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Fraud valued at £188 million was detected by England’s councils in 2013/14, a ten-fold increase since 1990. The figure beats all records for the past 25 years, the Audit Commission revealed in its latest report on fraud in local government.

Protecting the Public Purse 2014: Fighting Fraud Against Local Government, the final one being issued before the Commission closes at the end of March 2015, looks at the landscape of fraud against councils and how this has changed since 1990, when the Audit Commission first turned the spotlight on to local government fraud with its ‘Protecting the Public Purse’ reports.

Jeremy Newman, Chairman of the Audit Commission, comments: ‘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.

Using its statutory power to mandate English councils to provide information on the fraud they detected, the Audit Commission was, and remains, the sole provider of fully comprehensive data on all types of fraud detected by local authorities. In 1990, the Commission’s first publication of ‘Protecting the Public Purse’ was pivotal to its aim of raising the sectors’ awareness of fraud. By publishing robust data, the Commission helped to demonstrate that the benefits of identifying fraud, outweighed the costs of doing so, thereby encouraging investment by local authorities in counter-fraud capability; it also pushed the issue up the national agenda and motivated councils to seriously review their approach to counter-fraud.

At one time, housing tenancy fraud, such as illegal subletting, was viewed by some councils as a low priority. However, these days, 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.

It is disappointing however, to note that despite an increasing number of councils that have played their part in the fight against fraud, there are still 39 councils (of which 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’ continues to highlight the most prevalent types of fraud and to identify newly emerging ones. For example, over the past two years, the Commission has reported a substantial increase in the number of Right to Buy fraud cases detected, currently at 193 cases for 2013/14. In 2012 the government brought in measures to encourage tenants to use the Right to Buy scheme, including a significantly increased discount. In some parts of the country the discount is now in excess of £100,000. These encouraged substantially 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 the levels 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 million. The majority of fraud was perpetrated by staff and as such the Commission is calling for schools to review their governance arrangements to help reduce their vulnerability to fraud.

The improvements in addressing fraud in local government are at risk; with councils under continued financial pressure, as any reduction in fraud investigators is matched by a similar fall in the detection of housing benefit fraud. Furthermore, 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 concludes: ’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.

Our Counter-Fraud team moves to CIPFA, the Chartered Institute of Public Finance and Accountancy, when the Commission closes at the end of March 2015, where they will have the opportunity to maintain the hard-won advances made, by the Audit Commission, in the battle against fraud in local government. Although we will be turning off the lights at the Commission, I hope the spotlight on identifying and preventing fraud will continue’.
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Notes to editors
1). Protecting the Public Purse uses data, collected yearly, in the only comprehensive survey of local authorities in England, to reveal the only accurate figures for the level, type and value of fraud over the financial year.

2). This will be the final Protecting the Public Purse report, before the Commission closes at the end of March 2015 and the Counter Fraud Team move to CIPFA, the Chartered Institute of Public Finance and Accountancy.

3). The value of detected cases of housing benefit and council tax benefit fraud rose by 7 per cent to nearly £129 million, while the number of detected cases fell by 1 per cent to nearly 47,000.

4). There has been a fall in the total number of cases of fraud detected in the last two years, falling by 14 per cent in 2012/13 and a further 3 per cent in the last year to 104,000. Some of the reasons behind this emerging trend are described in the latest report.

5). The value of detected cases of non-benefit fraud rose by 2 per cent, to £59 million, while the number of detected cases of non-benefit fraud fell by 4 per cent to around 57,000

6). Between 2009/10 and 2013/14 we have witnessed rises in non-benefit related frauds of:

• a nearly six-fold increase in the number of detected Right to Buy fraud cases (to 193 cases, worth £12.3 million);
• a three-fold increase in the number of detected cases of social care fraud (to 438, worth £6.2 million); and
• also around a three-fold increase in the number of detected cases of insurance fraud (to 226, worth £4.8 million).

5). Business rates fraud cases, fell from 149 to 84 and their value dropped by nearly five- fold to
£1.2 million in the last year.

Figure 6: The shift from benefit to non-benefit fraud Detected cases 1991/92 to 2013/14
(Reproduced from Protecting the Public Purse 2014) – Please see the attached file.

6). 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.

For further information please contact: 
Nick Rigg, Senior communications specialist
Direct line: 0303 444 8284
Press office: 0303 444 8282
Email: n-rigg@audit-commission.gsi.gov.uk