Can anti-corruption training and awareness influence meaningful counter-fraud change throughout local government?

Having researched and drafted several English Local Government Strategies over the past 10 years as part of the Fighting Fraud and Corruption Locally (FFCL) Board, I read with interest the recent articles about corruption in local government.

Preventing corruption is a key part of good governance. It is linked to culture and behaviours, and detecting corruption is part of putting strategies into action and monitoring them. Overall, investigating corruption requires skills and unfettered access.

What does corruption look like and where can it happen?

Corruption can manifest in many forms in a local authority, and this may be contributing to a lack of specific data on these offences. From my own knowledge, some of the forms it can take are collusion, conflicts of interests, lobbying, cronyism, and bribery. There are areas of council activity which may be very susceptible to corruption, for example, planning decisions – called Section 106 agreements. These are agreements between a local authority and a developer for planning permission and to reduce a negative impact on an area that is being developed.

Corruption may be closely linked to bribery and there is guidance on the ‘adequate procedures’ that organisations should have in place to prevent it. The Bribery Act 2010 is also the legislation that may be used for prosecution.[1]

Furthermore, senior officers should pay heed to the new Economic Crime and Transparency Act 2023 which introduces the new ‘Failure to Prevent Fraud’ offence. Whilst a corporate offence that may affect local government only in the respect of traded services, the repercussions of not ensuring ‘reasonable procedures’ are in place may lead back to senior internal officers.

There is no legal definition of corruption but the most accepted one by Transparency International describes it as “the abuse of entrusted power for private gain”. Prior to the Bribery Act 2010, the legislation covering this area were the Prevention of Corruption Act 1906 and the Public Bodies Corrupt Practices Act 1889. The common law offence of ‘misconduct in a public office’ still exists and has been in existence for over 100 years[2]. In 2018 (the last available figures), there were 95 prosecutions.[3]

A closer look at corruption impacting local and central government

There are issues of ‘revolving doors’ where consultants or staff members work on projects and then leave to work for the supplier. Unethical lobbying is also an issue and can affect both local and central government – including politicians.

One of the most famous cases is of T. Dan Smith, the ex-leader of Newcastle City Council. He was appointed as a consultant to John Poulson, a local architect, who was bidding for work at local authorities. Through friendships with public servants, Poulson won a significant amount of work at local authorities and wider public sector such as railways. Eventually, Poulson and two others were charged with various corruption offences and T. Dan Smith was jailed for six years. Released in 1977 after just three years, Poulson and his creditors received only 10p in the pound.

While the MPs who had been implicated were not charged, later the House of Commons’ ‘register of interests’ was created and their activity was called “conduct inconsistent with the standards which the House is entitled to expect from its Members”.[4]

Who has formal responsibility for the detection and monitoring of corruption in local authorities?

Prior to its abolition in 2015, the Audit Commission – the local authority regulator’s counter-fraud team – produced a series of reports called ‘Protecting the Public Purse’. Whilst not specifically focussing on corruption, its very existence shone a spotlight on counter-fraud activity. The National Fraud Authority (NFA), the penholders for the first Fighting Fraud Locally strategy, did not ‘own’ the strategy or activity but its work also focussed attention on local authority counter-fraud and corruption. The NFA was abolished in 2013 and the local authority work was not transferred to any other body – which ultimately leaves a vacuum.

In recent times, Cifas has conducted an important piece of work – researching and drafting the last FFCL strategy in 2020. That 290 Councils attended 13 workshops to input into the counter-fraud and corruption strategy for local government, the FFCL 2020s – and there now being an active FFCL regional group across all English authorities who discuss risks – shows there is a vital commitment by counter-fraud practitioners to provide a co-ordinated response to fraud and corruption perpetrated against local authorities. Rather crucially too, the final section in the FFCL 2020s blueprint contains a checklist of activity for counter-fraud teams, and importantly, sections on what chief officers and elected members should be asking for, in order to get assurance that procedures are in place. Overall, the arrangements laid out in the FFCL 2020s strategy represent a holistic approach and should help to prevent corruption, if followed.

The skills required to prevent and detect corruption

The ability to tackle corruption and its relationship to bribery is another factor to consider. However, to identify, assess, detect, and investigate bribery and corruption requires resource, skills, training and support by local law enforcement, for what may be a long and complex investigation.

Many local authority investigators are skilled and qualified and have developed counter-fraud strategies which lay out processes for reporting. Creating a culture to prevent, detect and follow through is essential but relies on a tone from the top. Whilst every officer does not need to be trained specifically or qualified on investigating this area, there is a necessity to ensure that staff across the organisation can spot corruption red flags and feel safe to report.

Tackling the insider threat

Nearly half (48%) of the 249 cases recorded to the Cifas Insider Threat Database between January-September 2023 related to dishonest conduct – a 35% increase compared to the same period in 2022. This emphasises the importance of staff feeling empowered to report dishonest conduct by colleagues before it escalates.

Whistleblowing is a crucial part of an anti-corruption programme and since incidents may be related to senior officers or local politicians, is it important that these policies are appropriately resourced, complaints are treated as confidential, and are independent and recorded, as well as reported properly.

Internal procedures for the political governance of a local authority have a framework including an audit committee, scrutiny committees and standards and ethics committees. However, these do not have responsibility for the physical operation of detecting or investigating. Additionally, whilst they have independent or lay members, they are mainly comprised of local elected members and officers of the council. Changing the culture means that these groups must be able to scrutinise and know what to look for – whole organisation fraud and corruption awareness is therefore essential.

The government delegation to ‘armchair auditors’ can be seen a part of a ‘responsibilisation' [5] strategy around transparency. But the elements of a responsibilisation strategy that covers self–governing tactics – such as due diligence and training – is not enough on its own. In isolation, no single strand can achieve a culture change. Additionally, the Nolan Principles[6] cover the basis of the ethical standards expected of public office holders.

Individuals involved in local government corruption must be in a position to offer something and are typically in senior roles or, in some cases, at the very top of the organisation. So, the tone from the top is crucial and should reflect the ‘adequate procedures’ for preventing bribery and the culture strands of FFCL.

To conclude...

Corruption is by its nature difficult to uncover. Hidden and secretive, it takes specialist skills, the right mindset and training to expose.

Therefore, the business case for tackling corruption for a local authority must be weighted heavily on reputational risk, and doing the right thing morally and ethically. Reflecting on the example of T. Dan Smith, he faced a trial with negative publicity and ultimately served time.

If there is appetite, the incentive for tacking local corruption must be the ethical and moral one.

As local authorities are funded in part by central government grants for specific purposes, and by council tax and, in some cases, business rates revenue, the ‘cost’ of corruption may be passed on to the taxpayer. Since it will unlikely be budgeted for, this can be reflected in an increase of local taxes or taken from reserves, subsequently resulting in the reduction of critical services.

The argument internally for tackling corruption in this area should include the impact of corruption: Where might the money go? What could it be funding? What are the global repercussions? Is it leading to trafficking? Does it undermine political democracy and fairness?

It is well known that fraud knows no boundaries geographically, nor by type, and that may be the same for corrupt activities (or bribery). Local authorities do not share corruption data amongst each other nor across the sectors, and so an intelligent data-sharing initiative could track patterns, multiple suppliers, and awards across organisations.

Additionally, with robust counter-fraud and corruption policies in place, there will be a stronger ability to monitor and report into the C-suite, to enforce meaningful change throughout. Training officers and locally elected members with general counter-fraud awareness while also providing the opportunity to obtain the skills needed to investigate, action, and record whistleblowing complaints in an unfettered way, can all help to strengthen a local authority team in a way that can influence an anti-fraud culture.

Today, awareness supported by the top table should focus on behaviour and culture change featuring ethical scenarios and perception surveys across the authorities. With the potential of having a single anti-corruption champion for local government linked to the FFCL initiative too, what might feel like a counter-fraud ‘project’ can soon transform into an ‘honesty and integrity in local government programme’.

Interested in building your counter bribery and corruption knowledge? Find out more about the Cifas Fraud & Cyber Academy's Professional Certificate in Counter Bribery and Corruption and book onto our next course.