Some £178m of fraud was detected by local government in the last year. Just over three quarters of that total was detected by one quarter of councils. So says the Audit Commission’s annual report, Protecting the Public Purse 2013: Fighting Fraud against Local Government.
The report goes into types of fraud – in procurement, the charity sector, blue badges for disabled drivers, housing tenancy, and false insurance claims – and work to counter fraud, such as whistle-blowing.
The report admits that fewer reports of fraud does not necessarily mean less fraud is done; it could mean fewer fraud investigators are around, due to cuts. The report says: “Organisations that do not look for fraud, or do not look in the correct way, will not detect it. Organisations and individuals are often embarrassed to admit they have been defrauded. This attitude continues to hinder effective action against fraud.” The report quotes a view in the counter-fraud sector that ‘there is no such thing as a small fraud, just a fraud that has been caught early’.
The commission’s findings tallied with the Local Authority Investigating Officers Group (LAIOG) which found that the number of specialist fraud investigators across English local government has fallen by a fifth since 2010; that is, the start of public sector austerity. Those cuts, and the roll-out of SFIS (Single Fraud Investigation Service) in April 2014 (benefit fraud investigators combined from councils, the DWP and HM Revenue and Customs), mean according to the commossion that ‘councils face a significant risk that they will be unable to detect fraud as effectively as in past years’.
Jeremy Newman, chairman of the Audit Commission says: “We should be celebrating that local government has detected some 107,000 fraud cases with a value of £178m in 2012/13. Most of the non-benefit fraud was identified by the top quarter of councils, which lead the way in the fight against fraud. This shows what can be achieved and we encourage all councils to play their part and do as much as they can to detect fraud. If the other 75 per cent of councils had found as much, we would see much higher overall rates of fraud detection.”
This is the first year the Commission has required local authorities to separately identify detected frauds against schools in its annual survey. The public sector auditors only collect data on maintained schools, as free schools, foundations and academies are outside the Commission’s remit. Councils reported 191 cases of fraud in schools with a total worth of £2.3m, 86 cases of which (with a value of £1.9m) involved internal fraud.
Jeremy Newman says: “These results suggest that schools may have fewer supervisory checks and controls than larger organisations, such as councils – potentially exposing them to higher risk of internal fraud. Our results help establish a baseline figure for the frequency of fraud, and its value, in schools. Armed with robust data, we can monitor levels and make informed policy decisions. Increased transparency and dialogue can help create a tougher environment to assist the prevention of fraud.”
Although the average value of a detected fraud has increased by 15 per cent in 2012/13, the total number of detected cases has fallen by 14 per cent. Had local government bodies detected the same number of cases as in 2011/12, the total identified loss would have been far greater, according to the auditors.
The commission also noted regional variations in fraud detection. In 2012/13, significantly lower levels of fraud detection were witnessed in most regions outside London, compared with the previous year. The falls in detection ranged from 6 per cent to 46 per cent. However, London boroughs increased both the number and value of frauds detected by 36 per cent. Some 79 district councils detected no non-benefit fraud at all.
Jeremy Newman says: “It’s difficult to isolate the specific factors that cause variations between organisations in the level of detection of different types of frauds. This will be influenced by the actual levels of fraud available to detect, differences in the services that bodies provide and their local approach to prioritising and tackling fraud. However, not to detect a single case of non-benefit fraud does raise concerns about the priorities and resources in those councils to tackle fraud. I would urge all councils to review their local policies to ensure they are doing all they can to detect and record fraud cases. Our report has many examples of what can be achieved by councils who acknowledge the scale of the problem and apply appropriate and proportionate resources to tackle fraud.”
Greater attention is being given to tackling social housing fraud, a topic featured in the July print issue of Professional Security; such as illegal sub-letting of council homes for profit. The Government estimates that such fraud against councils costs the public purse the equivalent of £845m a year each year, nearly three times the annual loss to housing benefit fraud. Councils are hitting back against tenancy fraudsters, recovering 2,642 homes from such fraudsters in the last year. Just to build an equivalent number of properties from new would cost the public purse nearly £400m. This represents a 51 per cent increase in detected social housing fraud since 2011-12.
Jeremy Newman adds: ‘There is no doubt our findings show councils increasingly out-smarting the housing tenancy fraudsters. This shows what councils can achieve by working effectively together in partnership, sharing and adopting best practice.’
