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I have been asked to talk about the general subject of fraud in the public sector, rather than about a specific report.
Fraud is a serious problem, and it is estimated that it costs the public sector in Northern Ireland around £500 million every year. Given today’s economic climate, in which we are in the teeth of a recession, the public sector must be even more vigilant in guarding against fraudulent activity.
The cliché that fraud is not a victimless crime is worth repeating because every pound that is stolen by a fraudster is one pound less for the improvement of public services. I notice that the Minister of Finance and Personnel is in the Chamber; if he were able to get his hands on some of that £500 million, he would be more than pleased. It might make a difference to the figure of £370 million that is being bandied about in the other direction.
The Comptroller and Auditor General has been given powers to deal with the problem. Under statutory provisions that were inserted in the Audit and Accountability (Northern Ireland) Order 2003 by the Serious Crime Act 2007, the Comptroller and Auditor General has the power to conduct data-matching exercises for the purposes of assisting in the prevention and detection of fraud.
That legislation provides a significant opportunity to tackle and reduce the scale of fraud in Northern Ireland and beyond, and it should provide a strong deterrent against future fraudulent acts. Data matching is a powerful tool in combating fraud, as is demonstrated by the national fraud initiative, which was established by the Audit Commission in 1996. The Audit Commission has so far helped participating bodies to identify around £400 million of fraud and overpayments.
In consultation with the Information Commissioner and other stakeholders, the Audit Office has prepared a code of practice for data matching. On 25 July 2008, that code was laid before the Assembly. It promotes good practice and data matching. It helps to ensure compliance with the law, especially the provisions of the Data Protection Act 1998.
The first exercise was undertaken by the Comptroller and Auditor General as part of the national fraud initiative exercise for 2008-09. The Audit Commission, on behalf of the Comptroller and Auditor General, carried out key aspects of the exercise, including the collection and processing of data.
A total of 70 public sector bodies provided data for the first round of the exercise. They included Departments and their executive agencies; larger non-departmental public bodies; Health Service bodies; and district councils. A small number of other bodies provided data voluntarily.
The types of data sets included information on payroll; pensions; trade creditors; housing benefits; housing tenants; blue badge holders; rates; and the electoral register. Those data sets were gathered in October 2008. The matching exercise took place shortly after that. In February 2009, bodies started to receive their results, which they are now in the process of examining. It is hoped that by the end of 2009, the process will be substantially completed. The Audit Office then proposes to compile a report on the national fraud initiative. We look forward to that report.
The Chairman outlined the Brangam Bagnall and Co inquiry in some detail; therefore, I will not. That inquiry has given me a perspective on public sector fraud, which, certainly, informs my work as a PAC member. In 2007, we looked at a relatively minor case of fraud that involved the Ordnance Survey of Northern Ireland. In 2008, we produced our report on social security benefit fraud and error. In 2009, we have dealt with the inquiry into suspected fraud in the education and library boards.
The Committee has also dealt with certain aspects of a report on Valence Technology, which is due to be published soon. We could not get to the bottom of certain matters. As a result, the Committee has repeated recommendations on counter-fraud policies and the importance of basic checks and supervisory arrangements. Those simple steps can identify and prevent fraud at an early stage.
As is evidenced in the report on Brangam Bagnall and Co, and in other cases to which I have referred, fraud is often simple. It relies on the incompetence of supervisory staff; on basic checks and procedures being lax; and, in the case of Brangam Bagnall and Co, on friendship and trust replacing a businesslike approach and general vigilance. The late Mr Brangam exploited the old boys’ network shamelessly. No one came out of that case with any credit; not even the Department of Health, Social Services and Public Safety or the Law Society, which were supposed to supervise his activities.
The data-matching exercise reinforces the Committee’s recommendations in its inquiries. Departments must allow information sharing in order to prevent fraudsters from repeating offences. An environment of open communication is encouraged. It contributes to early detection of non-compliance with controls and can help to identify problems early.
It is also a key part of the culture that is required for a robust, whistle-blowing policy to be maintained and fully implemented. During the course of its work on various reports, the Committee has found that, often, whistle-blowers’ allegations, which should be properly investigated, are not.
Many times, as a constituency politician, I have heard misgivings that have been voiced by members of the public, which, when investigated, have led to significant findings of malpractice and conflict of interest, in particular. Therefore, I fully endorse all efforts by Departments to promote a whistle-blowing culture. I commend the national fraud initiative as an example of good practice and robust efficiency. The role of the Public Accounts Committee, as the guardian of taxpayers’ money, is to ensure that no fraud is deemed acceptable.
Earlier, I mentioned Valence Technologies. The report on that case is due to be published on 1 October 2009. Therefore, I cannot discuss it. Let me just say that some reports have been known to highlight matters other than fraud; perhaps, the need to maintain good practice, even under pressure, and to learn lessons from previous experiences and, indeed, previous PAC reports, such as that which was produced on the DeLorean inquiry.