Significantly large volumes of funds are being handed out to companies and individuals to support them during the pandemic, and it is vital to ensure this support is being used for the purposes intended by government.
By expanding the use of technology such as artificial intelligence (AI) within the public sector, auditors can identify and rectify potential problems before they become a concern. The use of AI also helps to reassure public sector organisations that public funds are being administered quickly, correctly and compliantly.
We know that criminals are seeking to take advantage of the Covid-19 crisis. In October, the National Audit Office warned that more than £3bn of job retention scheme (furlough) money and £26bn in bounceback loans might have been stolen by criminal gangs and fraudulent employers.
As well as identifying fraud, real-time insight can feed back into claims processes, with predictive analytics helping to tighten control
With the pandemic continuing to create economic challenges, businesses and individuals still require ongoing financial support. It is therefore essential for lessons to be learned in order to target Covid loan fraud and furlough scheme fraud, and to minimise the potential loss of public funds in the future.
So how can technology play a role in detecting and preventing future fraud and error?
First, the public sector needs to understand the level of fraudulent activity and the primary areas to be addressed, which can be done through an intelligent, data-led approach. The power of AI in public sector IT systems can be used to detect mistakes, fraud and financial mismanagement, and to predict and prevent future abuse.
HMRC leads the way, using its extensive experience in identifying and tackling tax fraud to address the misuse of furlough. More broadly, the government has a vast amount of data that can be mined to spot fraud. Tapping into this will require cross-government collaboration and co-operation.
It is possible that the speed of delivering Covid-19 support will have led to gaps in data collection – an issue that will need addressing quickly if the data is to be utilised to its full potential. Gap analysis needs to be carried out, using machine learning to identify anomalies that could display either fraud or systematic error.
There will be greater misuse of public funds if we fail to learn from the mistakes of the past few months
Local authorities are less likely to have the skills or resources in place to undertake this sort of analysis. A central government initiative is needed.
As well as identifying fraud, real-time insight can feed back into claims processes, providing public sector bodies with a chance to move away from retrospective review towards the use of predictive analytics in a bid to tighten control.
With an understanding of the key signals of fraud, the application process can automatically raise an alert when a claim looks unusual.
Need for speed
It is evident that many public sector bodies still feel overwhelmed, and it is essential to take these steps quickly. Even at a time of crisis, efficient processes are vitally important; there will be greater misuse of public funds if we fail to learn from the mistakes of the past few months.
Collectively, the public sector, businesses and individuals need to adapt to operate in this environment. That means getting the right people to spend time observing the data, identifying problems and ensuring controls are put in place.
With an AI-led approach, these individuals will learn lessons about what has worked and what hasn’t in this unprecedented release of public funds.