The Scottish Government

FRAUD: ANNEX 1

SCOTTISH GOVERNMENT FRAUD POLICY STATEMENT

Introduction

1. The Scottish Government (SG) requires all staff at all times to act honestly and with integrity and to safeguard the public resources for which they are responsible. The SG will not accept any level of fraud or corruption; consequently, any case will be thoroughly investigated and dealt with appropriately. The SG is committed to ensuring that opportunities for fraud - both internal and external - are reduced to the lowest possible level of risk.

Definition of Fraud

2. The term "fraud" is commonly used to describe a wide variety of dishonest behaviour such as deception, forgery, false representation, and concealment of material facts. It is usually used to describe the act of depriving a person of something by deceit, which may involve the misuse of funds or other resources, or the supply of false information. Computer fraud covers the use of information technology equipment to manipulate programs or data dishonestly (e.g. by altering, substituting or destroying records, or creating spurious records), or where the use of an IT system was a material factor in the perpetration of a fraud. The fraudulent use of computer time and resources is included in this definition. Historically most internal fraud in the SG that has come to light has been linked to claims for travel and subsistence and overtime, irregularities in procurement procedures and the abuse of flexible working hours. Examples of external fraud include providing false information in applications for grants or other forms of assistance and submitting bogus invoices.

Danger Signs

3. Managers and staff must always be alert to the risk of fraud, theft and corruption. Danger signs of internal fraud include evidence of excessive spending by staff engaged in cash/contract work, inappropriate relationships with suppliers, reluctance of staff to take leave, requests for unusual patterns of overtime and where there seems undue possessiveness of records. Junior staff should resist any pressure from line managers to circumvent internal controls or to over-ride control mechanisms. Such action could be indicative of fraudulent activity and should be reported - see below.

Avenues for Reporting Fraud

4. The SG has in place avenues for reporting suspicions of fraud. Staff should report such suspicions either to their line managers, to Internal Audit Division, to their Finance Team or - either in writing or using the fraud hot-line (0131 244 1460) - direct to the SG's Fraud Response Co-ordinator. All matters will be dealt with in confidence and in strict accordance with the terms of the Public Interest Disclosure Act 1998. This statute protects the legitimate personal interests of staff. See also the HR guidance on Whistleblowing on the SG Intranet. Suspicions of fraud reported to line managers, Internal Audit Division or Finance Teams must be passed on to the Fraud Response Co-ordinator, subject to the reporting procedures included in any local arrangements for dealing with actual and suspected fraud (see the Scottish Government Fraud Response Plan at Annex 2).

Responsibilities

5. The Scottish Ministers are responsible for issuing relevant guidance in the Scottish Public Finance Manual (SPFM) on the prevention, detection, reporting and handling of fraud.

6. The Principal Accountable Officer (the Permanent Secretary) and Portfolio / SG Executive Agency Accountable Officers are responsible for establishing and maintaining sound systems of internal control that support the achievement of the Scottish Ministers' policies, aims and objectives. The systems of internal control are designed to respond to and manage the whole range of risks that the SG faces. The systems of internal control are based on an on-going process designed to identify the principal risks, to evaluate the nature and extent of those risks and to manage them effectively. Managing fraud risk will be seen in the context of the management of this wider range of risks.

7. Portfolio Accountable Officers are responsible for ensuring that relevant sponsored bodies are aware of fraud risks and have appropriate procedures in place to prevent and detect fraud that are consistent with and reflect the guidance in the SPFM. These should include a requirement for reporting cases of fraud to the sponsor Directorate within the SG. NHS Boards (including all Special Boards and Agencies) are subject to the specific arrangements set out in the Scottish Government Strategy to Combat NHS Fraud in Scotland and the Partnership Agreement between NHS Boards and NHSScotland Counter Fraud Services.

8. Management Boards (or equivalents) support Accountable Officers by identifying those operational areas where the risk of fraud or other loss is greatest. This will help inform internal audit activities and should also provide pointers to where line managers should target their counter fraud measures.

9. Audit Committees are established by the Principal Accountable Officer and Portfolio / Agency Accountable Officers to support them on issues of risk, control and governance and associated assurance. The Scottish Government Audit Committee (SGAC) and Portfolio / Agency Audit Committees therefore have a general responsibility for monitoring the operation and effectiveness of anti-fraud arrangements and should receive appropriate reports on fraud activity.

10. Overall responsibility for ensuring that necessary controls are in place for managing the risk of fraud in the SG is delegated by the Principal Accountable Officer to the SG Director of Finance. The responsibilities of the Director of Finance include:

• preparing, reviewing and updating relevant guidance on the prevention, detection, reporting and handling of fraud for issue by the Scottish Ministers in the SPFM;
• establishing an effective anti-fraud policy and fraud response plan;
• ensuring that core financial systems are designed and operated so as to minimise the risk of fraud;
• coordinating assurances about the effectiveness of anti-fraud policies to support the Statement on Internal Control provided alongside the SG's consolidated accounts.
• ensuring that all staff are aware of the SG's anti-fraud policy and know what their responsibilities are in relation to combating fraud;
• ensuring that appropriate anti-fraud training and development opportunities are available to appropriate staff;
• ensuring that vigorous and prompt investigations are carried out if fraud occurs or is suspected; and
• ensuring that appropriate action is taken to minimise the risk of similar frauds occurring in future.

11. Internal Audit Division is responsible for:

• delivering an opinion to the relevant audit committee / Accountable Officer on the adequacy of arrangements for risk, control and governance (including those for managing the risk of fraud) and ensuring that the SG as a whole promotes an anti-fraud culture;
• assisting in the deterrence and prevention of fraud by examining and evaluating the effectiveness of control commensurate with the extent of the potential exposure/risk in the various segments of the SG's operations;
• ensuring that management has reviewed its risk exposures and identified the possibility of fraud as a business risk; and
• assisting management in conducting fraud investigations.

12. Operational managers are responsible for:

• ensuring that an adequate system of internal control exists within their areas of responsibility consistent with relevant guidance in the section on Fraud in the SPFM and that controls operate effectively and as intended;
• assessing the types of risk involved in the operations for which they are responsible;
• regularly reviewing and testing the control systems for which they are responsible;
• ensuring that controls are being complied with and their systems continue to operate effectively;
• implementing new controls to reduce the risk of similar fraud occurring where frauds have taken place; and
• undertaking preliminary inquiries to establish relevant facts with regard to suspicions of fraud brought to their attention and reporting relevant cases to the SG Fraud Response Co-ordinator - subject to the reporting procedures included in any local arrangements.

13. Each member of staff is responsible for:

• acting with propriety in the use of official resources and the handling and use of public funds whether they are involved with cash or payments systems, receipts or dealing with suppliers;
• conducting themselves in accordance with the principles identified by the Committee on Standards in Public Life. They are: selflessness, integrity, objectivity, accountability, openness, honesty and leadership;
• being alert to the possibility that unusual events or transactions could be indicators of fraud;
• reporting details immediately through the appropriate channel if they suspect that a fraud has been committed or see any suspicious acts or events; and
• cooperating fully with whoever is conducting internal checks or reviews or fraud investigations.

Acceptance of Gifts or Hospitality

14. It is an offence under the Prevention of Corruption Act 1906 for civil servants in their official capacity corruptly to accept any gift or consideration as an inducement or reward for doing, or refraining from doing, anything; or showing favour or disfavour to any person. Furthermore, under the Prevention of Corruption Act 1916, any money, gift or consideration received by a civil servant from a person or organisation holding or seeking to obtain a Government contract will be deemed by the courts to have been received corruptly unless proved to the contrary.

15. These procedures are laid down in the Procurement Policy Manual (for staff involved in purchasing and contracting) and, in more detail, the Staff Handbook (Standards of Propriety / Gifts & Hospitality) available to all SG staff on the SG Intranet.

Recording and Accounting

16. Losses due to fraud are subject to the guidance on Losses and Special Payments. Details must therefore be submitted to and recorded by relevant Finance Teams and, as appropriate, brought to the attention of the Parliament through notes to the resource accounts.

Conclusion

17. All cases of actual or suspected fraud will be vigorously and promptly investigated and appropriate action will be taken. The police will be informed where considered appropriate. In addition disciplinary action will be considered not only against those members of staff found to have perpetrated frauds but also against managers whose negligence is held to have facilitated frauds. Both categories of offence can be held to constitute gross misconduct, the penalty for which may include summary dismissal.

Page Published / Updated: March 2009