Guidance

ESF Anti-Fraud Policy

Updated 10 March 2020

1. Introduction

The Managing Authority (MA), Certifying Authority (CA) and Audit Authority (AA) for European Social Fund (ESF) England are committed to maintain high legal, ethical and moral standards, to adhere to the principles of integrity, objectivity and honesty and wish to be seen as opposed to fraud and corruption in the way that they conduct their business. All members of staff in the Authorities are expected to share this commitment. The objective of this policy is to:

• promote a culture which deters fraudulent activity
• facilitate the prevention and detection of fraud
• facilitate the implementation of timely and appropriate procedures that aid in the investigation of fraud and related offences

A procedure is in place for the disclosure of situations of conflict of interests.

The term ‘fraud’ is commonly used to describe a wide range of misconducts including theft, corruption, embezzlement, bribery, forgery, misrepresentation, collusion, money laundering and concealment of material facts. It often involves the use of deception to make a personal gain for oneself, a connected person or a third party, or a loss for another; intention is the key element that distinguishes fraud from irregularity.

Fraud does not just have a potential financial impact, but it can cause damage to the reputation of an organisation responsible for managing funds effectively and efficiently. This is of particular importance for a public organisation responsible for the management of EU funds.

Corruption is the abuse of power for private gain. Conflict of interests exists where the impartial and objective exercise of the official functions of a person are compromised for various reasons including:

• involving family
• emotional life
• political
• national affinity
• economic interest
• any other shared interest with, for example, an applicant for or a recipient of EU funds

2. Responsibilities and Reporting Structure

Policy Owner: Anti-fraud Lead

Within ESF England, overall responsibility for managing the risk of fraud and corruption has been delegated to the Risk Manager; Head of Programme Reporting & Correspondence Team in the MA who has the responsibility for:

• undertaking a regular review of the fraud risk; with the help of the Risk Assessment Group
• establishing an effective anti-fraud policy and fraud response plan
• ensuring fraud awareness for staff and implementing training
• ensuring that ESF England promptly refers investigations to competent investigative bodies when they occur.

Process owners/managers of the MA are responsible for the day-to-day management of fraud risks and action plans, as set out in the fraud risk assessment and particularly for:

• ensuring that an adequate system of internal control exists within their area of responsibility
• preventing and detecting fraud
• ensuring due diligence and implementing precautionary actions in case of suspected fraud
• taking corrective measures, including any administrative penalties, as relevant

The Anti-fraud lead is responsible for ensuring that there is a system in place which receives, records and stores the information on each allegation of fraud, suspected fraud and confirmed fraud.

The Anti-fraud lead is responsible for identifying if these relate to a non-CFO project (Direct Bid) or a Co-financing Organisation (CFO) as this will determine the investigation process, as this will vary on a case by case basis.

The Anti-fraud lead will co-ordinate an Independent Review Panel to hear allegations of fraud and/or refer to the relevant CFO.

The Independent Review Panel hears allegations of fraud. The panel is made up of an Independent Chair, an Independent manager, the Anti-fraud Lead, a representative from Verification team, a representative from the CA, a representative from Delivery team (often the contract manager). In some cases, a Counterfraud Investigation Manager is asked to attend. The panel review the evidence presented and using their ESF knowledge, decide if there is sufficient evidence to warrant a fraud referral.

Following the Independent Review Panel hearing, the Anti-fraud lead will:

• refer all suspicions of fraud to the competent investigating body
• co-ordinate the investigation on a day-to-day basis and ensure any additional evidence is promptly sent to the investigating team
• only disclose such details in relation to a case where such disclosure is necessary to facilitate the investigation and should not disclose information that may damage the reputation of persons who may later be found to be innocent of any alleged wrongdoing
• follow up all referrals

Following any investigation, the Anti-fraud lead will:

• Establish and raise any new risks arising from any investigation
• Work with the relevant project or CFO lead to implement precautionary actions
• Put in place any further mitigating controls
• Creating an Anti-fraud culture within the MA
• Implementing training for all MA staff
• Taking any corrective measures, including any administrative penalties, as relevant
• Referring suspicions of fraud to the CA for reporting on the Irregularity Management System
• Escalating any issues to the Senior Management Team

The Head of ESF England, is fully committed to anti-fraud activity within the ESF Directorate and is regularly updated on such activities and provides advice, direction and assistance with any issues and complex cases.

The horizontal escalation route is outlined below

• All allegations of fraud are reported to the designated Anti-fraud lead
• The Anti-fraud lead sets up an independent review panel (IRP)
• The IRP decide if there is enough evidence to refer for an investigation
• The Anti-Fraud lead follows the instructions of the IRP and either makes a referral for investigation (to either GIAA or the relevant CFO) or closes the case
• Following any investigation, if fraud has been proven, the Anti-fraud lead will inform the Certifying Authority of the amount
• The Certifying Authority report the fraud to the European Commission

The CA is responsible for ensuring that there is a system which records and stores reliable information on each operation; and that they receive adequate information from the MA on the procedures and verifications carried out in relation to expenditure.

The AA has a responsibility to act in accordance within professional standards in assessing the risk of fraud and the adequacy of the control framework in place.

The vertical escalation route for Anti-fraud management, reporting and issues is as follows:

• the Anti-Fraud lead reports to the immediate Line Manager and will in the first instance escalate any issues via this route; currently the Senior Programme Reporting, Correspondence and Risk Manager.
• issues may be escalated further to the Head of Programme Reporting, Correspondence and Risk Manager.
• if necessary, issues may be escalated further to the Head of the European Social Fund Managing Authority.
• reporting and management of Anti-Fraud cases, risks and issues take place between the above job roles on a regular basis

3. Reporting Fraud

ESF England has procedures in place for reporting possible fraud, both internally and to the European Anti-Fraud Office (OLAF).

Allegations of fraud may be reported to the MA by both internal mechanisms such as members of staff or by external mechanisms such as Whistleblowers.

The MA is responsible for identifying if these relate to a non-CFO project (Direct Bid) or a Co-financing Organisation (CFO). For allegations relating to non-CFO projects, the MA will progress allegations of fraud directly to the The GIAA (CF&I) team. The GIAA (CF&I) team will therefore deal directly with fraud allegations that arise from these non-CFO cases. For allegations relating to CFO’s, the MA will refer directly to the relevant CFO. The CFOs Employment and Skills Funding Agency (ESFA), The National Lottery Community Fund (NLCF):, Her Majesty’s Prison and Probation Service (HMPPS) and Department for Work and Pensions (DWP) will therefore lead on any fraud cases in the first instance, liaising with GIAA CF&I if appropriate.

These procedures also require that the MA is notified of all ESF fraud allegations which have been referred directly to GIAA (CF&I) or the CFOs. In all instances, GIAA (CF&I) and each CFO will inform the MA immediately when reasonable grounds to allege fraud have been established. All cases of alleged or identified fraud must be notified to the MA Anti-fraud lead within 2 days of the initial date of detection.

All cases of suspected or identified fraud are communicated to OLAF and, where there is a financial element to the fraudulent activity (irregular expenditure), this is recorded on OLAF’s Irregularity Management System (IMS) within the reporting period specified in the regulations. The MA Anti-fraud lead will notify the CA for input to IMS.

The GIAA (CF&I) team (or other CFO fraud team, in liaison with GIAA (CF&I)) will be invited to investigate the case and keep the relevant authorities notified of the status. They also instigate criminal proceedings (through the police) where it is deemed appropriate. All reports are dealt with in the strictest of confidence and in accordance with the Data Protection Act 1998. Staff reporting irregularities or suspected frauds are protected from reprisals.

All allegations or actual fraud concerning any CFO should be reported to the following; Her Majesty’s Prison and Probation Service: CFO-ServiceDesk@noms.gov.uk
The National Lottery Community Fund: fraud@tnlcommunityfund.org.uk There is also a fraud hotline : 0800 496 9991

Employment and Skills Funding Agency: ESF.COFINANCING@education.gov.uk

Department for Work and Pensions: ESF14-20.CFOPOLICYQUERIES@dwp.gov.uk

There is also a Whistleblowers hotline 0800 917 4881

Greater Manchester CFO: ESFCFO@greatermanchester-ca.gov.uk

All Anti-fraud communications received into any CFO inbox or GIAA inbox should be forwarded to the ESF England MA Anti-Fraud Lead via: ESFENGLAND.ANTIFRAUD@dwp.gov.uk. Any allegations of fraud may also be referred to this inbox.

4. Anti-fraud measures

ESF England has put in place proportionate anti-fraud measures based on a regular and thorough fraud risk assessment. In particular, it uses IT tools (such as ARACHNE) to detect potentially risky operations and ensures that staff are aware of fraud risks and receive anti-fraud awareness training from the GIAA CF&I team.

ESF England carries out a rigorous and prompt independent review into all cases of suspected and actual fraud which have occurred with a view to improve the internal management and control system where necessary. The review feeds into the subsequent update of the fraud risk self-assessment. It is objective and self-critical, resulting in clear conclusions about perceived weaknesses and lessons learned, with clear actions, responsible individuals and deadlines.

5. Conclusion

Fraud can manifest itself in many different ways. ESF England has a zero tolerance policy to fraud and corruption, and has in place a robust control system that is designed to prevent and detect, as far as is practicable, acts of fraud and correcting their impact, should they occur.

This policy and all relevant procedures and strategies are supported by the ESF England Senior Management Team, who proactively review and update them on a continual basis.