For many people in the United Kingdom, talk of Brexit has fallen by the wayside. Despite the pause in what had seemed like non-stop Brexit talk, the end of the transition period (31 December 2020) remains on the horizon. For UK recipients of European Union (EU) grant funding, things are going to change. For counter fraud professionals in the public and private sectors, changes to (or the absence of) EU grant funding is expected to pose a significant challenge once the transition period ends.
The EU is a huge source of grant funding for its member states. EU grants currently cover infrastructure, cultural, environmental, agricultural, scientific, educational and fishing initiatives, among others. However, the participation of the UK in future programmes after 2020 will depend on the outcome of negotiations on the relationship with the EU.
Currently, recipients who have been awarded or are already in receipt of EU funding will continue to receive those payments, including funding due to be received after the close of the transition period. Additionally, applications for some EU funds can be made under the current spending framework. However, it has yet to be decided what funding UK organisations will be able to apply for after the spending framework ends.
In July 2020, the UK government published its Research and Development Roadmap, which set out its vision and ambition for science, research and innovation. The Roadmap restates the UK’s ambition to fully associate to Horizon Europe and Euratom, subject to agreeing a fair and balanced deal. The government has also said it would implement short-term alternative funding arrangements if there are any funding gaps before a more formal agreement is reached. It has committed to providing funding to UK partners who are successful in bidding to programmes open to third country participation.
With significant change in uncertain times and decisions being made without knowledge of long-term agreements, the risk of fraud is greatly increased. Businesses and local governments will be making long-term decisions on key projects with limited knowledge of secured funding. This economic setting means that agreements will be entered into with new partners and suppliers, new ways of working will be adopted and an increased reliance on risk management will be realised. These circumstances create the perfect breeding ground for fraud and opportunists that aim to take advantage of uncertainty and its associated vulnerability.
Organisations will have to stay vigilant while this significant, anticipated change occurs in the UK. Existing and new controls will have to be reviewed and developed for new ways of working, and it is expected that there will be a greater reliance on risk management frameworks.
With fraudsters looking to seek opportunity in turbulent and uncertain times, weaknesses in future grant application processes will likely be preyed upon, with a view to diverting grant funding through the misrepresentation of genuine claims. Due diligence will become more important than ever. In post-transition period Britain, fraud loss from grants will no longer be a shared EU loss, but rather will be borne solely by UK budgets.
The risks are real, and planning for unknown changes to grant funding should be a current and ongoing area of focus for counter fraud professionals.
by Marc McAuley, Head of Counter Fraud Operations at CIPFA