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Councils could save hundreds of millions of pounds if they cracked down harder on fraud

In a new report, the Audit Commission says that councils can do more to tackle fraud.

According to Protecting the public purse - local government fighting fraud published today, 15 September, council taxpayers could be losing almost £2 million a week to fraudsters claiming a 25 per cent single person discount on their council tax. The discount can be claimed by householders where there are no other residents aged 18 or over living at an address.

There is a significant social cost to fraud. The Commission found housing tenancy fraud could be tying up at least 50,000 council and housing association properties worth more than £2 billion, while queues for homes have increased by more than 50 per cent over the last six years.  The number of people in need of social housing is predicted to rise to two million by 2011.

Councils in England spend £154 billion annually on providing services. The report says they will face a severe challenge in coping with increased demand for their services.

Steve Bundred, Chief Executive of the Audit Commission said:

‘It has never been more important that councils fight fraud.  Every pound lost to cheats is a pound that can’t be used for people in real need. 

The report is a comprehensive look at threats facing town halls. It calls on councils to urgently reassess their counter fraud plans. They also need to ensure that staff understand, and have faith in, whistle-blowing arrangements. The work of Croydon council, a case study in the report,  shows councils are more effective if they work with other organisations to target the most costly frauds.’

Case study

Following a tip-off from a social worker, Croydon’s corporate anti-fraud team discovered that a fraudster, who had no right to work in the UK, had claimed more than £135,000 in benefits from the council, by using someone else's identity.  A joint investigation with the UK Border Agency and the NHS Local Counter Fraud Specialist established that the fraudster was also at this time working at a care home and in receipt of a £17,650 bursary from the NHS while studying to be a nurse.  The investigation established that the alternative identity was also being used by the fraudster’s sister to work illegally in a hospital.  A police raid on the fraudster’s home found prescription drugs worth approximately £12,000 and forged documents. 

The report identifies specific risks that are often inadequately addressed, to do with housing tenancy, council tax and recruitment.

  • Housing tenancy fraud - The report looked at the work of three London boroughs (this is a particular problem in London and the South East) which reclaimed 274 homes in a year through targeting high-risk tenancies.  In the worst cases some properties are being sublet for personal profit.
  • Council tax - Single Person Discount fraud - false claims for single person discount on council tax are estimated at £90 million each year. Council tax payers meet the cost of these 25 per cent discounts payable to individuals who are the only adult over 18 living at the address.
  • Recruitment fraud - Councils employ approximately two million permanent staff and many thousands of temporary and contract staff at any one time. The report highlights the importance of verifying the identity, qualifications, employment history and criminal record of both staff and applicants.  Such checks will defend against fraud, and other abuses.
Mr Bundred continued:
‘The Audit Commission will launch an annual survey of existing and emerging risks and levels of identified frauds and associated costs. This will enable us to track trends and highlight developing threats.'

The first survey will cover the financial year ended 31 March 2009 and provide a base against which the Commission can measure future levels of fraud.

Among the specific challenges identified in the report are:
  • Housing and Council Tax benefits: of the more than £18.5 billion paid each year, over £200 million is estimated to be fraudulent. 
  • Insurance claims: many fraudulent claims are made against councils every year. 
  • Procurement: councils need to reduce the risk of fraud in how they buy goods and services.

Housing tenancy fraud

The report examined how three London boroughs had tackled housing tenancy fraud.  They were able to bring 274 properties back into use in just one year. The activities of those boroughs were characterised by:

  • a clear commitment by all organisations involved in social housing in those council areas to prevent and detect tenancy fraud
  • recognition of the full cost and harm caused by tenancy fraud
  • a high level of fraud awareness among staff
  • the use of campaigns to raise public awareness of tenancy fraud and to encourage residents to report suspected illegal occupancy
  • regular housing tenancy audits to confirm that the correct tenant was in residence
  • the use of specialist counter-fraud staff to support housing officers where appropriate
  • use of NFI results and other data matching
  • the use of indicators that may highlight the likelihood of tenancy fraud, for example, a tenant's failure to let gas inspectors in

As local economies are squeezed, so the pressure on public services is increasing with:

  • a rise in applications for housing and council tax benefit
  • more people seeking debt counselling
  • more demand for help from local businesses and contractors
  • a higher demand for social housing
  • greater numbers of children entitled to free school meals
  • greater demand for children's services and social care
  • increased demand for state education places

Notes to editors

  1. The Audit Commission is an independent watchdog, driving economy, efficiency and effectiveness in local public services to deliver better outcomes for everyone.
  2. Our work across local government, health, housing, community safety and fire and rescue services means that we have a unique perspective. We promote value for money for taxpayers, auditing the £200 billion spent by 11,000 local public bodies.
  3. As a force for improvement, we work in partnership to assess local public services and make practical recommendations for promoting a better quality of life for local people.

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