Local authorities across England have succeeded in detecting £185 million worth of fraud in 2010/11, an improvement of 37 per cent on last year’s figure of £135 million.
This is equivalent to a year’s funding for around 700 libraries or the wages of up to 11,000 care workers.
The country’s only annual survey of detected frauds against councils, Protecting the Public Purse, shows that 121,000 scams were detected in 2010/11, including false benefit claims, council tax discount cheating, and unlawful use of social housing. Director for the National Fraud Authority, Mike Haley, said:
‘By its nature, fraud often remains a hidden crime. I am encouraged to see that Local Authorities are identifying greater levels of fraud against them and are engaged in fraud prevention.
‘This pro-active approach helps to lessen the impact of spending reductions on front line services. This report highlights the fact that local authorities are acknowledging that there is a problem with fraud and are positive about ensuring more of this activity is prevented and detected.
‘Fraudsters are being identified and are being punished for this type of crime.
‘A strategic approach is now needed to tackle fraud in local government. This will build upon the good practice and successes we have seen so far as well as creating a new partnership between central and local government.’
Chairman of the Audit Commission, Michael O’Higgins, said: ‘Councils are certainly acting on fraud, and it is now firmly on the government agenda. But our latest survey of detection rates shows that we may be seeing just the tip of a very large iceberg.
‘Our research shows high rates of council tax discount fraud and widespread unlawful occupancy of council houses. Now, for the first time, we are also able to publish details of fraudsters targeting care payments to the elderly and vulnerable.
‘Also scams involving fraudulent student council discounts and fraud that goes to the heart of councils’ multi-million pound procurement budgets.’
This year’s protecting the public purse report shows:
- 1,800 homes recovered from tenancy fraudsters by councils, this fraud costs at least £900 million a year
- more than £22 million worth of false claims for student and single person council tax discounts
- 145 cases of council procurement fraud involving losses of £14.6 million, a 400 per cent increase on 2009/10
- 59,000 cases of housing or council tax benefit fraud valued at £110 million
- 102 cases of proven social care budget fraud worth over £2.2 million
Fraudsters blocking social housing
This is the largest category of fraud loss across local government. Housing tenancy fraud is the use of social housing by someone not entitled to occupy it. At its worst, fraudsters sub-let for profit.
Although councils have increased the number of properties recovered by 75 per cent in the last three years, the vast majority of these are in London.
Over half of councils outside London with housing stock failed to recover a single property. There are nearly four million social housing properties in England. In 2010 almost two million families were waiting for council houses, with temporary housing for homeless families costing nearly £1 billion a year.
Fraudsters claiming council tax discounts
Fraudulent claims for discounts directly increase the amount of council tax that everyone pays. We estimate that single person discount fraud alone costs taxpayers at least £90 million each year.
Investigations by Bristol City Council have also uncovered widespread abuse of student discount, with 34 per cent of a sample of 4,500 exemption applications proving to be fraudulent, worth £1.9 million.
Fraudsters cheating on council contracts: Councils spend over £50 billion each year buying goods and services from suppliers and funding multi-million pound construction projects.
In doing so, they are vulnerable to a range of frauds such as cartels skewing bidding processes, contractors providing shoddy goods or services, inflated performance claims and false invoicing. Losses in individual cases can be large - the total value of just two in 2010/11 was £6 million.
Fraudsters not entitled to benefits
The report shows that there are more detected Housing Benefit and Council Tax Benefit frauds than any other type. In the last year they comprised over half of all fraud detected by councils. In the last three years councils have detected almost 210,000 cases of benefit frauds worth more than £310 million.
Fraudsters targeting care budgets
Councils increasingly make adult care payments directly, for example to the person receiving the care, to independent care providers, or to family members. This increases the recipient’s choice and control, but it can be exploited by fraudsters.
This year’s report is the first to track the rising value of this hard-to-detect fraud, showing that councils proved 102 cases this year valued at an average £21,000 per case. This represents a 101 per cent increase in the average cost of detected social care fraud.
Criminals, including some based outside the UK, are now using details of key creditors from the transparency information that councils now publish on their websites. They use data to mislead and to redirect payments to and from public bodies.
The fraudsters have sent letters to council finance teams that appear legitimate and often follow them up with phone calls to chase payments.
Last year councils reported several detected frauds of this type amounting to some £7 million. Through greater sharing of information and awareness of risk public bodies have put in place controls preventing a further £20 million of such attempted fraud.
Michael O’Higgins added: ‘We are all victims of fraud against councils. It is heartening to see councils making inroads, and improving detection rates in areas like council tax discounts. But they need to do more to tackle housing tenancy and procurement frauds.
‘Huge amounts of public money are still being diverted from the public purse into fraudsters’ pockets. National figures suggest that over £2 billion a year is lost to councils by fraudsters, so it is clear that only a small proportion of frauds are being detected.
‘Our report shows fraudsters will exploit any system weaknesses, from an individual’s care budget to a multi-million pound building contract. In these tough times councils need to maintain the strongest possible anti-fraud defences to safeguard jobs and services.’
For more information and/or a copy of Protecting the Public Purse, please contact the National Fraud Authority on 020 7035 3431.