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Failing to prevent fraud in Housing and Social Care: Is your organisation compliant with the new requirements?

Fraud is elusive, hidden and of all crime is the one that impacts the most people in the UK. It is a significant and increasing challenge.

In response to this the UK government has passed the Economic Crime and Corporate Transparency Act (ECCTA). This requires organisations meeting certain criteria to have, and be able to demonstrate, that reasonable processes are in place to prevent fraud from occurring.

Organisations within scope of the legislation are those with more than 250 employees, an annual turnover of above £36 million and/or assets of more than £18 million in total. If an organisation meeting two of these criteria is judged as failing to prevent fraud, they can face an unlimited fine. For social care organisations, this supplements the requirements already in in the Regulator of Social Housing’s Governance and Viability Standard.

Areas in scope are:

A good time to take a step back and ask key questions

So, even more than ever, it is a good time to ask:

• Does your organisation have embedded fraud prevention processes in place, communicated across the organisation and regularly reviewed and tested to ensure that they remain fit for purpose? Can you demonstrate where procedures have been effectively implemented? Can you demonstrate training making a difference in practice, for example an increase in reported incidents or discussion of risk after training has been completed?


• Have you managed the risk of third parties and joint venture arrangements to mitigate the risk of a third-party committing fraud for the benefit of your organisation? For example, where a joint venture party commits fraud, or a supplier commits fraud to the manufacturer to secure a contract with your organisation


• Is support provided to customers or clients on how to identify and report instances of fraud


• Can your organisation demonstrate actions taken and lessons learned where fraud are identified, for example third parties not onboarded, suppliers terminated, staff dismissed and review of advertising to ensure that it is accurate.


• Are resources dedicated to countering fraud proportionate to the level of profit of the organisation and fraud risk?

Asking these questions now, and reviewing what is currently in place, will enable organisations to identify and remove any gaps in the fraud management framework before they are expected by law to have a complete, robust framework in place.

The context

Minimising the risk of fraud also helps protect organisations from the impact of financial crime, both through deterring and preventing fraudsters so that frauds do not take place and/or detecting frauds that have taken place to recoup funds and stop similar frauds happening again.

Fraud can happen to any organisation, and is increasingly more likely to, with examples including:

• - Cyber-crime such as the theft of personal and/or financial details
• - Procurement fraud
• - Payroll fraud from employees making inaccurate claims for time worked and/or benefits due
• - Misrepresentation of products or services by staff to potential customers including making false statements or failing to disclose key information. Services must be advertised fairly.
• - Reputational damage resulting from reported frauds

The exact nature of fraud risks will differ depending on the organisation, for example a smaller organisation may be more exposed to risks around lack of segregation of duties; organisations with more devolved structures may be exposed to more inconsistent application of processes and opportunity for employees to act without oversight. The level of risk appetite will also differ across organisations depending on the board and management and what risk is accepted to deliver strategic objectives.

Social care providers should also assess the risk of financial abuse where fraud is committed against someone within their care. Individuals receiving social care are often more vulnerable and/or isolated, and in positions where abuses of trust can occur by those caring for them. Social care providers should ensure that a framework is in place to mitigate the risk of carers exploiting opportunities such as lone working or handling of cash on behalf of clients.

In our previous blog on the importance of risk management in social care, we highlighted that ensuring the safety and well-being of individuals is paramount, with effective risk management integral to achieving this. Counter fraud is a crucial element of any risk management framework, as all frauds divert funds from their proper purpose and result in less income for the provision of care.

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Elsiarc - Internal Audit, Risk and Compliance Services

At Elsiarc we can help you be resilient to fraud and compliant with the new legislation. Our accredited counter fraud specialist has experience of working with social care clients, including residential social care.

We have provided fraud health checks assessing the fraud risk management framework including the areas below and against the criteria of the new failure to prevent fraud offence:

• Fraud risk assessment and within this determination of the risk appetite
• Strategy and policies including communication and review of these
• Training for staff
• Management information which can be used to detect unusual patterns and potential fraud
• Reporting and investigation of frauds
• Lessons learned