Given that I am going to be writing for you about public sector fraud the best starting point of these blogs would be to address the questions: who is a public sector fraud investigator an what do they do?
A private sector fraud investor is anyone who is employed by a public service body. In other words a public servant, who’s primary task is to investigate and prosecute those people who would defraud the public purse. I would exclude Police, who are public servants but have a wider remit and powers to investigate and prosecute a range of crime. I would also place into a half-way house Trading Standards Officers who are regulators with a focus on protecting consumers.
Broadly speaking there are two schools of public sector fraud investigators. There are the Central Government investigators; which would include Department for Work and Pensions (DWP) Benefit Counter-Fraud Team and HM Revenues and Customs (HMRC) investigators. The second group are Local Government Counter-Fraud Teams. These include; Housing and Council Tax Benefits (HB/CTB) fraud investigators, Housing fraud teams and National Health Counter-Fraud Team.
The District and Borough Local Council teams may be purely HB/CTB teams leaving internal fraud to the Auditors, or Corporate Fraud Teams investigating a range of internal and external fraud against the local authority. These latter teams are likely to also investigate housing and insurance fraud. Some of these teams are very effective and a good example of this would be the team at the London Borough of Brent. Other Councils have branched out in to Financial Investigation and again have had very good results. This is often a service that they sell on to other organisations. Two examples would be Trafford Metropolitan Borough Council and Kirklees Metropolitan Borough Council. While across the divide the DWP fraud Investigators and Leeds City Council operated for some time as a single city wide team.
County Councils tend to be responsible for Trading Standards, education grant fraud and internal fraud will be investigated by internal auditors. Single tier authorities follow the same arrangements as the district, borough and county councils.
I have often heard it said, by those who do not understand the real differences between the public and private sectors, that the private sector investigator is more effective. I have never seen any real evidence that is the case. The operational differences between the two sectors are profound. The public sector is constrained by virtue that it represents the state and is by law restrained from abusing the rights of the private citizen more than is considered reasonable.
The public sector will have a duty to make payment of public funds, such as benefit, even when it has some suspicions of fraud. You can only withhold entitlement when the fraud can be prosecuted. In other words, there is a robust prima facia case.
Whereas, the Private Sector may withhold the funds or product much as it feels is necessary or appropriate. As long as in the process of gathering the evidence does not involve the investigators, themselves, committing a crime. This can be an equally tricky area especially in the light of evidence given to the Levison Inquiry on Phone Hacking. However, suspicion is usually enough and does not require much explanation as long as the organisational decision is not subject to administrative testing by ombudsman or regulators. Those regulators, of course, may be public sector investigators. Breach of contract may be another area of concern.
Because of the fact that public sector investigators need to abide by law, it has often got its self in to a knot over the Regulation of Investigatory Powers Act and Data Protection Act. For the best example of how DPA can be misinterpreted, you need go no further than the Bishard Inquiry which reported on the Soham Murders.
However, DPA is equally quoted as the reason why intelligence cannot be exchanged by the private sector. Of course, it is company policy and confidentiality that prevents the exchange of intelligence rather than DPA. DPA by the way is an empowering act and not a preventative one.
All of that having been said, the public sector do exchange information between government departments and with local government. It is far from perfect but more of it goes on than the public tend to realise. The two main programmes are DWP’s General Matching Service and Housing Benefit Matching Service and the Audit Commission’s National Fraud Initiative. Both of these match a range of data sets from across local and central government. There is also the National Anti-Fraud Network (NAFN), which facilitates some intelligence gathering on behalf of local authorities.
While there is no express legal requirement that a person suspected of having committed an offence must be interviewed under caution before any decision as to whether to prosecute is taken. Public sector investors will interview under caution those who are suspected of committing because:
- the interview may provide important evidence against the suspect, which you would otherwise be unable to obtain;
- the interview may provide important information revealing further lines of inquiry;
- the interview may provide relevant information to be considered in the prosecution decision;
- it is fair and proper to allow a potential defendant an opportunity to answer the allegations and give their own account;
- an interview under caution will help to satisfy the provisions of the Enforcement Concordat
All public sector bodies will have, or least ways should have an Enforcement Concordat. Introduced by the government of the day in 1998, the Enforcement Concordat its aim is to promote good enforcement that brings benefits to business, enforcers and consumers.
Once it has been decided that there is a prima facia case against the accused fraudster all interviews must be conducted under a caution. However, most public sector investigators do not have the power to arrest or detain.
Prosecutions, usually follow some aspect of the Philips Principle of investigators and prosecutors being separate. The DWP and HMRC now use the Crown Prosecution Service. In Scotland prosecution is always carried out by the procurator fiscal. While LAs will use their own legal teams or contract the work to the private sector. The LA legal team will be separate management line from the investigation team.
Next time I will look at the proposed changes to public sector fraud.
About Malcolm Gardner
Malcolm is the author of many articles on local authority administration, especially on benefits, fraud and technical matters. He ran the not-for-profit organisation, The Counter-Fraud Group between 1996 to 2011 and was the author of the LGA’s “Fraud Book”.
Follow Malcolm on Twitter: @gardmal