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Appendix M: Anti fraud and corruption policy and strategy In this appendix we set out Leicester's anti fraud and corruption policy and strategy document. This document sets out Leicester’s commitment to the prevention and detection of fraud and corruption. It summarises the responsibilities of members, management and employees and outlines the procedures to be followed where suspicion of financial irregularity is raised. It is reproduced in full as it represents good practice which other authorities might adopt. Policy Leicester City Council is committed to the prevention, deterrence, detection and investigation of all forms of fraud and corruption. Definition of Fraud and Corruption Fraud is defined as
This definition does not include misappropriation or petty theft without the distortion of financial statements or other records. This document, however, is intended to cover all financial irregularities which may affect the authority, including theft. Corruption is defined as
These definitions conform to those used by the Audit Commission. Strategy The following headings briefly summarise the approach to be adopted in order to achieve the policy stated as above. They are each dealt with in the body of this document. Prevention
Deterrence
Detection
Investigation
Prevention The role of members As elected representatives, all members of the council have a duty to the citizens of Leicester, to protect the assets of the council from all forms of abuse. This is done through the adoption of the anti fraud and corruption policy statement and by compliance with the national code of conduct for members. In addition, members have a duty to provide sufficient resources to allow it to fulfil its obligation under the Accounts and Audit Regulations 1996, to provide an adequate and effective internal audit of the accounting records and control systems. The role of management The code of practice for audit which supports the authority's Financial Regulations states that
Chief officers may delegate responsibility to managers. Management at all levels are responsible for ensuring that their staff are aware of the authority's Financial Regulations and Standing Orders and that the requirements of each are being met. They are also responsible for ensuring that appropriate procedures are in place to safeguard the resources for which they are responsible. Managers should also strive to create an environment in which their staff feel able to approach them with any concerns they may have about suspect irregularities. If they are unsure of the appropriate action they should be aware of the role of the internal audit section. Special arrangements may apply where employees are responsible for cash handling or in charge of systems that generate payments, for example payroll or the HB computer system, Managers should ensure that adequate and appropriate training is provided for staff and that checks are carried out from time to time to ensure that proper procedures are being followed. Managers may also wish to consider whether pre employment checks should be undertaken for some posts. The references and qualifications of all proposed new employees should be thoroughly checked prior to a position being offered. Advice and assistance can always be obtained from the Internal Audit Section within the Town Clerk’s and Corporate Resources department. Responsibilities of employees Employees are responsible for ensuring that they follow the instructions given to them by management particularly in relation to the safekeeping of the assets of the authority. They may be required to disclose information about their personal circumstances in accordance with the authority's Financial Regulations and Standing Orders. Employees should always be aware of the possibility that fraud, corruption and theft may exist in the workplace and be able to share their concerns with management. If, for any reason, they feel unable to speak to their manager they should be aware of the employee hotline, ext 7999 which is staffed by members of the Investigation Team who can deal with queries regarding suspected financial irregularities. The hotline is advertised on posters throughout the authority and employees may give information anonymously if they wish. Official guidance In addition to Financial Regulations and Standing Orders departments will have their own procedures to prevent and deter fraud. There may also be audit reports which recommend methods to minimise losses to the authority. Managers and staff should be aware of these and ensure that their working practices are in accordance with official guidelines. Role of internal audit and investigations The audit and investigations teams are part of the internal audit section within the Town Clerk’s and corporate resources department. The audit teams play a preventative role in trying to ensure that systems and procedures are in place to prevent and deter fraud. The investigations team investigates cases of suspected financial irregularity and carry out fraud searching exercises to establish whether irregularities have occurred. They liaise with the audit teams to recommend changes in procedures to prevent further losses to the authority. Both internal audit and investigations provide advice and assistance to all departments. Role of district audit Independent external audit, which is a key role for the district auditor, is an essential safeguard of the stewardship of public money. This role is delivered through carrying out of specific reviews that are designed to test (amongst other things) the adequacy of the council's financial systems and arrangements for preventing and detecting fraud and corruption. It is not the external auditor's function to prevent fraud and irregularity, but the integrity of public funds is at all times a matter of general concern. External auditors are always alert to the possibility of fraud and irregularity and will act without due delay if grounds for suspicion come to their notice. The external auditor has a responsibility to review the council's arrangements in respect to preventing and detecting fraud and irregularities, and arrangements designed to limit the opportunity for corrupt practices. Deterrence Prosecution The authority has adopted a prosecution policy which encompasses both external fraudsters and employees. It is designed to deter others from committing offences against the authority whilst recognising that it is not always in the public interest to refer cases for criminal proceedings. Disciplinary action Theft, fraud and corruption are serious offences against the authority and employees may face disciplinary action if there is evidence that they have been involved in these activities. Disciplinary action may be taken in addition to, or instead of criminal proceedings, depending on the circumstances of each individual case. Publicity Where a case is referred to the police for criminal proceedings and is subsequently brought to court, the press office is advised so that a reporter can attend court to cover the story. It is hoped that any resultant publicity will act as a deterrent to potential fraudsters. Detection The role of management It is vital that management at all levels are alert to potential problems in their work area and that adequate and effective safeguards are in place to prevent financial irregularities. However, managers should also satisfy themselves that checks are in place at the appropriate levels, so that in the event of a breach, any irregularity would be picked up promptly, so minimising any loss to the authority. Internal audit can provide advice and assistance in this area. The role of employees Employees play an important role in detecting theft, fraud and corruption. They may have suspicions about colleagues they work with or those in different sections whose work they deal with. All employees should be encouraged to discuss their concerns with line management or the investigations team if the suspect financial irregularities are occurring. The employee hotline (ext 7999) was set up so that employees could report their concerns anonymously to someone outside of the immediate work area, or where they felt that their line management were not taking their concerns seriously. Whilst the hotline is not a vehicle for employees to use to settle personal scores, all calls are treated seriously. The role of internal audit and investigations The responsibility for the detection of financial irregularities rests with management. Internal audit and Investigations will advise and assist management in fulfilling their responsibility for preventing irregularities and will investigate cases where irregularities are thought to have taken place. There may be circumstances of course, where auditors and investigators detect fraud as a result of the work that they are undertaking or as a result of specific fraud searching exercises. Investigation Involving employees During the course of an investigation it will be necessary for members of the audit or investigations team to speak to employees. They will be trying to ascertain what has happened and what procedures have been followed. They may also require access to documents, correspondence and data held on the authority's computers. There may be occasions when employees are suspected of financial irregularities or thefts and guidelines exist to govern the way in which investigative interviews should be notified and conducted. Involving the public Sometimes it is necessary to interview members of the public in connection with the suspected irregularities. Although the Investigations team has no special powers, the Fraud Act 1997 does give the authority the option of appointing inspectors with rights of access to business premises in order to investigate suspected HB fraud. The authority has taken advantage of this option and the Chief Executive has appointed 2 investigators as inspectors using his powers under the Act. Audit code of practice The audit code of practice complements the Financial Regulations and explains in broad terms the functions of internal audit and investigations. It is attached to this document as an appendix. Investigators code of conduct, operational guidelines and CBI The investigators code of conduct lays down the procedures to be followed when employee irregularities are being investigated. It was drawn up in consultation with the human resources unit and staff side. Operational guidelines provide Investigators with guidance on how they should conduct themselves and to the special arrangements which apply to those officers engaged on visiting duties and work outside of normal office hours etc. The CBI manual provides audit and investigations staff with procedural guidance, for example on the registration of files, the procedures for ordering goods and stationery and the action to be taken when the files are closed.
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