Councils find £178m in frauds against local government but detection rates are patchy
The Audit Commission’s annual report, Protecting the Public Purse 2013: Fighting Fraud against Local Government, highlights that £178 million 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.
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 £178 million 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 have required local authorities to separately identify detected frauds against schools in our annual survey. We 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 £2.3 million, 86 cases of which (with a value of £1.9 million) 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.
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. One of the striking findings of the survey of local authorities was that 79 district councils detected no non-benefit fraud at all.
Jeremy Newman comments: “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, 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 £845 million per 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 £400 million. This represents a 51 per cent increase in detected social housing fraud since 2011/12.
Jeremy Newman comments: ‘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.’
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Protecting the public purse 2013: Fighting fraud against local government
Notes to Editors
1) The Audit Commission
The Audit Commission’s role is to protect the public purse. We do this by appointing auditors to a range of local public bodies in England. We set the standards we expect auditors to meet and oversee their work. Our aim is to secure high-quality audits at the best price possible. We use information from auditors and published data to provide authoritative, evidence-based analysis. This helps local public services to learn from one another and manage the financial challenges they face. We also compare data across the public sector to identify where services could be open to abuse and help organisations fight fraud.
2) A key weapon in fighting fraud is the National Fraud Initiative, in which special statutory powers are used by the Audit Commission to highlight anomalies by the forensic matching of data sets. Mismatches can indicate human error, but often provide clues to potential frauds or overpayments worth investigating. The Audit Commission welcomed the Government announcement that the responsibility for overseeing the National Fraud Initiative will transfer to the Cabinet Office when the Commission closes in March 2015.
For further information please contact:
Nick Rigg
Communications
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Press office: 0303 444 8282
Email: n-rigg@audit-commission.gsi.gov.uk