Part 2: Detailed results for district health boards

Preventing fraud

Having the right framework to prevent fraud means having a code of conduct and policies about fraud, protected disclosures, receiving gifts, and using credit cards. It means making it safe and easy for staff to talk about fraud and raise any concerns or suspicions. It also means having fraud controls that are reviewed regularly, carrying out due diligence checks of suppliers, doing pre-employment screening, and providing staff with fraud awareness training.

Code of conduct and policies

Most respondents said that their district health board had a fraud policy (79%) and a code of conduct (97%). The percentages dropped when respondents were asked whether these were regularly communicated – only 58% said they received regular communication about their fraud policy, and only 60% were regularly reminded about their code of conduct.

Fewer respondents (64%) said that their district health board had a protected disclosures policy, even though every public entity is legally required to have such a policy.

Most respondents (90%) said that their district health board had a clear policy on accepting gifts or services. However, this question in the survey still generated significantly more "free text" responses than any other question. It was clear to us that many respondents have unanswered questions, regardless of the clarity of their policy. In our view, the most important matter is the conflict of interest risk – district health board staff should always decline a gift if accepting it could influence, or be seen as influencing, their decision-making. And gifts need to be recorded in a gifts register.

Clear and consistent policies, and messages about those policies, can prevent inappropriate behaviour, provide guidance to all staff, and ensure that everyone understands their role in, and responsibility for, preventing fraud.

Clear roles and responsibilities

Although the culture modelled by the leaders of an entity is critical, preventing fraud is not the responsibility of any one person. Only 53% of district health board respondents said that other employees understood their responsibilities for preventing and detecting fraud. This was the lowest percentage in the central government sector and one of the lowest of all responses to this question.

In our view, all employees need to understand their roles and responsibilities so that a culture receptive to discussing fraud can be supported and maintained.

Respondents from all levels in district health boards (from the chief executive through to operational and administration staff) felt confident that managers understood their roles and responsibilities for preventing and detecting fraud. Senior managers understood well the importance of building an anti-fraud culture and regularly communicating with staff about incidents – but only 27% of respondents said that managers told staff about incidents of fraud.

Environment receptive to conversations about fraud

Most respondents (86%) worked in an environment where staff were encouraged to raise concerns. Most (89%) also said that they could do so knowing that their concerns would be taken seriously and without fear of retaliation. The percentage answering "Yes" to this question was not as high as it was in the wider central government sector and the public sector overall (95%).

Fraud controls

Fraud most commonly occurs when controls are inadequate and when staff do not comply with policies and procedures. Although entities should be able to trust their employees to do the right thing, having trusted employees is not a fraud control. The likelihood of being discovered is often a strong deterrent for those contemplating wrongdoing, so internal controls and culture play a critical role in preventing and detecting fraud.

The pace of change in many work environments means that the process of ensuring that fraud controls align with the business should be an ongoing exercise.

Only 64% of respondents said that their district health board regularly reviews its fraud controls. This could mean that some of the fraud controls are no longer effective, because systems and processes change over time. To work effectively, fraud controls need to be reviewed annually or every two years.

Due diligence checks and pre-employment screening

Many frauds occur through the use of fake suppliers and suppliers with a close personal relationship with an employee. Carrying out due diligence checks can help to mitigate the risk that suppliers can pose. Some examples of due diligence checks are:

• removing unused suppliers from the system;
• requesting references or credit checks; and
• regularly monitoring the changes to supplier details.

The percentage (59%) of district health board respondents who said that due diligence checks were carried out was higher than the result for the wider central government sector (51%) and the whole public sector (48%). In our view, all public entities should be carrying out due diligence checks on new suppliers.

Most often, it is trusted employees who commit fraud. Trusting employees is important, but to trust without first ensuring that it is appropriate to do so exposes district health boards to unnecessary risk.

District health boards appear to be more prudent than other public entities, with a greater percentage of respondents (76%) saying that new employees undergo pre-employment screening that includes a criminal history check.

Fraud awareness training

Even the most diligent employees might not identify a fraud if they have not had training. Knowing where to look and what to look for can be difficult. Only 29% of district health board respondents had received fraud awareness training at their current workplace. For more than a quarter of those who had been trained, the training occurred more than two years ago.

By combining due diligence checks with awareness training and internal controls, any entity can foster a strong anti-fraud culture. Raising awareness of fraud helps build a culture that is receptive to fraud conversations and encourages employees to come forward if they suspect anything.

Greater risk during tougher economic times

We note that 69% of all respondents did not feel that their entity had a change in risk because of the current economic climate. Experience internationally generally confirms that recessionary economic climates – when staff feel less secure in their employment and increasingly under pressure – present a greater fraud risk. Fraud increases because of "need" rather than "greed".

District health boards need to be particularly aware of their increased fraud risk. At the time of our survey, respondents in district health boards felt less secure in their employment than workers elsewhere in the public sector, and also reported higher rates of feeling under pressure to "do more with less".

Questions 1 to 15 in Appendix 1 set out the survey response data about fraud prevention.

Detecting fraud

Responding to risks

Survey participants were asked whether their entity takes proactive steps to reduce any risks when fraud or corruption risks are raised. The percentage of "Yes" responses was lower among district health board respondents (79%) than wider central government respondents (94%) and all public sector respondents (87%).

A fifth of the district health board respondents did not know whether their district health board took proactive steps to reduce risks. This suggests a need for senior managers to communicate more about how any identified risks are responded to.

Monitoring credit card spending

District health board respondents said that their organisation was closely monitoring credit card spending, but the rate of "Yes" responses (79%) was lower than it was for other central government respondents (94%) and all public sector respondents (90%).

Again, a fifth of the district health board respondents did not know whether their district health board was monitoring credit card spending. This suggests a need for senior managers to communicate more about credit card monitoring.

Monitoring staff expenses

Most district health board respondents were much more certain their organisation closely monitored staff expenses. The rate of "Yes" responses (94%) was comparable to the rate of 97% for other central government respondents and for all public sector respondents.

Questions 16 to 22 in Appendix 1 set out the survey response data about fraud detection.

Responding to fraud

Telling staff about incidents of fraud

Less than a third of the district health board respondents said that their senior managers told all staff about incidents of fraud. About half said that senior managers did not do this.

Communicating with staff is vital in raising awareness about fraud. Greater awareness makes it easier for staff to be vigilant, can confirm the organisation's "zero tolerance" approach to fraud, and helps to maintain an environment where it is easy for staff to speak up about risks and raise any concerns.

Referring suspected fraud to the appropriate authorities

Most respondents (83%) expected that suspected fraud would be reported to the appropriate authorities. In reality, nearly half the most recent incidents of fraud were not reported to the appropriate authorities.

We know that many entities are reluctant to bring criminal charges against their employees, because of materiality – but also because of the time and costs of preparing a case, resolving matters in the courts, and a perception that fraud is a low priority for the Police.

However, all public sector entities are expected to consider reporting fraud to the appropriate authorities. We encourage all district health boards to do this.

Any decision made not to respond to fraud can erode staff confidence in the senior management team. It can create a perception that managers are not committed enough to preventing fraud and discourage staff from reporting their concerns. Taking no action when fraudulent behaviour occurs also increases the risk that an employee suspected of committing fraud could move to another public entity and continue their dishonest behaviour.

Credit card and expense claim fraud

Many respondents were confident that their district health board would take inappropriate credit card spending seriously and discipline the person involved (76%). This affirmative response rate was lower than that of respondents in the wider central government sector (86%) and the public sector overall (83%).

Just over a fifth of the district health board respondents did not know, which suggests a need for senior managers to communicate more about the fact that inappropriate credit card spending is not only discovered through monitoring but also taken seriously.

There was a smaller gap in responses when district health board staff were asked whether inappropriate expense claims were taken seriously and resulted in disciplinary action. The affirmative response rate of 83% was very close to the 86% response rate of those in the wider central government sector and the public sector overall.

Most respondents (90%) were confident that their district health board would take action to recover any misappropriated funds. This positive response rate was similar to that of respondents in the wider central government sector (91%) and of all of the public sector (93%). A clear process to recover funds shows the seriousness with which fraud is taken. In our view, chief executives and senior managers need to send clear messages that they will seek to recover any misappropriated funds.

Questions 23 to 31 in Appendix 1 set out the survey response data about fraud responses.