Housing Association Guide Part 1 - Appendix 11 Annex B
Measures Against Fraud and Theft1.01Definition of Fraud - In law there is no specific offence of fraud. For the purposes of this guidance it is defined as the use of deception with the intention of gaining an advantage, avoiding an obligation or causing loss to another party. For practical purposes, fraud may include such acts as deception, bribery, forgery, extortion, corruption, theft, conspiracy, embezzlement, misappropriation, false representation, concealment of material facts and collusion. The criminal act is the attempt to deceive; attempted fraud is therefore treated as seriously as accomplished fraud.
1.02Fraud - can be committed in an infinite number of ways including false representations, altering, concealing or destroying manual or computer records, the misuse of computer facilities or changing computer programs. The suspicion that any of these acts has taken place should be regarded as potentially fraudulent and dealt with as such. Obtaining money (including grants) by providing false information can also be a criminal offence even if it is on behalf of an organisation rather than an individual.
[Note: Associations should note that in accordance with the Housing Association Grant For Eligible Housing Activities General (Northern Ireland) Determination 1992 (see Appendix: 1 to Part 1) a relevant event under Article 35(1) of the 1992 Order includes the NIHE (DPG) receiving incorrect information in connection with the payment of grant. When such a relevant event occurs grant will be recovered in full.]
2.01Board Responsibility - The Board is at the centre of governance in an Association, and is responsible, among other things, for ensuring that the Association:
- Develops & maintains an anti- fraud culture;
- Introduces effective controls to prevent and detect fraud;
- Ensures prompt and vigorous investigations; and
- Applies effective sanctions and redress.
2.02If this responsibility - is to be applied properly, then the Board must:
- Identify risks that might enable fraud to occur either within the Association or from an external source;
- Promote fraud awareness and deterrence within the Association;
- Develop an anti-fraud strategy encompassing a Policy Statement, reporting systems, response plan, register and fraud liaison officer; and
- Ensure staff have the expertise to recognise risks of fraudulent activities.
2.03The Association’s Board must:
- Ensure that timely forecasts and monitoring information on performance and finance are provided and if overspends or underspends are likely corrective action is taken.
- Bring any significant problems, whether financial or otherwise, and whether detected by internal audit or by other means to the attention of the Department in a timely fashion;
- Be aware of it’s responsibilities on the discharge of it’s activities as set out in the Criteria for Registration and in any other relevant instructions and guidance that may be issued from time to time by the DSD;
- Be informed of the Association’s performance compared with its aim(s) and objectives;
- Ensure that financial considerations are taken fully into account at all stages in reaching and executing its decisions, and that standard financial appraisal techniques are followed appropriately;
- Advise the DSD if its Chairman, is contemplating a course of action involving a transaction which the Chief Executive or any other senior staff or Board member considers would infringe the requirements of propriety or regularity, or does not represent prudent or economical administration or efficiency or effectiveness;
- Ensure that a system of risk management is maintained to inform decisions on financial and operational planning and to assist in achieving objectives and targets;
- Make certain that an effective system of programme and project management and contract management is maintained;
- Make sure that all public funds made available to the Association (including any approved income or other receipts) are used economically, efficiently and effectively;
- Guarantee that adequate internal management and financial controls are maintained by the Association ncluding effective measures against fraud and theft;
- Maintain a comprehensive system of internal delegated authorities that are notified to all staff, together with a system for regularly reviewing compliance with these delegations;
- Have effective personnel management policies maintained; and
- Put in place an Equality Scheme that is reviewed and equality impact assessed as required by the Equality Commission.
3.01Background - When allegations are raised, they can represent a serious challenge to the values and reputation of both the Association and the individuals within it. Mistakes, mismanagement and poor performance are also serious (and may also be involved) but they do not challenge integrity and values in the same way as fraud. It is this dimension that makes it so important to deal with allegations effectively. Unless there is a demonstrable commitment among both Board members and the senior management team to combat fraud, it is unlikely that an anti-fraud culture will exist in the organisation.
3.02Allegations - are always unsettling. At the time they are received they will often run counter to perceptions of the individuals or the organisation to which they relate. The temptation to ‘play them down’ or put them to one side is strong. All allegations should be taken seriously and should be explored robustly and in a way that is appropriate to their specific circumstances. To do otherwise is to risk everything. To ignore an allegation that is subsequently found to be true is one of the quickest ways of destroying the reputation of an organisation (and of the individuals in it). It invariably carries the implication that the Association was involved in some kind of ‘cover up’ or was colluding with the wrong actions.
4.01The Need to Obtain Assurance - An Association must operate a framework, which effectively identifies and manages all risks, which might prevent it achieving its objectives. A Boardroom Briefing (from the Institute of Chartered Accountants in England and Wales Centre for Business Performance) suggests that ‘risk and control issues’ could be standard agenda items for the Board and that reports from Committees (e.g. the audit committee) provide opportunities to discuss risk and control at Board level. Board members must be involved in the risk-identification and assessment processes, and must take ownership of and approve the Association’s risk-management framework. Unless there is a demonstrable commitment to governance and risk management among both Board members and the senior management team, it is unlikely that a flourishing control culture will exist in the Association.
5.01Management Assurances - One of the main sources of assurance for many Associations will be managers’ and directors’ routine reports that the internal control activities are providing adequate risk management. Such reports should cover operational and financial matters as well as lower-level information giving assurance that controls are operating, as they should be. Management certification on the operation of controls needs to be sure there is a proper basis for that certification. When professional auditors test the operation of controls, they usually take a sample, using scientific techniques to extrapolate their findings. If management adopt such an approach, it needs an adequate understanding of the techniques.
6.01Risk-Management Activities - An Association’s risk-management and risk-identification activities may in themselves provide assurance that the Association is focusing on and addressing the key risks that threaten the attainment of the Association’s business objectives. Particular attention should be paid to how the Association’s risk profile is changing over time. Such activities could include the formation of a risk panel to hold round-table debates on key risks, which would involve members of staff from all levels and sectors of the Association, and possibly stakeholders from time to time.
6.02The Board - should ensure that there is a clear and well-communicated policy covering prevention, detection, and reporting of fraud, and the recovery of the assets. The register of all incidents of fraud and attempted fraud should also be regularly reviewed. Management should report to the Board and the Department all cases of fraud and attempted fraud, detailing the nature and extent of the fraud and any implications for the Association's internal control system. Housing Division will circularise Associations on a quarterly basis to ensure that information on successful or attempted frauds has been reported as required.
6.03An internal control system - aims to minimise the occurrence of significant control failings and weaknesses. This requires that all people in an organisation understand the internal control and risk implications of the tasks they perform, and act accordingly. They must also understand the importance of assurance and internal control in achieving the organisation’s objectives. To achieve these objectives and understandings, an Association’s system of internal control must be embedded in its operations and culture.
7.01Embedding of internal control - Some or all of the following may help to achieve this:
- Communication of the Board’s risk-management policy at all levels;
- Consultation at all levels on, for instance, what is risk, what risks does the organisation face, how should those risks be addressed;
- Setting out clear guidelines on the responsibility for risk;
- Linking corporate objectives to individual staff targets, reward mechanisms and training opportunities;
- Encouraging a climate of openness and honesty;
- Ensuring that Board members and employees have the knowledge and skills to address risk and internal control issues (and providing training opportunities if not);
- Establishing a risk panel including members from all levels and across the Association;
- Establishing a common risk language in the Association; and
- Communication of the importance attached to risk management by the Board and senior management.
8.01Review of Effectiveness - The Board should conduct an annual review of the effectiveness of the Association’s system of internal control. For all Associations with more than 250 units at the start of the financial year the Board should include, with its audited financial statements, a statement of internal control that refers to the annual review of the effectiveness of the Association’s internal control systems. The annual statement should be published as part of the Board report required by the Statement of Recommended Practice (SORP): accounting by registered social landlords.
8.02Assurance and risk management - are not once-a-year exercises; they should be continuous processes. In this light the Board’s annual review should largely consist of bringing together the results of the forms of assurance that the Board has ‘identified as appropriate to obtaining its overall assurance on the Association’s system of control’. To this end, the Association’s chief executive or executive team should present to the Board, or audit committee, an annual report on the Association’s system of internal controls. It is for the Board, or audit committee, to review this report in the light of the ongoing assurance reporting process.
9.01Model Fraud Policy Statement - The model statement, which is recommended by DSD for use by Associations, is:
“The purpose of this statement is to provide a framework for the development, throughout ……………… Housing Association, of policies and measures to counter fraud. It sets out the responsibilities of all staff regarding the prevention of fraud and the action to be taken where a fraud is suspected or detected. The Association requires all staff at all times to act honestly and with integrity and to safeguard the resources for which they are responsible. Fraud is an ever-present threat to these resources and hence must be a concern to all members of staff. The purpose of this statement is to set out your responsibilities with regard to the prevention of fraud.”
The statement covers fraud and loss within the Association and applies to staff, Board Members, tenants, members of the public and contractors. The Association is responsible to the DSD as the sponsoring Department to ensure that it has in place counter fraud arrangements, which comply with the principles contained in the Department’s Statement of Fraud Policy, set out in Annex D.
10.01Fraud Response Plan - The Board must ensure the association has a fraud response plan and that staff know what to do in the event of fraud so that they can act without delay. An effective fraud response plan should be closely tailored to the association’s circumstances and should reflect the likely nature and scale of losses. A fraud response plan should cover:
- To whom the fraud or suspicion of fraud should be reported in the first instance (e.g. senior managers or board member or internal audit);
- How the association will investigate fraud. This investigation should cover details of the incident leading to suspicion and the events leading up to it, an assessment of the scope and impact of the incident, including a list of any assets affected, the probable cause and details of any control weaknesses and the remedial action taken;
- How to secure evidence in a legally admissible form;
- When and how to contact the police;
- How to initiate recovery action;
- Who else to contact for advice (e.g. insurers, DSD, legal advisers); and
- How to disseminate the lessons learned from fraud cases.
|
