PwC on the Fraud Impact from Proposed UK Budget Cuts

Monday, July 05, 2010 , , , , 1 Comments

"budget cut cubicle"

Editor's note: It's the day after the 4th of July so there isn't shit going on over here on this side of the pond. The fact that I have today off is a testament to that so we may or may not be lazy today.

There's always shit going down in England when we're out of news.

U.K. government departments have been told to plan for spending cuts of as much as 40 percent as Chancellor of the Exchequer George Osborne seeks to narrow a record budget deficit.

The Treasury has ordered most ministers to draw up scenarios for spending reductions of both 25 percent, the average figure specified by Osborne in last month’s budget, and 40 percent over four years, Transport Secretary Philip Hammond said on BBC 1 television’s “Andrew Marr Show” yesterday.

Prime Minister David Cameron’s coalition of Conservatives and Liberal Democrats is proposing expenditure cuts and tax increases totaling 113 billion pounds ($172 billion) to slash a deficit of 11 percent of economic output. Osborne is due to set budgets for each department in a spending review in October once ministers have made their own proposals.

PwC has some really fascinating threats revolving around budget cuts, internal control and government spending:
In the U.K., the government is set to cut spending in departments other than those concerned with health and overseas aid by 25% over the next five years, and according to a leaked Treasury document that will likely involve 700,000 jobs cuts.

According to a survey of senior public sector executives in the U.K. and elsewhere, measures of that kind create the conditions which are most likely to lead public sector workers to consider fraudulent actions.

"Fears about job losses and achieving tough targets may drive people to take drastic steps," PwC said. "When economic survival is threatened, the line separating acceptable and unacceptable behavior can, for some, become blurred. Our survey revealed that the top reason for an increased risk of economic crime in the current environment is the fear of redundancy."

And PwC said staff reductions also create the conditions where fraudulent actions are possible, since the emphasis on preserving "front line" jobs can lead to a reduction in the resources dedicated to making internal checks.

"Financial difficulties force organizations to reduce costs and explore possible efficiencies," PwC said. "Staff reductions can result in reduced segregation of duties and less monitoring of suspicious transactions and activities. This, in turn, weakens the internal control environment and is often likely to result in more opportunities to commit fraud."

Jr Deputy Accountant

Some say he’s half man half fish, others say he’s more of a seventy/thirty split. Either way he’s a fishy bastard.


They should know...but let's not start quoting cases at them