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Caerphilly County Borough Council must “urgently” improve its anti-fraud measures or face estimated losses of up to £26.8 million a year.

Audit Wales said the council had failed to address a list of 15 recommendations made in 2020 by the Auditor General for Wales.

Opposition councillors called the findings “shocking” and said any money lost to fraud could have been used to protect jobs and services.

A council spokesman said the local authority accepted the findings, but claimed the sums in the report were “theoretical” and “should be treated with considerable caution”.

The report refers to Cabinet Office analysis, which found the exact sums lost to fraud in government are “unknown”, but are estimated to cost the public sector between 0.5% and 5% of spending.

Audit Wales, an independent public body established by the Senedd, calculated that in Caerphilly these losses would equate to between £2.68m and £26.8m a year, based on the council’s budget for running services.

A report shows Audit Wales reviewed whether Caerphilly’s counter-fraud measures are “proper arrangements to secure value for money in the use of resources” in 2024.

Audit Wales found that the council “lacks appropriate counter-fraud arrangements, which exposes it to increased risks of fraud, and it has not addressed the Audit[or] General’s previous recommendations in this area”.

Cllr Lindsay Whittle, who leads the council’s Plaid Cymru opposition group, called the findings “disturbing”.

He said senior officers and cabinet members “need to bear in mind that any fraud represents public money that is being lost and it is money that cannot be spent on retaining vital services”.

“They are paid highly to resolve these issues and if they fail then top management must take full responsibility for the failings,” he added.

The local authority “fully accepts” new recommendations to make urgent improvements, and is in the process of completing a fraud risk assessment, the council spokesman said.

It is also providing more training to staff and preparing a new action plan to tackle fraud.

However, Plaid councillor Gary Enright, who sits on the council’s audit committee, called the findings “absolutely shocking”, and alleged the failure to earlier implement the 2020 recommendations amounted to “financial mismanagement”.

In light of recent announcements about likely job losses and cuts to services, Cllr Enright added: “Just think what this authority could have done with this taxpayers money if the correct protocols had been implemented.

“The Auditor General’s report is clear and evident proof that checks and balances are not in place and taxpayers money is not robustly protected,” he said. “Ultimately, this council seems comfortable in wasting taxpayers’ money, which if accumulated over the last four years, could peak to over £107m wasted through fraud and error practices.”

In response, a Caerphilly Council spokesman said the previous report on fraud losses “stated that headline estimates should be treated with considerable caution”.

He added: “Actual levels of known fraud in the council are low and where fraud is suspected, it is fully investigated.”