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Fraud in local government

Fraud valued at £188m was detected by England’s councils in 2013/14. That’s a ten-fold increase since 1990 and beats all records for the past 25 years. So says the official Audit Commission in its latest report on fraud in local government.

Protecting the Public Purse 2014 Fighting Fraud against Local Government is the final such report before the Commission closes at the end of March 2015. It looks at the landscape of fraud against councils and how this has changed since 1990, when the Audit Commission first looked at local government fraud with its ‘Protecting the Public Purse’ reports.

Jeremy Newman, Chairman of the Audit Commission, says: “Protecting the Public Purse’ has helped local government foster greater transparency and accountability around its response to fraud. In the early days, it created a common language with which to report fraud. By allowing councils to make peer comparisons, the Commission’s work has helped councils to benchmark their individual performance against local and national figures. I believe it also encouraged the sector to develop a real passion for fighting fraud – a passion that has ensured that £188 million of fraud was detected by English councils in 2013/14: the highest total value we have recorded and a six per cent increase on the result we reported for 2012/13.”

The Audit Commission says that at one time, housing tenancy fraud, such as illegal sub-letting, was viewed by some councils as a low priority. However, the commission says, councils are doing well in turning the tide against housing tenancy fraud. There has been close to a six-fold increase in the number of council homes recovered from housing tenancy fraudsters in just five years by councils outside London. For all English councils, the number of social homes recovered from tenancy fraudsters increased by 15 per cent in the last year to 3,030, nearly doubling in the last five years.

The commission says it’s disappointing however, to note that despite more councils playing their part against fraud, there are still 39 councils (35 are district councils) that did not detect a single case of non-benefit fraud, although this is down from 88 recorded in the previous year.

‘Protecting the Public Purse’ highlights the most prevalent types of fraud and identifies emerging ones. For example, over the past two years, the commission has reported a rise in the number of ‘Right to Buy’ fraud cases detected, at 193 cases for 2013/14. In 2012 the government brought in measures to encourage tenants to use the Right to Buy scheme, including an increased discount. In some parts of the country the discount is now £100,000-plus. These encouraged more Right to Buy applications, but also led to more detected frauds. In the two years between April 2012 and March 2014, when the new discount applied, detected Right to Buy frauds have increased by over 400 per cent.

Another example of an emerging theme can be found in the Commission’s first comparison of fraud in schools, having taken a baseline measure last year. The detected cases of fraud in maintained schools rose by 6 per cent to 206, worth £2.3 m. The majority of fraud was by staff. The Commission is calling for schools to review their governance arrangements to help reduce their vulnerability to fraud.

According to the Commission, the improvements in addressing fraud in local government are at risk; with councils under financial pressure, any reduction in fraud investigators is matched by a similar fall in the detection of housing benefit fraud. Changes in government policies such as Right to Buy and social care choice, may have unintended consequences and heighten fraud risks.

The Audit Commission’s chairman, Jeremy Newman adds: ’I urge the government to mandate the provision of fraud data from all local authorities, after the Commission’s closure, to ensure that future reports are able to provide as complete and authoritative a picture of fraud detection as ‘Protecting the Public Purse’. This would help preserve the high levels of transparency and accountability that English councils currently exhibit in their approach to countering fraud and prevent those councils that are not yet playing their part in the fight against fraud, from avoiding public scrutiny.

The Commission’s Counter-Fraud staff move to CIPFA, the Chartered Institute of Public Finance and Accountancy, when the Commission closes at the end of March 2015.


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