National Audit Office reports £21bn of public money lost to fraud

Robert Brooker, Head of Fraud & Forensics, takes a closer look at the recent news from the National Audit Office (NAO).
Since the start of the COVID pandemic in 2020, tens of billions of public funds have been lost to fraud, according to the National Audit Office (NAO). Of the £21bn identified, and with a small chance of the majority being reclaimed, the NAO have said that more than £7bn is linked to pandemic-related government backed schemes and it is “very unlikely” that the majority of taxpayers’ money will be recovered.

With levels of fraud rising by over 280%, from £5.5bn in 2018 to £21bn in the following two years, the NAO believe that many public bodies are unaware of the amount of fraud they are facing.

HMRC’s Taxpayer Protection Taskforce is investigating a variety of COVID employment scheme fraudulent claims but it is expected to recover only £1.1bn of the estimated £4.5bn believed to have been lost to fraud.

Whilst appreciating COVID was a unique series of events and schemes were pushed out quickly to try and help as many companies as possible, it was always clear that, with insufficient due diligence these schemes would be targeted by fraudsters.
Fraud, similar to the ‘fire triangle’, requires three components: opportunity, motivation and rationale.

Many took the opportunity to claim Bounce Back Loans (BBL), as an example, and then intentionally closed down their company immediately following the receipt of funds, transferring these to a personal account.

In some cases HMRC has prosecuted individuals for doing so, but unfortunately this a very small number. Fraudsters were provided the opportunity to commit the fraud as very few if any checks were undertaken as to whether the business was operating or how it had been performing.

The motivation for committing fraud was easy during the pandemic with companies having to limit their services or look for alternative ways to continue trading, and personal protective equipment (PPE) contracts provided an opportunity for anyone to source and procure PPE. As we know now, some of these companies either didn’t provide the PPE as disclosed, or it was of inferior quality. The motivation for individuals to make money on this was evident. Companies took the opportunity to diversify their business in an attempt to make money, but their motivation was greed, with no regard for the victims – in many cases the NHS and ultimately, vulnerable members of society.

The fraudsters rationalised their actions by being furloughed or made redundant and viewing the government’s money as something they wouldn’t miss and could afford to lose.

The NAO report states otherwise, and acknowledges the many sacrifices that have been made along the way. As we are seeing now, the cost of living crisis accentuated by the energy crisis and various other contributing factors may not have been so impactful had UK Public Sector not lost £21bn to fraud.

Robert Brooker

Director - London

t: 07917001182

e: robert.brooker@pkfgm.co.uk

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