Anti-fraud and corruption policy - Introduction

1.1  The authority aims to provide community leadership and quality services.

1.2  In carrying out its functions and responsibilities, the authority has always adopted a culture of openness and fairness and has expected that elected members and employees at all levels will adopt the highest standards of propriety and accountability. This has been achieved by leading by example and by an understanding of and adherence to rules, procedures and agreed practices. These standards are also expected from organisations that have dealings with the authority (e.g. suppliers/contractors).

1.3  However, in light of the Nolan Report, several well-publicised fraud and corruption cases within local government and the Local Government Act 2000, the authority has formalised these accepted standards and practices and developed an anti-fraud and corruption policy.

1.4  The authority demonstrates clearly (through this policy) that it is firmly committed to dealing with fraud and corruption and no distinction will be made for perpetrators inside (members/governors and employees) or outside the authority. In addition, there will be no distinction made in investigation and action between cases that generate financial benefits and those that do not.

1.5  This policy document embodies a series of measures designed to frustrate any attempted fraudulent or corrupt act and the steps to be taken if such an act occurs. For ease of understanding, it is separated into the following sections:

• Culture – Section 2
• Roles – Section 3
• Deterrence – Section 4
• Detection and investigation – Section 5
• Awareness and training – Section 6.

1.6  The authority is also aware of the high degree of external scrutiny of its affairs by a variety of bodies such as its external auditors, inspection bodies, the Local Government Ombudsman, HM Revenue and Customs. These bodies are important in highlighting any areas where improvements can be made.

1.7  Fraud and corruption were defined by the Audit Commission as:

FRAUD – “the intentional distortion of financial statements or other records by persons internal or external to the authority which is carried out to conceal the misappropriation of assets or otherwise for gain”.

In addition, fraud can also be defined as:

“The use of deception with the intention of obtaining an advantage, avoiding an obligation or causing loss to another party.”

1.8  Bribery and corruption

A bribe is a financial or other advantage that is offered or requested with the intention of inducing or rewarding the improper performance of a relevant function or activity, or with the knowledge or belief that the acceptance of such an advantage would constitute the improper performance of such a function or activity.

1.9  The Bribery Act is now in force and places responsibilities and powers on organisations such as local authorities. Full details of the Council’s bribery policy is shown at Annex D.

1.10  There are 4 key sections of the Act which need to be considered for the purposes of this document, which are:

• Section 1, which deals with bribing another person by money, payment in kind, or goods and services.
• Section 2, the act of being bribed. This relates to individual officers and could lead to prosecution of senior managers.
• Section 6, bribery of foreign officials.
• Section 7, failure of a commercial organisation to prevent bribery.

1.11  For this section a “relevant commercial organisation” means an entity that carries on a business and current indications are that this includes local authorities. This section also includes persons associated with the organisation, such as agency workers, suppliers and contractors.

1.12  Under the legislation an organisation has a defence if it can show that it has adequate bribery prevention procedures in place, which are informed by the following 6 principles:

• Proportionality – the action an organisation takes should be proportionate to the risks it faces and the size of the business.
• Top level commitment – a culture needs to be evident in which bribery is never acceptable. This can be shown via leadership statements, training and procurement expectations.
• Risk assessment – to include proportionate risk management perhaps via training, newsletters, procurement controls and inclusion within organisational policies such as this one.
• Due diligence – i.e. knowing who the organisation is dealing with.
• Communication – communicating policies and procedures by training and general awareness including how occurrences should be investigated and by whom.
• Monitoring and review – to ensure policies, training and awareness are relevant and updated and by nominating a responsible officer.

1.13  Defence against bribery charges under the act, therefore, should be considered adequate if the organisation has the following in place:

• Risk awareness and preparation
• Adequate communication and senior management buy-in
• A zero-tolerance culture
• Adequate education and training
• An audit trail and integration with counter fraud processes
• The penalties for individuals under this legislation can, on conviction on indictment, be as high as a prison term of 10 years, or a fine or both. Although under section 7 a guilty person is only liable to a fine. The organisational consequences may include disbarment from contract tenders, reputational and financial risk exposure and adverse publicity. 

1.14  Other risk areas to be considered include:

• facilitation payments – i.e. payments designed to make things happen but do not secure agreement
• gifts and hospitality – genuine low level hospitality is deemed acceptable but it is imperative that corporate registers are kept up to date and all employees must make declarations of interest.

1.15  In addition, this policy covers “the failure to disclose an interest in order to gain financial or other pecuniary gain.” Details of the Council’s Financial Crime Policy are included at Annex C.