NORTH LEVEL DISTRICT INTERNAL DRAINAGE BOARD
Fraud and Corruption Policy
One of the basic principles of public sector organisations is the proper use of public funds. It is
therefore important that all those working in the public sector are aware of the risk of wrongdoing and
the means of enforcing the rules against it. The aim of this document is to set out a policy and
response plan for the organisation for suspected or detected irregularities.
The Board is committed to a culture of honesty, openness and fairness. It is therefore also committed
to the elimination of any fraud and corruption and to the rigorous investigation of any such cases and
the punishment of those involved.
The Board actively encourages anyone having reasonable suspicion of irregularities to report them. It
is also the policy of the Board that no employee should suffer as a result of reporting reasonably held
The Board will always seek to recover fully all losses from those responsible in proven cases of fraud
or corruption including all costs incurred in the pursuit of action against them.
There is no offence in law of Fraud but the term encompasses criminal offences involving the use of
deception to obtain some benefit or to be to the detriment of some person or organisation.
Corruption, in its broadest sense, involves the taking of decisions for inappropriate reasons – e.g.
awarding a contract to a friend, appointing employees for personal reasons, or the giving or accepting
of gifts as an inducement to take some course of action on behalf of the organisation.
The Audit Commission defines Fraud as – “the intentional distortion of financial statements or other
records by persons internal or external to the authority which is carried out to conceal the
misappropriation of assets or otherwise for gain”.
Corruption is defined by the Commission as – “the offering, giving, soliciting or acceptance of an
inducement or reward which may influence the action of any person”.
DISCOVERY OF FINANCIAL IRREGULARITIES
Financial irregularities can come to light in a number of ways. They are usually discovered as a result
• Manual & Craft employees or Office Staff becoming aware of or suspecting that management
controls are not being complied with
• Routine work, or Audit testing
• Information (tip-off) from a third party, internal or external to the organisation.
Any allegation, but particularly an anonymous one, should be treated with caution and discretion,
because what appears to be suspicious circumstances may have a reasonable explanation. There is
also a risk that some reports may be malicious.
Under no circumstances should information about any suspected irregularity, be passed to a third
party or to the media without the express authority of the Chief Executive or Internal Auditor.
RESPONSIBILITY OF EMPLOYEES
Employees who are aware of, or suspect that a financial irregularity is taking place, or has taken place,
have a duty to report their suspicions, since by doing nothing they may be implicating themselves.
Employees who may feel uncomfortable referring suspicions to line managers are encouraged to
contact a senior Board Member or the Internal Auditor. If these reporting lines are unacceptable to an
employee, an alternative is available in the Board’s “Whistle Blowing Procedure”.
If an employee suspects that a financial irregularity of any type has occurred or is in progress, they
should immediately inform their line manager. The only exception to this rule is where the employee
suspects that the line manager might be involved in the irregularity. In that event, the employee should
advise the Chief Executive, Internal Auditor or a Senior Board Member.
Employees must not attempt to investigate suspected irregularities themselves, or discuss their
suspicions other than with more senior managers in accordance with the guidance above.
Examples of the types of financial irregularity that might be suspected are: -
• Theft or abuse of Board property or funds
• Deception or falsification of records (e.g. fraudulent time or expense claims)
RESPONSIBILITIES OF MANAGERS
It is Management’s responsibility to maintain system controls to ensure that the Board’s resources are
properly applied in the manner, on the activities, and within the limits approved. This includes
responsibility for the prevention and detection of fraud and other irregularities.
Where a manager receives a report from an employee or other party of a suspected financial
irregularity, they should immediately inform the Chief Executive, who in turn will notify the duly
appointed Internal Auditor.
Line Managers should not themselves attempt to undertake any detailed investigation of the possible
irregularity and should not discuss their suspicions or those reported to them, other than with the Chief
Executive and the Internal Auditor.
In cases of suspected irregularities, it is often necessary to suspend a suspect from duty. Before an
employee is suspended, advice should be sought from the Chief Executive. The purpose of
suspension is to prevent any suggestion of a suspect having the opportunity to continue with the act
complained of, falsify or destroy records, influence witnesses, etc. Suspension is not a punishment
nor does it imply any fault or guilt on the part of the employee concerned.
Upon receiving a report of suspected financial irregularity, the Internal Auditor will launch an
investigation and a record will be made in the Board’s Fraud Log. The Log will record all reported
suspicions including those dismissed as unsubstantiated, minor or otherwise not investigated. It will
also contain details of actions taken and conclusions reached. Significant matters will be reported to
the Board and the Chairman will be updated on the situation.
The Internal Auditor will confer with the Chief Executive to agree the action plan to be adopted in the
light of the particular circumstances.
When a prima facie case of fraud or corruption has been established, the following procedure will
apply regarding referral to the Police: -
• Minor cases of Misappropriation of Cash, etc.
In minor cases of suspected fraud and/or cash misappropriation by employees, as soon as
reasonable evidence has been acquired and speedy action is considered imperative in order to
prove fraud, the Internal Auditor may call in the Police without reference to other officers. He will
however advise the Chief Executive as soon as practicable afterwards.
• Major and More Complex Frauds:
The Internal Auditor will discuss the case with the Chief Executive, and consultation with the Police
will normally be approved.
Depending upon Police advice, the case will be reviewed by the above officers who will decide if it
should be referred officially to the Police for investigation. If it is decided to do so the Chief
Executive will authorise the official complaint and notify the Chairman of the Board.
Following the official report to the Police, any further investigations by the Internal Auditor that are
considered necessary, will be planned and executed in close co-operation with the Police, with the
Chief Executive and Chairman of the Board being kept informed.
The circumstances of the particular case will dictate when the Police and external auditors are
informed, but it is recommended that the Police should be informed when: -
• There is evidence of an irregularity which needs to be confirmed by witness interview if criminal
prosecution is contemplated;
• Interview of the suspect is desirable to confirm the evidence of records;
• A prima facie case of fraud has been established but the perpetrator could not be identified.
INVOLVING THE POLICE
Internal Auditors and Chief Executives may be reluctant to involve the Police in the belief that: -
• They are only interested if the alleged criminal offence is greater than a specific monetary value
• They will not be interested because of the potential complexity of the issues involved which render
little chance of a successful prosecution
• The organisation prefers to deal with such incidents internally, avoiding publicity but implementing
dismissal and recovery through civil action
• The Police will want hard evidence before they will pursue investigations, but when it is provided
they advise that the rules of evidence have not been complied with.
Protracted internal investigations often unnecessarily delay involving the Police, thereby diminishing
the value of co-operation with them. However, properly organised investigations, conducted by
individuals with an inside working knowledge of the organisation, will be of great assistance to any
subsequent Police enquiry, and management should therefore not be discouraged from liaising with
the Police as soon as the issues are identified.
Chief Executive 01733 270333
GP Internal Audit Services 07957 977614