FRAUD RESPONSE PLAN
April 2009
Vicki Haslam – Acting Director of Corporate Services
Version / Date / Updated by / Changes1.0 / 07.04.09 / Vicki Haslam / Initial draft
1.1 / 05.05.09 / Vicki Haslam / Amends made to section 5 following consultation with EMT and Audit and Standards Committee. Clarification of potential to suspend internal investigation if subject to police investigation and the need to notify external auditors if appropriate.
Contents
1.0 / Introduction / 4
2.0 / Definitions of Fraud / 4
3.0 / Prevention of Fraud / 5
4.0 / Reporting Fraud / 6
5.0 / Investigating fraud / 6
6.0 / Suspension / 7
7.0 / Disciplinary Procedures / 7
8.0 / Recovery of Losses due to Fraud / 8
9.0 / Learning from experience / 8
1.0 Introduction
Six Town Housing requires all staff at all times to act honestly and with integrity and to safeguard the public resources for which the organisation is responsible.
The purpose of this plan is to define the responsibilities for action in the event of a suspected fraud. Its focus is to:
· Establish responsibilities for investigating the incident and taking appropriate action;
· Establish and secure evidence for disciplinary and/or criminal action;
· Prevent further loss; and
· Recover losses.
Fraud may occur internally or externally and may be perpetrated by staff, consultants, suppliers, contractors, tenants, leaseholders or partners individually or in collusion with others.
2.0 Definitions of Fraud
· Fraud:
“Those intentional distortions of financial statements or other records which are carried out to conceal the misappropriation of assets or otherwise for gain”
The “intentional” nature of the act distinguishes it from simple error.
· Corruption:
“The offering, giving, soliciting or acceptance of an inducement or reward which may influence the actions taken by the authority, its members or officers”
FRAUD ACT 2006
The Act creates a new general offence of fraud.
There are three ways of committing the new offence of fraud:
· False representation
· Failing to disclose information
· Abuse of position
False representation
Any representation as to fact or law, express or implied, which they know to be untrue or misleading.
Failing to disclose information
Where a person fails to disclose information to a third party when they are under a legal duty to do so.
Abuse of position
Where a person occupies a position where they are expected to safeguard the financial interests of another person, and abuses that position – includes cases where the abuse consists of an omission.
The Act creates other new offences as follows:
· Obtaining services dishonestly
· Possessing articles for use in frauds
· Making or supplying articles for use in frauds
· Fraudulent trading by non-corporate traders
3.0 Prevention of Fraud
The key to prevention of fraud is the creation of a sound control environment with well established and accepted systems and effective controls. This is the approach adopted at STH, where appropriate systems and controls are established and maintained by management. Board Members and officers alike support the anti-fraud and corruption culture throughout the authority.
Six Town Housing has a number of policies and procedures that exist to protect the organisation against losses from fraud. These include:-
· An established Audit and Standards Committee
· An adopted Code of Conduct for all Board members and staff
· The Constitution, Financial Regulations, Standing Orders and the Scheme of Delegation
· Internal control reviews by Internal Audit
· A Confidential Reporting Code
· This Fraud Response Plan
· A Data Protection Policy and procedures
· A complaints procedure
· Freedom of Information procedures
· Risk assessed pro-active fraud work carried out by Internal Audit
· Effective disciplinary procedures
· Effective recruitment procedures
To deliver the Company’s objectives, we need to optimise the financial resources available to us. In order to do this we must reduce fraud and misappropriation to a minimum. We seek the strongest possible sanctions against those who seek to defraud Six Town Housing. This includes our own Board Members, Officers, contracting partners and external individuals and organisations. Six Town Housing takes very seriously its responsibilities for protecting our finances and those that we administer on behalf of the Government or the community. In turn, our managers have a duty to protect their service area from losses due to fraud and irregularity and are responsible for implementing effective internal controls.
4.0 Reporting Fraud
Detection of fraud is primarily a management responsibility, although there are several ways in which fraud can come to light. When an irregularity is suspected by management, procedures for notification are clearly set out in financial regulations.
Extract 5.8 from the Financial Regulations
“Whenever any matter arises which involves, or is thought to involve, irregularities or fraud concerning cash, stores or other property of the Company or any other suspected irregularity in the exercise of the activities of the Company, the Unit manager concerned shall notify the Director of Corporate Services who shall invoke the Fraud Response Plan”.
In addition, all employees are encouraged to raise any serious concerns via the Confidential Reporting Code. It is important that this procedure is used and that concerns are raised internally within Six Town Housing other than in exceptional circumstances.
5.0 Investigating Fraud
Six Town Housing has established a Fraud Response Group comprising the following core membership:
· Director of Corporate Services
· Head of HR and OD
· Finance and Business Development Manager
· Representative of Councils Internal Audit
The FRG will also have the facility to co-opt an appropriate senior manager responsible for the area in which the suspected fraud is alleged to have occurred.
The Director of Corporate Services will call a meeting of the FRG at the first available opportunity and ideally within 24 hours of the suspected fraud being reported. Where members of the FRG are not available, suitable alternatives can be appointed by the FRG.
The FRG will consider the report of suspected fraud and decide:
a) Whether to instigate an investigation to establish the facts of what has taken place;
b) Whether to recommend to the Chief Executive that the matter is reported to the police;
c) Whether to recommend to the Chief Executive to suspend the individual(s) suspected pending further investigation.
Where further information is required before deciding whether to instigate an investigation, the FRG will commission the gathering of further evidence and reconsider the position in order to make a decision.
Any decision to investigate internally must not hamper/damage any criminal proceedings that may be underway. In this case the FRG may suspend any internal investigation pending the outcome of a police investigation.
If any of the core membership of the FRG are personally implicated in the suspected fraud, it should be reported directly to the Chief Executive and/or the Chair of the Audit and Standards Committee. In such circumstances the Chief Executive/Chair of the Audit and Standards Committee will determine the procedure for examining the facts of the suspected fraud, any subsequent investigation and for deciding action.
In line with section 32.1 of the Management Agreement between Six Town Housing and Bury MBC the FRG will notify the Council’s Representative of any suspected fraudulent action or malpractice. Six Town Housing will also notify the external auditors if the FRG find this to be appropriate.
The Council’s Representative may arrange for the independent investigation of any suspected fraudulent action or malpractice of which they are made aware in line with section 32.2 of the Management Agreement should this be deemed appropriate.
6.0 Suspension
The FRG will consider whether to make a recommendation to the Chief Executive to suspend the individual(s) suspected pending further investigation. The prime consideration in this respect is to prevent further loss and/or the destruction or removal of evidence.
Where an individual is to be suspended they should be approached unannounced and asked to attend a meeting, where the suspension is confirmed and explained. Wherever possible, they should be given the opportunity to be accompanied at the meeting by a trade union representative or work colleague. If it is not possible for them to be accompanied, the meeting may proceed nonetheless so that action can be taken to prevent further loss and/or the destruction or removal of evidence. Following suspension, the individual will be supervised at all times before leaving the premises. Only personal property may be removed and all key fobs or security passes must be surrendered. The ICT Manager will be informed and access to all STH IT systems denied immediately. The individual will be sent confirmation of the suspension in writing.
Suspension pending investigation of suspected fraud does not imply that it has been established that fraud has taken place and does not represent disciplinary action. Members of staff will remain on full pay during the period of suspension.
7.0 Disciplinary Procedures
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It should be clearly understood that investigations carried out under Financial Regulation number 5 are entirely separate from the organisations disciplinary procedures. Following an investigation/report the FRG may recommend initiation of action under those procedures. The investigation may lead to criminal proceedings, which can become a lengthy process, and which will usually require a higher degree of proof than that required in disciplinary action. The outcome of one is not always dependent on the other, and disciplinary action should be concluded as quickly as possible, unless advice is specifically given to the contrary. The Director of Corporate Services will advise if such action is likely to jeopardise any other proceedings.
When an employee has been found to have committed an act of gross misconduct, involving theft from any client of Six Town Housing, member of the public, or other party, then the action to be taken should be in accordance with disciplinary procedure which states “If the employee is found to have committed gross misconduct, the normal consequence may be dismissal”. Six Town Housing, whilst being fair, must also be seen equally to be firm and consistent.
8.0 Recovery of Losses due to Fraud
Six Town Housing will seek to recover all funds obtained fraudulently from the organisation either from the individual(s) concerned or through the organisations insurance policy.
9.0 Learning from experience
Where a fraud has occurred, any necessary changes to systems and procedures must be made to ensure that similar frauds will not recur. The FRG will review the Fraud Response Plan after each case and report its conclusions and any recommendations to the Audit and Standards Committee.
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