control, and governance
AN UNHEALTHY FRAUD
A National Audit Office (NAO) investigation has concluded that Serco Group PLC — the leading private contractor of U.K. government services — falsified staffing and performance figures 252 times when reporting to the U.K.’s National Health Service (NHS), according to The Guardian. The NAO points out that although a review by the NHS commissioner found no evidence that the service was systematically unsafe, safety depended on the service being fully clinically staffed on a regular basis. A parliamentary committee will hold a hearing on the NAO’s findings in April.
While it is commendable that the NAO reported extensive manipulation of health care-related performance data and Serco is moving to address its performance problems, this story highlights several issues that should be of concern to auditors: governance, oversight, performance measurement, and reporting.
In 2012, Serco earned close to the equivalent of US $8 billion, with 90 percent of its business relating to the provision of public services on behalf of U.K. federal and local governments. For Serco staff to be able to falsify performance figures more than 250 times, it appears that serious gaps would have to exist in oversight and controls — both on the part of the NHS and within Serco.
As governments around the world increasingly pursue public-private partnerships and contract for services, while seeking the most cost-effective arrangements, the importance of effective oversight and monitoring of performance against expectations also increases. Public and private organizations must have effective oversight regimes in place that address the need for regular monitoring (and periodic auditing) of performance results. Governance and oversight regimes also should be reviewed or audited periodically to ensure their continued efficacy, especially where they concern large dollar amounts and sensitive service areas.
Auditors in particular should position themselves — through audit plans and engagements — within both oversight bodies and the organizations they oversee to assess:
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