Tackling Fraud and Error

Background

Fraud is an act of deception carried out for personal gain or to cause a loss to another party. In the public sector, fraud can be committed internally by public sector workers or externally by suppliers, contractors and members of the public. Fraud covers a wide spectrum of activities.

For the purposes of this report, there are two main types of error:

• mistakes made by government that result in over or under payments; and
• genuine mistakes made by claimants in making claims to government for payment.

Fraud differs from error in that fraud involves an intentional act of deception. Corruption is dishonest conduct by those in power which can include bribery.

Preventing and detecting fraud and error are key to minimising loss and ensuring that public funds are spent in the way that taxpayers would expect. With ongoing pressure to cut costs, reducing loss of public funds through fraud and error can be an opportunity for governments to make potentially significant savings.

Across many jurisdictions there is a need for governments to do more to estimate their levels of fraud and error, put in place cost-effective counter-fraud and error controls and detect and recover fraudulent payments and payments made in error to protect the taxpayer’s interest.

Within the States of Jersey, Accountable Officers are responsible for managing the risks which their respective Department or States Bodies face, including fraud and error risk. They are responsible for establishing and maintaining sound systems of internal control to manage such risks. The Public Finances Manual (PFM) sets out requirements in respect of fraud risk assessment, prevention and fraud response.

The States of Jersey are in the process of updating their corporate approach to managing fraud, error and corruption risks.

Scope

This review has evaluated the States of Jersey’s progress in tackling fraud and error against a good practice framework.

It also follows up on previous recommendations the C&AG has made in respect of the related area of anti-corruption arrangements.

The review has considered each aspect of the framework in the context of Jersey as a relatively small Island jurisdiction and the risks faced.

In addition to considering the progress in developing a corporate framework to manage the risk of fraud and error, the C&AG has evaluated some of the approaches for managing the risks of fraud and error in the key areas of:

• Customer and Local Services Department – Social Benefits payments (including pensions)
• Treasury and Exchequer Department – Revenue Jersey; and
• Justice and Home Affairs Department – Customs and Immigration Service.

The review has included departments within the States of Jersey. It has not assessed policies and procedures within States controlled and States established entities. The review has not considered financial crime more widely in Jersey or the Government’s contribution to combatting financial crime.

The review has also included consideration of progress in implementing recommendations in the following reviews:

• Anti-Corruption Arrangements (January 2021)
• Government Support to Business during the COVID-19 pandemic – co-funded payroll scheme (November 2021); and
• Government Support to Business during the COVID-19 pandemic – other schemes (November 2021).

Conclusions

The States have a declared intention to strengthen corporate arrangements for managing the risk of fraud and error. Steps have been taken to improve governance arrangements and promote an appropriate anti-fraud and error culture.  Processes in place within Revenue Jersey, CLS and Customs and Immigration are more mature than in other parts of the States.

More remains to be done to fully embed a culture of anti-fraud and error and to document and test controls in a number of risk areas to demonstrate that risk is being managed appropriately.