exercise. • Put in place arrangements for monitoring follow-up activity, and where it is necessary seek to understand reasons for low or nil outcomes.
Page 9
5 1. 1. Introduction 1. Introduction The proactive detection and prevention of fraud using the National Fraud Initiative (NFI) remains vitally important to public sector financial management as public bodies continue to recover from the Covid-19 pandemic and to deal with the impact of the cost-of-living crisis. 1. Fraud against the public sector costs the taxpayer and can undermine both confidence in government and the delivery of public services. The National Fraud Initiative (NFI) is a proactive data matching exercise designed to identify and prevent fraud. It remains vitally important during a time of ongoing financial pressure as public bodies continue to recover from the Covid-19 pandemic and to deal with the impact of the cost-of- living crisis. 2. The Public Sector Fraud Authority (PSFA) oversees the NFI across the UK, and Audit Scotland leads the exercise in Scotland, working with a range of Scottish public bodies and their external auditors. The NFI takes place every two years, and this report considers the outcomes from the 2022/23 exercise. Statutory basis for NFI 3. We carry out the NFI under powers introduced by the Criminal Justice and Licensing (Scotland) Act 2010 and incorporated in Part 2A of the Public Finance and Accountability (Scotland) Act 2000. It is important for all parties involved that this exercise is properly controlled, and that data is handled in accordance with the law. The Audit Scotland Code of Data Matching Practice includes a summary of the key legislation and controls governing the NFI data matching exercise. Participating bodies 4. In 2022/23, 110 public sector bodies in Scotland participated in the NFI, submitting data and following up on matches. The Scottish Government also submitted data for another 17 central government bodies who share their systems for payroll and/or creditors. Many councils also submit payroll data for their Arm’s-Length External Organisations (ALEOs). Across the UK there are over 1,100 participating bodies and data matching takes place across them all.
Page 10
1. Introduction 6 Main data match areas in 2022/23 5. The main data match areas for the 2022/23 NFI exercise were: • Payroll • Creditor payments • Council Tax (Single Person Discounts and Reduction Scheme reliefs) • Pensions • Housing Benefit • Housing Tenancy and waiting lists • Blue Badges (disabled parking) • Adult concessionary bus travel (new in 2022/23 exercise). 6. The 2022/23 NFI exercise matched new data from His Majesty’s Revenue and Customs (HMRC) using powers under the Digital Economy Act (2017). 7. Non-Domestic Rates Small Business Bonus Scheme (NDR SBBS) matching was postponed for the 2022/23 exercise due to the national NDR revaluation exercise in 2023. Results will be reported as part of the 2024/25 exercise. Basis for reported outcomes 8. All monetary outcomes included in this report are on a cash basis, prior year totals have not been adjusted to reflect inflation or changes in estimation methodologies since amounts were originally reported. Details of estimate methodologies used can be found at Appendix.
Page 11
72. Overall outcomes 2. Overall outcomes Overall outcomes from the NFI have increased from £14.9 million in 2020/21 to £21.5 million in 2022/23. Overall outcomes by type 9. The value of outcomes from the NFI, recorded since our last report, total £21.5 million (up from the £14.9 million in 2022). The cumulative value of outcomes from the NFI in Scotland since participation started in 2006/07 now stands at around £180 million. Exhibit 1 shows NFI outcomes by type for 2022/23 and the previous three exercises. Exhibit 1. NFI outcomes by exercise and type, 2016/17 to 2022/23 Reported outcomes have increased to £21.5 million in 2022/23. Source: Audit Scotland analysis of NFI outcomes 0 10 25 2022/232020/212018/192016/17 £ million £17.8m £15.3m £14.9m £21.5m 3.1 2.7 4.2 6.8 9.2 7.0 6.2 8.9 5.5 5.6 4.5 5.7 Actual savings: overpayments and additional income Forward savings estimates: from overpayments, additional income and prevented fraud Notional outcome estimates: not directly linked to actual overpayments or additional income, eg blue badges, housing tenancy and waiting lists 10. Increased outcomes reported in 2022/23 partly reflect improvement in recording of results as bodies continue to recover from Covid-19. There have also been changes to estimation methodologies which contribute to higher outcomes in some areas (details of methodologies can be found in the Appendix). It is not possible to extrapolate from these figures that underlying levels of fraud have increased.
Page 12
2. Overall outcomes 8 Outcomes by data match area 11. Most monetary outcomes from the NFI accrue to councils, the Scottish Public Pensions Agency and the Department for Work and Pensions (DWP) in the form of savings arising from council tax, pensions and housing benefits matches. 12. Many participating bodies only submit payroll and creditors datasets for matching, and this limits the monetary outcomes available to them. However, overpayments associated with duplicate creditor payments and payroll matches are not insignificant. NFI outcomes analysed by main data match area, are shown for the last three exercises in Exhibit 2 (page 9).
Page 13
2. Overall outcomes 9 Exhibit 2. NFI outcomes by area and exercise Most savings arise from Council Tax, Pensions and Housing Benefits matches. Notional outcome estimates Forward savings estimates Overpayments and additional income 0 1 2 3 4 5 6 Care Home Payments Payroll Concessionary Bus Travel Creditors Housing waiting lists Council Tax Reduction Scheme Housing Tenancy Housing Benefit Pensions Non-Domestic Rates Blue Badges Council Tax SPD Care Home Payments Payroll Concessionary Bus Travel Creditors Housing waiting lists Council Tax Reduction Scheme Housing Tenancy Housing Benefit Pensions Non-Domestic Rates Blue Badges Council Tax SPD Care Home Payments Payroll Concessionary Bus Travel Creditors Housing waiting lists Council Tax Reduction Scheme Housing Tenancy Housing Benefit Pensions Non-Domestic Rates Blue Badges Council Tax SPD £ million 2020/21 2018/19 2022/23
Page 14
2. Overall outcomes 10 Notes: 1. Non-Domestic Rates Small Business Bonus Scheme data was first submitted for the 2020/21 exercise but did not form part of the 2022/23 exercise due to the revaluation exercise taking place in 2023. 2. Care home payments have not been matched since 2018/19 due to legislative constraints. 3. Adult concessionary bus travel was a pilot exercise in 2020/21 and has been mainstreamed in 2022/23. Source: Audit Scotland analysis of NFI outcomes Wider benefits of NFI 13. The NFI also delivers benefits which are more difficult to quantify. These include its fraud deterrent effect and the financial governance assurance it provides to bodies where no issues are identified (Exhibit 3). Exhibit 3. Non-monetary benefits of NFI Source: Audit Scotland Acts as a deterrent to potential fraudsters Can provide assurance that systems are operating well Can identify where system improvements are required
Page 15
113. NFI delivery 3. NFI delivery NFI governance and follow-up arrangements remain sound for most participating bodies. However, when compared to previous exercises, appointed auditors assessed slightly fewer bodies as having fully satisfactory arrangements. Auditor assessments 14. NFI governance and follow-up arrangements remain sound for most of the 110 bodies in Scotland that participated in the 2022/23 exercise. However, several bodies have struggled with delivery and there remains some scope for improvement. 15. We asked auditors to assess participating body NFI arrangements, and rate them as Green (satisfactory), Amber (mostly adequate) or Red (unsatisfactory). Auditor returns for 2022/23 included a slightly increased number of amber and red ratings Exhibit 4 (page 12). 16. In most cases amber or red assessments reflect deficiencies with follow-up activity. Participating bodies routinely cited the lack of adequate resources as the main reason for delay or lack of progress with follow-up activity. 17. Our NFI Self-Appraisal Checklist includes requirements for participating bodies to consider Leadership, Commitment and Communication. The checklist also asks NFI key contacts and users to consider potential improvements to the efficiency and effectiveness of follow-up activity. The checklist can be found on our Counter Fraud webpage and has been updated for the 2024/25 exercise.
Page 16
3. NFI delivery 12 Exhibit 4. Auditor assessments of NFI delivery arrangements Amber and red assessments were up slightly in 2022/23. Source: Audit Scotland analysis of Auditor Returns Percentage Satisfactory Mostly adequate Unsatisfactory 0 10 20 30 40 50 60 70 80 90 100 Colleges 2022/23 Colleges 2020/21 Colleges 2018/19 CG 2022/23 CG 2020/21 CG 2018/19 NHS 2022/23 NHS 2020/21 NHS 2018/19 LG 2022/23 LG 2020/21 LG 2018/19
Page 17
3. NFI delivery 13 18. Exhibit 5 shows the main determinants of successful NFI delivery that participating bodies should be focusing on to strengthen their arrangements. Exhibit 5. NFI participation – main determinants of success Successful delivery of NFI requires a clear commitment to a well-thought-out approach that optimises the use of available resources to follow up matches appropriately. Source: Audit Scotland 19. Audit Scotland will continue to work with bodies to support effective and efficient delivery of NFI through its ongoing engagement activities. Knowledge Resources Leadership Effective NFI delivery
Page 18
144. Specific match areas 4. Specific match areas NFI outcomes have increased in most data match areas in 2022/23. However, savings from council tax single person discounts decreased slightly, and increases in some areas are partly due to changes in estimation methodologies. Payroll 20. The number of payroll and multi-contract working frauds identified as a result of the NFI has increased. There were 12 cases identified in 2022/23. This is the highest number since 2016/17, which is the last exercise for which immigration data was matched. Overpayments and case numbers for the 2022/23 exercise are shown alongside those for the three previous exercises at Exhibit 6. Exhibit 6. Payroll outcomes and case numbers by NFI exercise There has been an increase in the level of identified fraud in 2022/23. Note. Notional outcomes of £5,685 per case are allocated where staff resign or have been dismissed (Appendix). Source: NFI management information 0 80 140 2022/232020/212018/192016/17 0 8 16 2022/232020/212018/192016/17 Number of cases Overpayments £ thousand 13 8 3 12 £20,000 £129,000 £27,000 £100,000 Notional outcomes
Page 19
4. Specific match areas 15 Creditor payments 21. Participating bodies submit details of payments made to people or organisations supplying them with goods and services. Data is matched by the NFI to identify potential duplicate payments. Bodies identifying duplicate payments often refresh procedures and tighten controls to reduce future risk. 22. In 2022/23 outcomes worth £0.75 million were identified from 146 duplicate payments across 31 bodies. This is broadly in line with previous exercises as shown in Exhibit 7. Exhibit 7. Duplicate creditor payment savings and case numbers by NFI exercise £0.75 million of recoverable duplicate creditor payments was identified in 2022/23. Source: NFI management information 0 0.6 1.2 2022/232020/212018/192016/17 Number of duplicate payments Overpayments £ million 168 147 144 146 £0.6m £1.1m £0.5m £0.75m 130 150 170 2022/232020/212018/192016/17
Page 20
4. Specific match areas 16 Adult Concessionary Bus Travel 23. Following a successful pilot exercise in 2020/21, adult concessionary bus travel mortality screening was rolled out to councils in 2023. The National Entitlement Card Project Office, working in partnership with councils, submitted details of all live travel passes for matching. 24. The NFI identified 99,600 travel passes that belonged to holders who had died. Transport Scotland was able to check usage of these passes and identified that 1,075 had been used after the date of death. 25. The full fare value of fraudulent bus trips associated with these passes amounted to £0.31 million, with a cost to Transport Scotland of around £0.18 million, based on the applicable reimbursement rates to bus companies. 26. The cancellation of these passes will prevent future fraudulent use with an estimated value of £0.45 million (based on £420 per travel pass used fraudulently, see Appendix (page 26). The resultant saving to Transport Scotland is estimated at around £0.25 million based on current reimbursement rates.1 Council Tax Single Person Discounts 27. People living on their own, or in some cases with adults who can be ‘disregarded’, are eligible for a 25 per cent single person discount (SPD) on their annual council tax bill. The NFI matches SPD recipients to the electoral register and to other datasets to identify where other adult residents have not been declared on applications, have subsequently turned 18 or have moved in. 28. Councils withdrew £1.8 million worth of SPDs because of the NFI. The additional income, based on a forward projection of annual savings for two years, in line with the Cabinet Office methodology, equates to an additional £2.7 million. These amounts are shown together and alongside savings for the previous three exercises in Exhibit 8 (page 17). 29. Only 19 councils recorded NFI activity in relation to SPDs, as more councils are now making use of third party providers for data matching and follow-up. Seven councils using third-party providers now record no NFI outcomes (an increase of two from the previous exercise). 1 Total outcomes for this area (Exhibit 2) includes a notional amount of £0.91 million relating to the pilot exercise in 2020/21 (based on the Cabinet Office methodology at the time which applied £550 to each travel pass cancelled).
Page 21
4. Specific match areas 17 Exhibit 8. Council Tax SPD savings and case numbers by NFI exercise Case numbers and savings from single person discounts decreased in 2022/23. Source: NFI management information Thousand 4,846 4,588 3,720 3,419 1.8 2.6 2.7 Case numbers0 3 6 2022/232020/21 2018/19 2016/17 0 3 6 2022/232020/212018/192016/17 £4.4m £4.9m £4.6m £4.5m 3.1 1.8 2.8 1.5 2.9 1.7 2.7 1.8 Forward savings estimate Discounts removed £ million Council Tax Reduction Scheme (CTRS) 30. Council tax reduction is available to low-income households in Scotland. The NFI matches CTRS data to other datasets, such as payroll and pensions, for example, to identify undeclared income. 31. In 2022/23, additional council tax income of £0.92 million was identified because of follow-up on NFI matches (up from £0.65 million in 2020/21). Savings and case numbers are shown alongside those from the previous three NFI exercises in Exhibit 9 (page 18).
Page 22
4. Specific match areas 18 32. Actual additional income from the removal of council tax reductions has increased, as have forward savings estimates. The forward savings estimate methodology has, however, changed with savings now based on 33 weeks, compared to the 21 weeks previously used. Exhibit 9. Council Tax Reduction Scheme savings and case numbers by NFI exercise Total potential savings from CTRS have increased to £0.92 million in 2022/23. Source: NFI management information 115 280 772 395 Case numbers0 400 800 2022/23 2020/212018/192016/17 0.0 0.5 1.0 2022/232020/212018/192016/17 £0.48m £0.30m £0.65m £0.92m 0.08 0.23 0.09 0.38 0.12 0.53 0.23 0.69 Forward savings estimate Reductions removed £ million 33. Only 18 councils identified savings from CTRS, with most savings arising from matches to pensions (around 40 per cent) and payroll (around 30 per cent), where income had not been declared.
Page 23
4. Specific match areas 19 Housing Benefits 34. Housing benefits (HB) help people on low incomes pay their rent. HBs in payment continues to decrease as more benefit recipients move on to universal credit. 35. The DWP’s Verify Earnings and Pensions alerts service has also impacted HB savings from NFI as alerts are sent directly to councils for investigation, allowing them to follow up outside the NFI process. We no longer match HB to payroll and pension as part of the NFI. 36. There has, however, been an increase in reported savings in 2022/23 due to the inclusion of late DWP savings from the 2020/21 exercise which was affected by Covid-19. Exhibit 10 shows the HB overpayments and forward savings reported for the current and previous three NFI exercises. Exhibit 10. Housing Benefit savings by NFI exercise 2022/23 includes significant late DWP savings from the 2020/21 exercise. Source: NFI management information 0.0 1.5 3.0 2022/232020/212018/192016/17 £2.1m £2.8m £1.2m £2.2m 2.1 0.7 1.4 0.7 0.3 0.9 0.4 1.8 Forward savings estimate Overpayments £ million 37. HB matches involving suspected fraud are referred to the DWP for investigation and resultant savings are not attributed back to councils. In 2022/23 almost £2 million of savings arose from these referrals. £0.2 million of savings was identified locally by 17 councils, largely from the follow-up of matches to student loans.
Page 24
4. Specific match areas 20 Exhibit 11. Pensions savings by NFI exercise Follow-up activity and recording of outcomes in 2020/21 was impacted by Covid 19. Source: NFI management information 0 3 6 2022/232020/212018/192016/17 £5.4m £3.2m £1.5m £5.6m 2.8 0.40.7 4.8 0.1 1.4 5.1 0.5 Estimated forward savings Actual overpayments £ million Pensions 38. The NFI is an efficient and effective way for the Scottish Public Pensions Agency (SPPA) and councils that administer pensions to check that they are only paying pensions to people who are alive. 39. The follow-up of matches has led to the identification of actual overpayments of £0.5 million as at 31 March 2024, with projected forward savings amounting to a further £5.1 million. These savings are shown along with those reported for previous exercises in Exhibit 11. 40. Forward savings are estimated based on a potential payment period from the date overpayments are identified until the date the deceased pensioner would have reached the age of 85 (consistent with actuarial assumptions used to value public sector pension schemes). 41. In 2022/23 we have seen improved follow-up of pensions matches. However, not all overpayments identified had been recorded by 31 March 2024. Late savings will be reported as part of the 2024/25 exercise as a result.
Page 25
4. Specific match areas 21 Exhibit 12. Blue Badges outcomes and case numbers by NFI exercise There have been higher levels of recorded cancellation in 2022/23 than for recent exercises. Source: NFI management information 0.0 2.0 4.0 2022/232020/212018/192016/17 Badges cancelled Notional outcomes £ million Thousand 4,505 3,215 4,616 5,140 £1.8m £2.6m £2.7m £3.3m 0 3 6 2022/232020/212018/192016/17 Blue Badges 42. The Blue Badge scheme allows individuals with mobility problems to park for free at on-street parking meters, in ‘pay and display’ bays, in designated Blue Badge spaces, and on single or double yellow lines in certain circumstances. Badges are sometimes used by unauthorised persons after the badge holder has died. Not only is this an offence under the Disabled Persons’ Parking Badges (Scotland) Act 2014, but it may also result in parking spaces being denied to people who legitimately use the Blue Badge scheme. 43. The NFI matches Blue Badges issued to records of deaths, enabling badges to be cancelled. The number of badges cancelled in 2022/23 has gone up to 5,140, as shown at Exhibit 12.
Page 26
4. Specific match areas 22 44. The increased number of cancellations, together with a new estimate multiplier, has resulted in a higher notional outcome value. The Cabinet Office estimation methodology now applies £650 per badge cancelled (compared to £575 per badge in 2020/21). Housing Tenancy 45. With reported housing shortages and high levels of homelessness, tenancy fraud is increasingly an issue for councils. Where fraudulent subletting exists, it means that properties are not available to house people who are in most need and this can be costly to councils. 46. The NFI uses council housing tenancy data to identify possible cases where tenants may have sublet their property. It also helps identify cases where the tenant has died, and the property is either empty or has other individuals living in it. 47. As a result of the 2022/23 exercise, councils were able to identify and recover ten properties. A housing association property was also identified and made available for social housing. The numbers of properties recovered along with the notional outcome estimates for the last four exercises are shown at Exhibit 13 (page 23). 48. Notional outcomes of £78,300 are allocated per property recovered (£93,000 in 2020/21). This is based on an average four-year fraudulent tenancy and includes estimated costs of temporary accommodation for genuine applicants; legal costs to recover property; re-let cost; and rent foregone during the void period between tenancies. 49. In addition to recovery of properties, NFI has enabled several councils to update tenancy details where there has been legitimate succession following a bereavement.
Page 27
4. Specific match areas 23 Exhibit 13. Housing Tenancy outcomes and case numbers by NFI exercise Tenancies recovered as a result of NFI have remained in double figures in 2022/23. Source: NFI management information 0.00 0.50 1.00 2022/232020/212018/192016/17 £ million 2 1 10 11 £0.09m £0.19m £0.93m £0.86m Notional outcomes Tenancies recovered0 6 12 2022/232020/212018/192016/17 Housing Waiting Lists 50. Councils maintain waiting lists for council housing, and in some cases for all social housing in their area. The NFI matches waiting list data to housing tenancy data and other data sets, enabling undisclosed changes in circumstances to be picked up. This enables removal of ineligible applicants from the waiting list, stops inappropriate allocations, and accelerates allocations to people in genuine need of social housing. 51. In 2022/23 we have seen an increase in the number of applicants removed from waiting lists as a result of NFI. Notional outcomes have also increased as shown in Exhibit 14 (page 24).
Page 28
4. Specific match areas 24 52. Notional outcomes are attributed to applicants removed from the waiting list on the basis that social housing could have been allocated inappropriately. The estimation methodology allocates £4,283 per case removed from the waiting list (an increase from £3,240 per application in 2020/21). Exhibit 14. Housing Waiting List outcomes and case numbers by NFI exercise More applicants have been removed from the waiting list in 2022/23 than in previous exercises. Source: NFI management information 0.0 0.8 1.4 2022/232020/212018/192016/17 £ million 90 230 187 280 £0.7m £0.3m £0.6m £1.2m Notional outcomes Applicants removed from waiting list0 150 300 2022/232020/212018/192016/17
Page 29
255. Pilot exercises and future developments 5. Pilot exercises and future developments Social Security Scotland took part in a pilot data-matching exercise which identified limited fraud and error. We are also exploring the possibility of involving wider public sector bodies in the 2024/25 NFI exercise on a voluntary basis. Social Security Scotland – benefits pilot 2022 53. In 2022 a pilot exercise was undertaken with Social Security Scotland (SSS) to identify any instances where claimants received support but were not residing in Scotland, or where claimants appear to have claimed benefits more than once (eg, from more than one Scottish address). The pilot exercise included payments made in the three-month period from April to June 2021. 54. Around 45,000 lines of data relating to benefit payments were submitted for matching, resulting in the identification of 367 claimants who appeared to be residing outwith Scotland. Following review and corroboration of addresses by SSS there were just 17 cases where claimants were not entitled to benefits. Overpaid benefits of £16,450 were identified, a further £20,000 could have been paid out in relation to these claims, over the remaining eligibility periods. 55. Despite the identification of fraud and error, the number and value of cases was not deemed sufficient to justify the inclusion of this match type in the main biennial NFI exercise in 2022/23. The intention is to run another pilot in 2024/25 which may also include Adult Disability Payments for the first time. Inclusion of bodies on a voluntary basis 56. There are potential benefits from expanding the NFI to include more public sector bodies in Scotland. We invited Scottish housing associations and universities to participate in the 2024/25 NFI on a voluntary pilot basis. 57. While no universities have volunteered for participation, we are working with several interested housing associations. At this time, it is unclear how many of those interested will actually participate.
Page 30
26Appendix Appendix Estimated outcomes methodologies In some cases NFI outcomes include an estimated element for forward savings or for where no monetary value can be recovered The NFI uses the term ‘outcomes’ to refer to the financial value of fraud, error and overpayment that can be attributed to NFI data matching. In some cases NFI outcomes include an estimated element which seeks to capture: • The value of loss from a fraud or error detected because of an NFI match, in instances where no monetary value can be recovered - such as the value of recovering a property from a tenant who has fraudulently obtained that tenancy. We have called these ‘notional outcome estimates’ in our report. • The value of any future losses that may have been incurred without intervention as a result of an NFI match. For example, the value of future overpayments prevented through detecting and stopping a fraudulent or erroneous housing benefit claim. We have called these ‘forward savings’ in our report. Most NFI datasets have a methodology to calculate estimated outcomes. These methodologies account for: • data relevant to the fraud problem, including national published data and data from previous NFI cases • the policy context relative to the fraud problem • any regional variances that may result in the generation of estimate methodologies specific to a region or area • alignment where possible with relevant estimated savings methodologies used in other central government departments. All methodologies are reviewed prior to the start of each new NFI exercise. Any changes are reviewed by the Cabinet Office NFI Governance Board and approved by the Cabinet Office Fraud Prevention Panel. This panel consists of cross government counter fraud experts (including representatives from DWP, HMRC, NHS, MOD, BEIS, DFID, NAO, etc.) who review and challenge, where necessary, methodologies for calculating the estimated value of fraud prevention initiatives across government departments.
Page 31
Appendix 27 Once approved, these methodologies are built into the NFI web application to enable the estimated outcomes element to be automatically generated. A summary of the outcomes methodology calculations applied to NFI datasets is set out in the following table: Data match Basis of calculation of forward savings and estimated outcomes Council tax single person discount Forward savings – Annual value of the discount cancelled multiplied by two years. Council tax reduction scheme Forward savings – Weekly change in council tax discount multiplied by 33 weeks (increased from 21 weeks in 2020/21). Housing benefit Forward savings – Weekly benefit reduction multiplied by 21 weeks. Pensions Forward savings – Annual pension multiplied by the number of years until the pensioner would have reached the age of 85. Housing Tenancy Notional outcomes – £78,300 per property recovered, based on average four–year fraudulent tenancy. Includes: temporary accommodation for genuine applicants; legal costs to recover property; re–let cost; and rent foregone during the void period between tenancies (reduced from £93,000 in 2020/21). Housing waiting lists Notional outcomes – £4,283 for each case based on the annual estimated cost of housing a family in temporary accommodation, the duration a fraud may continue undetected and the likelihood a waiting list applicant would be provided a property (increased from £3,240 in 2020/21). Blue Badges Notional outcomes – Number of badge holders confirmed as having died multiplied by £650 to reflect lost parking and congestion charge revenue (increased from £575 in 2020/21). Concessionary bus travel Forward savings – Number of bus passes used fraudulently multiplied by £420. Based on average fraudulent use and reflecting two years forward use. Payroll Notional outcomes – £5,685 for each employee dismissed or resigns as a result of NFI matching. (up from £5000 in 2020/21).
Page 32
The National Fraud Initiative in Scotland 2024 Audit Scotland, 4th Floor, 102 West Port, Edinburgh EH3 9DN Phone: 0131 625 1500 Email: info@audit.scot www.audit.scot ISBN 978 1 915839 46 6
Page 33
Appendix 2 National Fraud Initiative 2022/2023 Renfrewshire Council Summary of arrangements and outcomes
Page 34
1. INTRODUCTION The National Fraud initiative is a biennial data matching exercise run by the UK Cabinet Office and overseen in Scotland by Audit Scotland. It supports the Council’s commitment to protecting public funds and preventing and detecting fraud. Each local authority across the UK alongside other government organisations such as the NHS and Department for Work and Pensions participate under the relevant Public Finance legislation, which in Scotland is the Public Finance and Accountability (Scotland) Act 2000. Information Security Participation in the exercise is communicated across the Council’s social media platforms to inform our customers and staff. All information is shared and stored in line with the Council’s privacy policy.
Page 35
2. PROCESS All matches generated from the data matching exercise require an outcome. To allow Audit Scotland and the Cabinet Office to report accurately across all organisations involved the outcomes available are prescribed and used by all organisations. Possible outcomes Updates for 2022/24 The Cabinet Office have included 1 new area for investigation – Adult concessionary bus travel (not our responsibility to investigate) and postponed Non-Domestic Small Business Bonus Scheme matching due to the national NDR revaluation exercise in 2023. External Auditor Assessment of Arrangements Our external auditors have stated in their Renfrewshire Council Group Annual Accounts 2023/24 in relation to 2023/24 NFI exercise that :- The most recent NFI exercise was for 2022/23. There has been a good level of follow-up activity at Renfrewshire Council with 100% of Very High Risk matches processed in most areas. As of March 2024, all reports have been closed except for two which the Council is waiting for further information from. The audited body has engaged well with the NFI exercise. The Council had a good level of follow up activity, meaning that most matches have been closed down. In addition, the body has strong governance arrangements in relation to communication and transparency of NFI. No savings identifiedClosed - Already known •These are matches that after investigation it is identified that the information available in the match has already been reported and acted on within the time of the data being uploaded and the match being released. No savings identifiedClosed - No Issue •After investigation the information received from the match has no impact on the benefit or service received. Savings identifiedClosed - Error •Savings are identified however the cause is considered to have been error and not fraud. Savings identifiedClosed - Fraud •A full investigation is carried out and evidence is identified to indicate that a material benefit was gained by the failure of the subject to declare information No savings identfiedClosed - Not selected for investigation •The match details do not offer sufficient evidence to allow for an investigation No savings identifiedClosed - referred to DWP •The match information relates primaily to state benefits that require to be investigated by the DWP.
Page 36
2. PROCESS All required datasets were exported in September 2022 and submitted to the National Fraud Initiative web portal. The National Fraud Initiative data matching cases were released on the web portal in January 2023. The matches are categorised by the fraud risk area and risk score. The risk score matrix has been designed by the Cabinet Office and is established to assist organisations to prioritise the resources required to carry out the match investigation to those most likely to identify savings and error or fraud. Renfrewshire Council process 2022 All Matches 2022 High Risk 2020 All Matches Housing Benefit claimants 67 51 85 Payroll 103 52 105 Housing Tenants 828 369 316 Blue Badge Parking Permit 524 524 522 Housing Waiting List 79 55 191 Council Tax Reduction Scheme 770 405 1326 Creditors 822 74 2160 Procurement 92 31 66 Business Rates 183 183 127 Business Grants N/A N/A 3 cumulative total 3468 1744 4901 Analysis of Renfrewshire council NFI matches 2022/24 Matches allocated ‘high risk’ status are prioritised for investigation. Blue Badge Parking Permit matches and Creditor matches are passed to the service to assess and any suspected fraud escalated to the Counter Fraud team to pursue. Housing Tenant matches saw the most significant increase in total number of matches from the previous exercise in 2020/21 and this was as a result of new matches to the data supplied by HMRC.
Page 37
3. RESULTS 2022/23 Fraud and error identified by Renfrewshire Council Staff Fraud Area No. of cases Actual Overpayment Estimated Savings CTRS1 40 £55,711 £13,753 HB2 1 £16,527 £3,925 Housing Tenancy 2 N/A3 £156,600 Waiting List 11 N/A £46,753 Procurement 0 0 N/A Payroll 0 0 N/A4 Blue Badge 152 N/A £98,800 Creditors 0 0 N/A NDR5 16 £104,117 £83,451 CT Discount6 534 £224,843 £406,414 All 756 £401,199 £810,056 Overall outcomes are down slightly from the previous exercise. The main reason for this is that for the matches that the Counter Fraud Staff investigate, a lot of work was undertaken during the previous exercise to investigate and close down a lot of the lower risk matches to prevent them from being listed again in this exercise. We were able to undertake this work as it was during the pandemic and some of our other work could not be undertaken as a result of the restrictions in place. The financial savings in excess of £401,000 are set to be recovered following the Council’s usual debt recovery processes. Our participation in the 2022/23 NFI exercise is estimated to have prevented further financial loss to Renfrewshire Council in excess of £810,000. 1 Council Tax Reduction Scheme 2 Housing Benefit 3 There are no Actual Overpayments recorded for Housing Tenancy, Waiting List and Blue Badge fraud and error cases 4 There are no Estimated Savings recorded for Payroll and Creditors fraud and error cases 5 Non-Domestic Rates / Business Rates 6 Council Tax Discounts
Page 38
Self-Appraisal for NFI 2024/25 – Appendix 3 Part A: For Those Charged with Governance: Leadership, Commitment and Communication Yes/No/Partly Is Action Required? 1. Are we aware of emerging fraud risks and have we taken appropriate preventative and detective action? Yes - National Anti-Fraud Network and other anti-fraud network alerts are subscribed to and monitored for emerging fraud risks. Attendance at regular SLAIG/SLACIAG meetings provide opportunity for the sharing of best practice across local authorities to improve and develop preventative controls and detective methods. No 2. Are we committed to NFI? Has the council/board, audit committee and senior management expressed support for the exercise and has this been communicated to relevant staff? Yes - Counter Fraud Team work jointly with operational services to investigate matches. Training is provided to operational teams and NFI outcomes reported to the CMT and the Audit, Risk and Scrutiny Board. No 3. Is the NFI an integral part of our corporate policies and strategies for preventing and detecting fraud and error. And do we make reference to NFI in our governance codes and statements? Partly - There is a Counter Fraud Policy in place, and it is incorporated into the Counter Fraud Business Plan. Reference to NFI will be added to Corporate Code of Governance. Yes: Interim Chief Auditor - 31/03/25 4. Does our Key Contact have sufficient authority and time to ensure that NFI is delivered effectively? Yes. No 5. Has the approach to follow up of different NFI match types been clearly set out and reported as part of the bodies NFI planning process? Yes - We review high risk matches in the first instance and then undertake a risk analysis to decide what our approach will be for the remainder of the matches. No
Page 39
Self-Appraisal for NFI 2024/25 – Appendix 3 6. Are NFI progress and outcomes reported regularly to senior management and elected/board members (eg, the audit committee or equivalent)? Yes - Counter fraud activity outcomes, including NFI results are reported quarterly alongside the outcome and performance report presented to the Audit, Scrutiny and Risk board. Audit Scotland's NFI reports are shared with Senior Management. The overall NFI outcomes and results are reported at the end of the biennial exercise. No 7. Where we have not submitted data or used the matches returned to us (eg, council tax single person discounts), are we satisfied that alternative fraud detection arrangements are in place and that we know how successful they are? Yes - Risk based assessment of matches, high risk matches given priority. We have established regular data matching exercises in regard to Housing Waiting List, Licensing and Council Tax discounts and Reductions. Revenues and Benefits have recently established a Review Team which will carry out checks and reviews aimed at ensuring accuracy in Council Tax discounts and reductions. The effectiveness of data matching exercises is demonstrated in the outcomes and corrections identified; these are reported as part of the quarterly reports to board. No 8. Does internal audit, or equivalent, monitor our approach to NFI and our main outcomes, ensuring that any weaknesses are addressed in relevant cases? Yes - Internal Audit is responsible for co-ordinating the exercise and regularly review outcomes identified. The findings from the NFI are considered as part of Internal Audit annual planning. No 9. Do we review how frauds and errors arose and use this information to improve our internal controls? Yes - This is considered in the annual audit planning. Meetings are held with the appropriate parties where issues are identified to improve internal controls. No 10. Do we need and have access to fraud investigation officers to enable frauds to be followed up fully? Yes - Counter Fraud officers are part of the Internal Audit Team. No 11. Do we publish, as a deterrent, internally and externally the achievements of our fraud investigators (e.g. successful prosecutions)? Yes - Report to members of the Audit, Risk and Scrutiny Board. Other publicity is considered on a case-by-case basis. No
Page 40
Self-Appraisal for NFI 2024/25 – Appendix 3 Part B: For NFI Key Contacts & Users Leadership, Commitment and Communication Yes/No/Partly Is Action Required? 1. Are we aware of emerging fraud risks and taken appropriate preventative and detective action? Yes - NAFN and other anti-fraud network alerts are subscribed to and monitored for emerging fraud risks. Service departments are made aware of any fraud risks we are alerted to. Attendance at regular SLAIG/SLACIAG meetings provide opportunity for the sharing of best practice across local authorities to improve and develop preventative controls and detective methods. No 2. Are we investing sufficient resources in the NFI exercise? Yes - Time is included in the counter fraud work and audit plan and regular engagement with services through counter fraud team monitoring. Revenues and Benefit services have included NFI match investigation in their work plan. No 3. Do we plan properly for NFI exercises, both before submitting data and prior to matches becoming available? This includes considering the quality of data and being clear about the approach to follow up of different match types. Yes - Full planning process and detailed action plan in place. Resource made available within the Counter Fraud Team to prepare for the upload of data to the NFI portal this includes a quality check of the data prior to upload. No 4. Where NFI outcomes have been low in the past, do we recognise that this may not be the case the next time, that NFI can deter fraud and that there is value in the assurances that we can take from low outcomes? Yes - Considered as part of risk-based assessment and consideration given to the deterrence our involvement has in the NFI exercise on potential fraud. No 5. Do we confirm promptly (using the online facility on the secure website) that we have met the fair processing notice requirements? Yes - Deadline met. No 6. Do we plan to provide all NFI data on time using the secure data file upload facility properly? Yes - Detailed action plan in place to ensure compliance, this has been successfully fulfilled in previous exercises. No
Page 41
Self-Appraisal for NFI 2024/25 – Appendix 3 Part B: For NFI Key Contacts & Users Effective Follow Up of Matches Yes/No/Partly Is Action Required? 7. Do all departments involved in NFI start the follow up of matches promptly after they become available? Yes - Monitored by Internal Audit and any resource difficulties are discussed with the service and the Director of Finance & Resources. No 8. Do we give priority to following up high-risk matches, those that become quickly out of date and those that could cause reputational damage if a fraud is not stopped quickly? Yes - Risk based assessment of matches. High risk matches are prioritised, consideration is also given to matches that may cause increased hardship if further delay in correction. No 9. Are we investigating the circumstances of matches adequately before reaching a ‘no issue’ outcome, in particular? Yes. No 10. Are we drawing appropriately (in health bodies) on the help and expertise available from NHS Scotland Counter Fraud Service? N/A N/A 11. Are we taking appropriate action in cases where fraud is alleged (whether disciplinary action, penalties/cautions or reporting to the Procurator Fiscal)? Are we recovering funds effectively? Yes - All relevant actions are considered. No 12. Do we deploy resources in proportion to risks, and scale down work on match reports where early work has not found any fraud or error? Yes - Risk based assessment of matches, where high risk matches show no fraud or error low risk matches are not considered for investigation. However, this is reviewed on a report-by-report basis and where there is a potential for hardship or reputational damage consideration is given to deploying resources to investigate low risk matches. No 13. Where the number of high-risk matches is very low, are we adequately considering the medium and low-risk matches before we cease our follow-up work? Yes - We will undertake a small sample of medium and low risk matches to determine if we are likely to get any outcomes. No 14. Overall, are we deploying appropriate resources on managing the NFI exercise? Yes - Any resourcing issues are discussed with the Service and Director of Finance & Resources as appropriate. Counter Fraud resources are committed within the workplan to the NFI exercise. No
Page 42
Self-Appraisal for NFI 2024/25 – Appendix 3 Part B: For NFI Key Contacts & Users Effective Follow Up of Matches Yes/No/Partly Is Action Required? 15. Are we recording outcomes properly in the secure website and keeping it up to date? Yes - Monitored by Internal Audit No 16. Do staff use the online training modules and guidance on the secure website, and do they consult the Cabinet Office NFI team if they are unsure about how to record outcomes (to be encouraged)? Yes - Training is provided to staff responsible for following up matches, training includes notifying of online training modules and videos available on NFI web application. No 17. If, out of preference, we record some or all outcomes outside the secure website, have we made arrangements to inform Audit Scotland and the Cabinet Office NFI team about these outcomes? Yes - This is included in the Report notes. No