Fraud prevention is an essential strategy for the NHS Counter Fraud Authority (NHSCFA). Put simply, it is the prevention of opportunities or steps, that would allow a fraud to occur in the first instance. It also involves process improvement to reduce fraud risk and financial vulnerability within NHS systems.
In 2019/20, NHSCFA estimated the financial loss to fraud, wastage and error from procurement and commissioning budgets to be approximately £300.4 million. In the same year, a national proactive exercise (NPE) was undertaken, directed at building a more accurate understanding of financial vulnerability exposure (FVE) in procurement and commissioning, and tackling fraud risk vulnerabilities within NHS procurement systems. By asking NHS organisations to undertake local proactive activity, NHSCFA was able to establish an understanding of procurement fraud risk and identified financial vulnerabilities within the NHS purchase-to-pay system (P2P) / purchase order (PO) systems. The 2019 exercise provided NHSCFA with a baseline and in 2021 a comparable exercise was undertaken to identify the impact of NHSCFA’s fraud prevention activity at national and local level.
Ideally all purchases made within NHS organisations should be raised by PO using an electronic P2P accounts payable system with key controls around separation of duties. This provides budget holders with a means of oversight ensuring non-pay expenditure is controlled. Non-PO spend is not fraud, but it exposes organisations to a far greater risk within finance and procurement systems. Our aim for this exercise was to influence behaviours for change.
Key Findings
NHSCFA achieved its aim to have a positive impact by influencing behavioural change and thereby reducing the most vulnerable instances of non-PO spend across the NHS provider sector.
NHSCFA-led fraud prevention activity at a national level and implementation at a local level, has influenced reductions in FVE within PO expenditure. Fraud prevention activity has influenced a reduction of £156.8 million in FVE across 79 organisations that provided data across both data collection exercises (baseline and comparable).
Areas for improvement
Instances of non-PO spend in some NHS organisations have reduced; however, the non-PO monetary value and average spend has increased demonstrating an overall cultural behaviour which amounts to vulnerable spend, and a greater reliance of spending outside of the established PO mechanisms. Some NHS organisations also demonstrated consistent behaviour in non-PO spend, often for high values.
NHS organisations must disrupt these practices by reinforcing existing organisational Standing Financial Instructions (SFIs), policies and procedures through embedding a culture of PO spend. This should be supported by the implementation of regular audits on departments’ performances with staff being held to account if procedures are not followed.
Approximately half the sample demonstrated a significant improvement in the reduction of non-PO spend whilst the other half presented a significant increase in non-PO spend. This demonstrates there are still lessons to be learnt, and ongoing prevention interventions are required.
Conclusion
NHS organisations should continue working to actively reduce their FVE by ensuring robust controls are embedded and maintained within finance and procurement systems and engender a low reliance on non-PO spend.
NHSCFA will provide participating NHS organisations with organisation-specific feedback on their performance within this exercise in 2022 – 2023. It is recommended NHS organisations review the findings and hold discussions with key stakeholders within their organisation to discuss and assess fraud risk vulnerability within the procurement process. Appropriate fraud prevention initiatives should be designed as an outcome of those discussions. Where applicable, discussions should take place on how these risks score on organisational risk registers.
To assist NHS organisations several recommendations have been identified within this report. NHSCFA will review and update its existing procurement fraud prevention guidance (available on the NHSCFA website), taking into consideration the outcomes from this exercise.
It would not have been possible for NHSCFA to undertake this work without the assistance and participation of NHS provider organisations and their Local Counter Fraud Specialists (LCFSs). NHSCFA would also like to extend our gratitude to our counterparts in NHS Counter Fraud Scotland for provision of statistical resources that have been invaluable. NHSCFA is grateful to all those organisations and their staff for their work and participation in this exercise.