Anti-Fraud policy

1) Introduction

The NPG requires all staff at all times to act honestly and with integrity and to safeguard the public resources for which they are responsible. The Gallery is committed to ensuring that opportunities for fraud and corruption are reduced to the lowest reasonable level of risk. This paper sets out the policy on the control of fraud and suspected fraud within the NPG. The policy can be found on the staff network at Anti-Fraud Policy (approved February 2010).doc.

2) Scope

This policy applies to all the Gallery’s activities, wherever they are undertaken, to all individuals who work for the Gallery and the National Portrait Gallery Company Ltd, including contract staff, volunteers and freelancers and to individuals in a commercial relationship with the Gallery e.g. the employees of suppliers. The aim of the policy is to minimise the risk of any fraud being perpetrated against the Gallery and the Company, thereby depriving the Gallery and Company of assets and resources and potentially damaging the Gallery’s reputation.

3) Definitions

What is Fraud?

The term is used to describe such acts as deception, bribery, forgery, extortion, corruption, theft, conspiracy, embezzlement, misappropriation, false representation, concealment of material facts and collusion.

For practical purposes fraud may be defined as the use of deception with the intention of obtaining an advantage, avoiding an obligation or causing loss to another party. Obviously fraud can be perpetrated by persons outside as well as inside an organisation. The criminal act is the attempt to deceive and attempted fraud is therefore treated as seriously as accomplished fraud.

The Fraud Act 2006 replaced parts of the Theft Acts of 1968 and 1978 which until then covered the offences of fraud. The 2006 Act introduced provisions for the general offence of fraud which broadened the interpretation of fraud. This is covered under 3 sections:-

  • Section 2 – Fraud by false representation
  • Section 3 – Fraud by failing to disclose information
  • Section 4 – Fraud by abuse of position

False representation includes dishonestly making a false representation, and intending - by making the representation – to make a gain for oneself or another, or cause loss to another or to expose another to a risk of loss. A representation is false if it is untrue or misleading, and the person making it knows that it is, or might be, untrue or misleading.

A person is considered to have committed a fraud through abuse of position if he:

  • occupies a position in which he is expected to safeguard, or not to act against, the financial interests of another person,
  • dishonestly abuses that position, and
  • intends, by means of the abuse of that position to make a gain for himself or another, or to cause loss to another or to expose another to a risk of loss.

The Fraud Act 2006 also created new offences of:
- Processing, making and supporting articles for use in fraud;
- Fraudulent trading and;
- Obtaining services dishonestly.

The definition of fraud can cover a wide variety of misdemeanours and criminal culpability is not necessary for an act to be fraudulent, as the offence can be civil in nature.

Frauds can be attempted or carried out in a number of ways, including:

  • The theft of cash, cheques, equipment or items from the collections;
  • The falsification of travel and subsistence or other expense claims;
  • False claims for overtime (or flexible working);
  • Irregularities in the tendering for, and execution and pricing of, supplies to the Gallery by contractors of: property, goods, services, works and consultancy;
  • Corruption, including the receipt of payment or other material advantage as an inducement to the award of contracts by the Gallery; and
  • Forging works of art or documents relating to them.

Computer fraud is where information technology equipment has been used to manipulate programmes or data dishonestly (e.g. by altering, substituting or destroying records or creating spurious records), or where the use of an IT system was a material factor in the perpetration of fraud. Theft or fraudulent use of computer time and resources is included in this definition.

4) Legal Basis

The NPG’s responsibilities in relation to fraud are set out in Annex 4.7 of Managing Public Money (www.hm-treasury.gov.uk/psr_mpm_annexes.htm) and the Gallery’s Management Statement and Financial Memorandum (MS/FM) agreed with the DCMS.

5) Statement of Principles

The Gallery will not accept any level of fraud or corruption; consequently any case will be promptly and thoroughly investigated and dealt with appropriately. Any member of staff found to be involved in theft, fraudulent action or conspiracy to defraud can expect to be dealt with in accordance with the agreed disciplinary procedures. Staff should draw attention to circumstances when they believe that there is improper behaviour by other Gallery staff or external contacts of the Gallery in accordance with the Whistleblowing Procedure (Appendix 2). All matters will be dealt with in confidence and in strict accordance with the terms of the Public Interest Disclosure Act 1998, which protects the legitimate personal interests of staff.

6) Responsibilities

Director (Accounting Officer)
The Director as Accounting Officer is responsible for establishing and maintaining a sound system of internal control that supports the achievement of the Gallery’s policies, aims and objectives. The system of internal control is designed to respond to and manage the whole range of risks that the Gallery faces. The system of internal control is based on an on-going process designed to identify the principal risks, to evaluate the nature and extent of those risks and to manage them effectively. Managing fraud risk is seen in the context of the management of this wider range of risks.

Head of Finance and Planning
Overall responsibility for managing the risk of fraud has been delegated to the Head of Finance and Planning. His/her responsibilities include: 

  • Undertaking a regular review of the fraud risks associated with each of the key organisational objectives.
  • Establishing an effective anti-fraud policy and fraud response plan, commensurate to the level of fraud risk identified.
  • Assisting in the design of an effective control environment to prevent fraud.
  • Establishing appropriate mechanisms for:
- reporting fraud risk issues
- reporting significant incidents of fraud or attempted fraud to the Director;
- reporting to DCMS and HM Treasury in accordance with Managing Public Money Annex 4.7 (www.hm-treasury.gov.uk/psr_mpm_annexes.htm) and the MS/FM.
- Co-ordinating assurances about the effectiveness of the Anti-Fraud Policy to support the annual Statement on Internal Control.
  • Liaising with the Planning Team and the Audit and Compliance Committee.
  • Making sure that all staff are aware of the organisation’s Anti-Fraud Policy and know what their responsibilities are in relation to combating fraud; 
  • Ensuring that appropriate anti-fraud training is made available to staff as required; and 
  • Ensuring that appropriate action is taken to minimise the risk of previous frauds occurring in future.

Head of Resources

The Head of Resources is responsible for:

  • Ensuring that vigorous and prompt investigations are carried out if fraud occurs or is suspected; o Taking appropriate legal and or/disciplinary action against perpetrators of fraud;
  • Taking appropriate disciplinary action against supervisors where supervisory failures have contributed to the commission of fraud;
  • Taking appropriate disciplinary action against staff who fail to report fraud; and
  • Taking appropriate action to recover assets.

Line Managers

The prevention and detection of fraud lies primarily with Line Managers as they are responsible for many of the processes and controls operated by the Gallery. In particular they are responsible for: 

  • Ensuring that an adequate system of internal control exists within their areas of responsibility and that controls operate effectively; o Preventing and detecting fraud as far as possible; 
  • Assessing the types of risk involved in the operations for which they are responsible; o Reviewing regularly and testing the control systems for which they are responsible ; 
  • Ensuring that controls are being complied with and their systems continue to operate effectively, (this is key as most frauds occur because controls have not been enforced); and 
  • Implementing new controls to reduce the risk of similar fraud occurring where frauds have taken place.

Internal Audit

The prevention and detection of fraud within the Gallery is a management and staff responsibility however, Internal Audit can assist by: 

  • Delivering an opinion to the Director and the Trustees on the adequacy of arrangements for managing the risk of fraud and advising the Gallery on how to promote an anti-fraud culture; 
  • Assisting in the deterrence and prevention of fraud by examining and evaluating the effectiveness of control commensurate with the extent of the potential exposure/risk in the various segments of the Gallery’s operations; 
  • Ensuring that management has reviewed its risk exposures and identified the possibility of fraud as a business risk; 
  • Assisting management in conducting fraud investigations.

Staff

Every member of staff is responsible for: 

  • Acting with propriety in the use of Gallery’s resources and the handling and use of Gallery funds whether they are involved with cash, receipts, payments, stock or dealing with contractors and suppliers;
  • Conducting themselves in accordance with the seven principles of public life set out in the first report of the Nolan Committee “Standards in Public Life”. They are: selflessness, integrity, objectivity, accountability, openness, honesty and leadership; o Being alert to the possibility that unusual events or transactions could be indicators of fraud; 
  • Alerting their line manager when they believe the opportunity for fraud exists e.g. because of poor procedures or lack of effective oversight; o Reporting immediately, in accordance with the Fraud Response Plan (Appendix 1), if they suspect that a fraud has been committed or see any suspicious acts or events; and 
  • Cooperating fully with whoever is conducting internal checks or reviews or fraud investigations.

7. Procedures

The Gallery has a Fraud Response Plan (Appendix 1) that sets out how to report suspicions and how investigations will be conducted and concluded.

8. Breach of the Policy

The Gallery views fraud EXTREMELY SERIOUSLY. After proper investigation, the Gallery will take legal and/or disciplinary action in all cases where it is considered appropriate. Where a case is referred to the police, the Gallery will co-operate fully with police enquiries and these may result in the offender(s) being prosecuted. In all cases the Gallery will seek to recover assets where it can.

The consequences of breaching the Anti-Fraud Policy are set out in more detail in the Fraud Response Plan (Appendix 1).

9. Review

The Anti-Fraud Policy will be reviewed every three years of after any occasion of fraud has been identified. The next review is due February 2013.

10. Date of Approval

This Anti-Fraud Policy was reviewed by Audit & Compliance Committee on 21 October 2009 and approved by Trustees on 25 February 2010.

Appendices

1) Fraud Response Plan

2) Whistleblowing Procedure

APPENDIX 1
NATIONAL PORTRAIT GALLERY FRAUD RESPONSE PLAN

1) REPORTING SUSPECTED FRAUD Where any member of staff suspects a fraudulent act has been or is being committed, s/he should immediately report it to the Head of Resources. Staff should not confront the individual(s) they suspect of committing a fraud and should not discuss it with anyone before reporting their suspicions to the Head of Resources. Staff may report directly or via the employee’s line manager, the Head of Personnel or the Head of Visitor Services & Security. This disclosure may be made verbally or in writing and must be dealt with in accordance with the Gallery’s Whistleblowing Procedure (Appendix 2). Following this procedure will ensure that the matter is properly investigated and dealt with promptly and confidentially. It will also protect the employee from any recriminations that may arise from making the disclosure. Should an employee feel that it would be inappropriate to report suspected fraud to the Head of Resources then s/he may report it in writing to the Director or the Chair of the Audit & Compliance Committee, who will then arrange for an investigation to be carried out. Failure by an employee to report a suspected or actual fraud may be construed as a disciplinary offence. In certain circumstances not reporting a suspected or actual fraud may be treated by the organisation as conspiracy to defraud even if the individual does not benefit directly from the fraud. If staff feel uneasy about using the reporting channels mentioned above, they may report their concerns to one of those individuals mentioned in the Whistleblowing Procedure (enclosed at Appendix 2), or contact the charity Public Concern at Work (on 020 7404 6609) who can offer impartial advice on how to proceed).

2) INVESTIGATING SUSPECTED FRAUD Once a suspected fraud has been reported as above, it is the responsibility of the Head of Resources to arrange for a thorough investigation to take place and to take the appropriate action. The Head of Resources must discuss the report with the Director and then decide upon the appropriate investigative action to be taken. The Head of Resources must immediately notify the Director and the Head of Finance & Planning of all allegations of fraudulent activity. The Head of Finance & Planning is responsible for reporting all frauds to the Department for Culture, Media and Sport and to the Chair of Audit & Compliance Committee, and the NAO if appropriate. If the suspected fraudulent activity is considered to be of a serious nature the Head of Resources must call for the assistance of the local police. In such cases no attempt must be made by Gallery line managers or staff to question the employee(s) or third parties involved as this could prejudice future police investigations and subsequent prosecutions. If, after consideration of the allegations, the police decide to either arrest or question under caution the individual(s) concerned, then the employee(s) must be interviewed by the Head of Resources and, after consultation with the Personnel Manager, formally suspended from duty (on full pay) for the period of the police investigations. Once the police have completed their investigations the employee(s) should be contacted as soon as possible and advised as to whether or not they are required to attend a formal disciplinary interview under the Gallery’s Disciplinary Procedure. If the Head of Resources decides, after consultation with the Director, that it is unnecessary to involve the local police s/he will arrange for the employee(s) line manager to hold a formal investigation and disciplinary interview with the individual(s) concerned in accordance with the Gallery’s Disciplinary Procedure [staff network hyperlink], which includes the right of an employee to be accompanied by a trade union representative or work colleague at meetings and the procedure for appeal after a decision is made. If necessary the Head of Visitor Services and Security can be requested to assist in investigating the allegations. Where the fraudulent activity involves third parties e.g. customers or suppliers, the Head of Resources, in consultation with Internal Audit, will have to devise a suitable form of investigation and take appropriate action. Where an allegation of fraud against an employee is substantiated, either by a police or internal investigation, the Head of Resources should follow the disciplinary process as laid down in the Gallery’s Disciplinary Procedure. It is not necessary for the Head of Resources to wait for the outcome of a police investigation or prosecution before taking action under the Disciplinary Procedure. Where a substantiated allegation of fraud involves a person who is not an employee the Head of Resources will inform the Director and Head of Finance & Planning and initiate legal action (as in 3).

3) CIVIL RECOVERY PROCEDURES Where an allegation of fraud is substantiated, the Head of Resources will initiate legal action against the individual concerned (whether the individual is an employee or not) to recover, if appropriate, any losses sustained by the organisation. This course of action may be a requirement if the Gallery is seeking to cover the loss through insurance, as some claims may be invalidated if legal action has not been taken.

4) POST-INCIDENT INVESTIGATION Once all disciplinary action has been completed the Head of Finance & Planning will arrange for Internal Audit to carry out a post-incident investigation, if it is deemed appropriate. This will focus on identifying any specific areas or procedures that need to be improved or re-designed in order to prevent any further occurrence of the particular fraudulent activity. The Head of Finance & Planning is then responsible for completing and submitting a final report on the fraudulent activity to the Director and the Audit & Compliance Committee. This report should include the following points:

a) Details of the fraud, the loss to the organisation, how it was detected and the likely causes of the fraud;
b) Action taken to deal with the persons involved in the fraud;
c) Action taken to recover lost assets and funds; and
d) Lessons learned and actions taken to prevent recurrence of the fraud.

Any losses arising from the fraud must be recorded in the Losses Register held by the Finance Manager. Individual losses over £250k will need to be reported in the Gallery’s annual report and accounts, in accordance with Annex 4.10 of Managing Public Money.

 

APPENDIX 2

NATIONAL PORTRAIT GALLERY “WHISTLEBLOWING PROCEDURE” (STAFF CONCERNS ABOUT IMPROPER CONDUCT)

1. A member of staff who believes that he or she is being required by the Gallery or Company to act in an improper way should initially raise the matter with his or her line manager or Head of Department.

2. Types of improper behaviours include actions that 

  • Are illegal;
  • Are in breach of a professional code or are otherwise unethical;
  • Make improper use of Gallery or Company funds
  • Make improper use of Gallery assets or sensitive data;
  • Involve maladministration;
  • May cause harm to another member of staff, Gallery users or the general public; and/or
  • Raise fundamental issues of conscience.

3. Staff should also draw attention to circumstances when they believe that there is improper behaviour by other Gallery/Company staff but that has not involved them personally acting improperly.

4. If a member of staff feels that he or she cannot approach the Head of Department because relationships would be jeopardised, the Director should be contacted in confidence. This also applies if the member of staff is dissatisfied with the Head of Department’s response to his or her concerns. The member of staff may choose to be accompanied by a trade union representative or work colleague at any stage of the procedure.

5. When a member of staff continues to feel that there has not been a satisfactory response by Gallery/Company management or that there are compelling reasons that the matter cannot be raised with Gallery/Company management, he or she may write in confidence to one of the following:

a) The Chairman of the Audit and Compliance Committee

Mr David Ross
The Kandahar Group Ltd
Nuffield House
41-46 Piccadilly
London
W1J ODS
dr@kandahargroup.co.uk

b) The Chairman of the Trustees

Professor Sir David Cannadine FBA FRSL
Institute of Historical Research
University of London
Senate House
Malet Street
London
WC1E 7HU
david.cannadine@sas.ac.uk

6. If staff feel that they cannot raise the matter with anyone associated with the Gallery, then they may write in confidence to one of the following external contacts:

a) The Comptroller and Auditor General, National Audit Office

Amyas C E Morse
Comptroller and Auditor General
National Audit Office
151 Buckingham Palace Road
Victoria
London
SW1W 9SS

There is also a National Audit Office whistleblowing helpline on 020 7798 7999

b) The Permanent Secretary at DCMS

Jonathan Stephens
Permanent Secretary
DCMS
2-4 Cockspur Street
London
SW1Y 5DH

Naturally, matters referred to any of the above should not be trivial, and referrals to the Permanent Secretary should be a last resort.

6. It is fundamentally important to the success of the “whistleblowing” arrangements that staff can have confidence that their concerns will be taken seriously and that their position at the Gallery/Company will not be prejudiced unfairly by their raising issues of improper conduct. Whistleblowers who have acted in good faith have guaranteed protection under the provisions of the Public Interest Disclosure Act 1998. Therefore, it is absolutely imperative that managers treat as highly confidential any allegations they receive of improper conduct. Investigations must be conducted with great tact. Every possible care must be taken to ensure that, unless formal disciplinary proceedings are instigated, the name of the member of staff who made the allegation is not revealed to any person who is accused of improper conduct, and even then his or her identity must only be disclosed if it is necessary for the fair and proper conduct of disciplinary or legal proceedings.

7. As soon as a manager receives an allegation of improper conduct and he or she has checked that the complaint is not frivolous, it must be reported upwards to the appropriate head of Department or the Director, as long as the Head of Department or the Director is not the subject of the allegation. The allegation must be reported upwards even if the matter is satisfactorily resolved by the manager who received the complaint.

8. The member of staff who raised the issue of possible improper conduct must be given a report in writing of the outcome of the investigation. This report should be sufficiently detailed such that the member of staff has confidence that the investigation and any consequential actions were appropriate. If the investigations are lengthy, an interim oral report should be given to the member of staff to reassure him or her that appropriate action is being taken.

9. Consideration should be given to referring an allegation to Internal Audit, either to conduct the investigation or to endorse the outcome. This should be discussed with the Director or, if more appropriate, the Head of Finance and Planning who is the Gallery’s principle point of contact with the Internal Auditors.

10. Raising a false allegation maliciously may lead to disciplinary action under the Gallery’s Disciplinary Procedure.

11. The nature of any whistleblowing allegation and the results of any investigation should be reported to the Audit and Compliance Committee in order for the Committee to consider the impact on the Gallery and the Company.