NHS changes 'carry danger of corruption and waste': Audit Commission warns of fraud risks

A WARNING that the Government's public service changes carry with them a risk of increased waste and corruption was sounded in the Audit Commission's annual report, published yesterday.

Sir David Cooksey, chairman of the Commission, which has the task of of monitoring efficiency in the NHS and local government, goes out of his way to welcome the 'early signs' that 'public services are being managed better than in the past'.

But in his foreword to the report he remarks that there are also 'increased risks of waste and more opportunity for dishonesty' because managers and professionals now handle large sums of money 'irrespective of their expertise or previous experience'.

The report includes:

A disclosure that less than half of the specific pounds 585m savings recommended by local government auditors between 1986 and 1992 have so far been achieved. Of potential savings identified in NHS 'value-for-money projects' since 1990, pounds 33m - or 21 per cent - 'has actually been achieved';

A call for new legislation to ensure that companies owned by local authorities are subject to the same rigorous audit requirements as the accounts of local authorities themselves. Under its present remits, the Audit Commission's investigative powers do not extend to such companies;

A new promise to collate league tables of local authority performance from 1995 after the requirement for local authorities to provide performance indicators under the Citizen's Charter comes into force. The report says the Commission will present the indicators 'in ways which will enhance the accountability of local authorities to their electorates';

A strong call by Sir David for ministers to resolve the uncertainty over the future of local government change 'as this is reducing the time members and officers should be devoting to improving services'. The Commission is also concerned at the conflict the uncertainty is generating between district and county councils;

And a warning that while progress is being made in the improvement of services in the NHS, 'the pace of change is variable'.

A spokesman for the Commission said that a report last December showed that fraud and corruption were on the increase, although starting from a very low base. Most fraud was committed by outsiders when making claims rather than by employees of local authorities.

Sir David urged: 'If the full benefits are to be gained, we must ensure that effective mechanisms for accountability are put in place to underpin the process of change and to ensure that the risks are minimised.'

Sir David added: 'The public sector is undergoing massive and fundamental change. The changes offer enormous opportunities for improving the quality of services and increasing their efficiency. But change also brings inherent risk - lines of accountability can become blurred, bringing with it opportunities for dishonesty.

'A well-regulated and balanced external audit is, I believe, an essential safeguard in our public life.'

Virgina Bottomley, the Secretary of State for Health, yesterday welcomed the report - particularly the conclusion that 'financial management within the NHS is improving'.

Audit Commission Report and Accounts; HMSO; pounds 9.