£1 billion fraud cost for Welsh public services

The Welsh Audit Office has warned that Welsh public services could lose up to £1 billion a year to fraud, saying that additional resources are needed to keep pace with the ever-changing methods of fraudsters.

The picture of counter-fraud arrangements in the Welsh public sector varies across Wales, but there is scope for greater collaboration and cross-agency working to combat fraud. Estimates of losses range from £100 million to £1 billion per year, which gives an indication of the potential risks of fraud facing the public sector in Wales.   

Types of fraud currently committed in the public sector are hugely varied, ranging from expenses and procurement frauds to cyber crime, among many others. The ways in which fraud is most commonly committed are through corruption, asset misappropriation and financial statement fraud. However, the most common type of fraud faced by UK businesses today is cyber crime, and in response public services need to work together and find ways to stop criminals exploiting weaknesses in their IT systems.     

The new Welsh Audit Office report features case studies of different types of fraud across the Welsh public sector. Two examples that have resulted in successful prosecutions include: The Dragon companies, who established a processing plant in Port Talbot and aimed to become the world’s largest supplier of rag worm bait for the fishing industry, defrauded the EU and the Welsh government of £4.7 million; and a temporary Project Manager at Powys Teaching Health Board established a private company and submitted bogus invoices totalling £822,000 to his employer using false names.

Adrian Crompton, the Auditor General for Wales, said: “New fraud threats are continually emerging in Wales, as elsewhere across the UK and around the world. Fraudsters do not respect geographical boundaries and the ways in which fraud is committed are constantly evolving as society and technology changes – this is becoming ever more apparent in today’s digital age. It’s therefore vital that collaboration and the sharing of intelligence and good practice in tackling fraud takes place between public, private and third-sector bodies across Wales, the UK and internationally.

“At a time of continuing austerity, I think it is more important than ever for all public bodies in Wales to seek to minimise the risk of losses through fraud. Organisations must prioritise fraud prevention and can help mitigate the risks of fraud by having the right organisational culture supported by effective counter-fraud arrangements.”