1.1  The County Council has a policy statement on its response to the issue of fraud or corruption.  This document on strategy and procedures outlines what it proposes to do to prevent fraud and corruption and actions it will take if it is suspected.

1.2  For the purpose of this document, the following definitions apply:-

2.1  Individuals who have dealings with the County Council, particularly employees and members, are responsible for their own standards of conduct.  In addition, where employees legitimately suspect that others may be acting fraudulently or corruptly against the County Council they should report this to an appropriate officer (as outlined in the document "Employees Code of Conduct, Whistleblowing Procedure").  They should also report to their manager (or if they prefer the Head of Internal Audit) if they believe that Council's systems are unsound in the prevention of fraud or corruption.

2.2  Certain officers have specific duties in the prevention of fraud and corruption.  These include:-

Chief Executive – has duties in relation to members’ interests.

Director of Resources - legal duties for the proper administration of financial affairs.

County Solicitor - County Council's monitoring officer and legal adviser.

Head of Human Resources - issues guidance on employees conduct and raising concerns.

Chief Officer - responsible for appropriate controls within systems and for following up reports of potential cases of fraud and corruption.

Line Manager – operates system controls and follows up complaints or serious concerns.

Departmental Personnel Officer - undertakes disciplinary duties.

Head of Internal Audit - gives assurance on the effectiveness of controls and advises on (or where appropriate carries out) investigations.

3.1  Prevention should be the most important element of the strategy.  Fraud and corruption needs to be difficult to undertake with a high likelihood of detection, thus reducing the risk of its occurrence.  To achieve this there needs to be:-

3.2  Effective Controls Within Systems.  The County Council’s Constitution (Financial and Contract Procedure Rules and its Delegated Powers) provide an overall framework for controls.  These are supplemented by individual corporate and departmental instructions and procedure guides.  Such guides will not only emphasise the controls required but also the importance of the separation of duties and information security measures.

3.3  Monitoring Of Systems.  The prime responsibility for ensuring sound systems is that of the department's own managers, who may call on the assistance of their departmental finance officer.  Internal Audit will give an opinion on those systems that are considered to have a higher potential risk attached to them.  External Audit has a responsibility to review the adequacy of the arrangements made by the audited body to prevent fraud and corruption.

3.4  Following Of Codes Of Conduct And Professional Obligations.   Employees and members are governed by codes of conduct and in some cases professional obligations.  Failure to abide by these may result in formal action, including disciplinary action.  Guidance on gifts and hospitality that may legitimately be accepted is issued to departments by the Head of Human Resources and to members by the Chief Executive.  Employees are also given instructions on when to include items in the gifts and hospitality departmental registers.  The Chief Executive keeps a register of personal interests of elected members.  Employees are required to give written notice of an interest (either theirs or their spouse/partner) to their manager, who then notifies the relevant chief officer so it can be formally registered.  When involved in contracting, they must also declare immediately to their manager any personal interests of theirs, their friends or family in relation to a contractor or potential contractor that could conflict with the Council’s interests. This includes when contracting on behalf of a partner or a partnership that the County Council is a member of.

3.5  Honest and Competent.  Selection and training of employees are important components of prevention.  Selection procedures, including the taking up of references and where appropriate a criminal record check, are to be followed and training provided to those undertaking financial and related duties.  Departmental finance officers will give advice to employees, as appropriate, to assist them in carrying out their duties.

3.6  Care During Periods Of Change.  Periods of employee change and system change can be particularly critical to the prevention of fraud.  Extra management supervision will be required during employee vacancies and changes.  The importance of controls against fraud in a new system will need to be considered by the managers undertaking the change.  Internal Audit must be informed of changes to important systems.  These may either be financial ones or ones where information feeds into financial systems.

3.7  Information And Warnings.  The experience of others, both internal and external to the County Council, can be used to prevent occurrences.  Internal Audit in particular is well placed to receive and share such information.

3.8  A Corporate Policy.  A clear and readily available policy statement to act as a deterrent to potential wrong doers and encourages others to pass on concerns over possible fraud or corruption.

4.1  Detection may arise through a number of sources.  It is therefore important that all of these are recognised and taken seriously:-

4.2  Internal Controls.  Well devised and properly operated controls should be the primary reason for detection.

4.3  Budgetary Control.  This can provide a useful secondary back up to managers identifying fraud, either in the form of unusual spending patterns (or expected income shortfalls) or overall budget overspends.

4.4  Complaints.  The recording and follow up of complaints, especially by service users, about services provided may help to uncover not just poor service but possibly fraud or corruption.

4.5  Whistleblowing.  The concerns (and rights under the Public Interest Disclosure Act) of whistleblowers need to be properly recorded and investigated.  Information from concerned third parties is a very important element in detection especially of corruption, where formal controls can be made ineffective by collusion.

4.6  Information From Other Public Bodies.  This may take the form of specific individual referrals or by the County Council taking part in national schemes such as the National Fraud Initiative run by the Audit Commission.  Participation in such schemes will be co-ordinated through Internal Audit.

4.7  Internal Audit Reviews.  It is part of Internal Audit's function to give assurance on the financial systems of the County Council.  Although it is not its responsibility to detect all frauds or corruption that may be occurring, if during an audit suspicions arise these will be followed up.

5.1  Guidance On Whistleblowing.  The Head of Human Resources will provide guidance to employees on how to raise matters of concern including those about fraud and corruption.  Employees may decide to raise their concerns through their line manager; direct to their Chief Officer; to the Chief Executive; to the County Solicitor (who is the Council’s Monitoring Officer); to the Director of Resources or the Head of Internal Audit; or to an independent body (either the Council's External Auditor PricewaterhouseCoopers on 01509 604000, request to speak to their Leicestershire County Council auditor, or the Audit Commission on 0845 052 2646).  Guidance to Governors will be provided by the Director of Children & Young People’s Service.

5.2  Follow Up.  Departmental managers need to react urgently to evidence of potential fraud or corruption.  The Chief Officer should be informed directly of suspected cases and he/she is then required to notify immediately the Director of Resources and the County Solicitor.  Headteachers should also notify their Chair of Governors.  Notifications must be treated with the utmost confidentiality.  Any person that is implicated in the alleged offence should not be included in the notification procedure.

5.3  Investigation.  In more complex cases, investigations will be carried out by Internal Audit.  Otherwise Internal Audit will give guidance to departments on how to carry out investigations.  Departments should not carry out their own investigations without first seeking advice from Internal Audit.

5.4  Police Contact.  Internal Audit will  advise departments on procedures relating to Police involvement.   Where Internal Audit carries out investigations, it will undertake Police contacts on behalf of the department, having taken the necessary guidance from the County Solicitor.

5.5  Interviewing.  Although departments and Internal Audit may undertake interviews there is a local agreement with the Police that these are not conducted under caution.  There is a presumption therefore that contact with the Police will occur at a relatively early stage, once there is sufficient evidence to justify it.

5.6  Investigating Skills and Staff Levels.  Internal Audit staff will receive training in investigating fraud or corruption.  However there may be occasions where outside specialists have to be brought in.  Such cases will be agreed with the Director of Resources.  The Director of Resources will also be advised if investigation work is significantly reducing the ability to carry out planned audits and therefore additional temporary staff should be recruited.

5.7  Investigation Reporting.  Where Internal Audit have undertaken an investigation a report will be produced for the Chief Officer which can then be used if appropriate in disciplinary action.  Internal Audit will also provide evidence and statements to the Police.  As part of its report, Internal Audit will make recommendations on whether systems should be changed to prevent recurrence.

6.1  Criminal Offences.  The County Solicitor will provide guidance as to whether a criminal offence has occurred.  In such cases the Council will seek a prosecution unless the relevant Chief Officer decides, following advice from the County Solicitor, that it would be inappropriate to do so.  In cases of suspected financial irregularities advice will also be sought from the Director of Resources.

6.2  Disciplinary Action.  The Chief Officer will decide whether disciplinary action should be taken against an employee.  Serious cases of fraud or corruption would represent gross misconduct and therefore the employee would be liable to dismissal.

6.3  Members.  The Chief Executive and the County Solicitor, acting as Monitoring Officer, will advise on action in relation to members.

6.4  Compensation.  Where a case has been proved, the Chief Officer and Director of Resources, with advice from the County Solicitor, will agree whether and how much to pursue as compensation. (The Chief Officer will also inform the Director of Resources’ Insurance Section where it is believed an insurance claim can be made).

7.1  To the Corporate Governance Committee. The Head of Internal Audit’s progress report to the Corporate Governance Committee will include investigations into suspected fraud or corruption.

7.2  To the Standards Committee.  The County Solicitor will report cases relating to members to the Standards Committee.

7.3  To Leaders.  The Chief Executive will advise the Leader, the Deputy Leader and the Chairman of the Scrutiny Commission where a serious case of fraud or corruption has resulted in an arrest.

7.4  To External Audit.  The Head of Internal Audit will advise the external auditor of any serious case of fraud or corruption.  He/she will also provide information as part of the Audit Commission's annual return on fraud and corruption.

7.5  Annual Audit Report.  The Head of Internal Audit will include cases that have been prosecuted in his/her annual report on Internal Audit work.