Fraud - December 2009
Protecting the Public Purse: Local Government Fighting Fraud
The Audit Commission’s latest report (15th September
2009) addressing the issues of fraud faced in local government
comes at an opportune time as the insurance industry begins to
accept that organised criminal gangs are moving away from the
traditional road traffic accident arena and into what they perceive
more fertile areas, including local government.
In this its most recent study the Audit
Commission, responsible for auditing the £200 billion spent by
11,000 local public bodies, provides a clear message that while
financial constraints on local authority resources tighten, and
demand for public services increase, there is no room for
complacency by local government in maintaining and implementing an
effective counter fraud strategy.
The report recognises the recessionary effect
driving an increase in the incidence of fraud as greater numbers of
individuals suffering “economic distress” view the option of
committing fraud as a viable way of improving their situation, and
proposes that in view of the emerging increase in risk existing
counter fraud strategies are reviewed, and improved where
necessary, to maintain there effectiveness.
Key tools in the armoury remain the
preservation of a clear commitment to fraud prevention and
detection at all levels, maintaining a high level of awareness both
within and outside of the organisation ( for example in publicising
a clear counter fraud policy and the outcomes of successful fraud
enquiries, including the prosecution of offenders ), data matching
and sharing through strategic partnerships and the National Fraud
Initiative and the ongoing review and use of indicators as the
fraudsters develop and evolve their own methods of attack.
By identifying three target areas (housing
tenancy fraud, single person discount fraud – council tax and
recruitment fraud) where their research demonstrated the risk of
fraud had not been adequately addressed the Commission’s report
provides reasoned guidance, using examples of successful strategies
adopted by several authorities and case studies, to appreciate the
extent of the issues involved and cost-effective means of dealing
with them.
The report acknowledges the improvements and
progress already made as Councils adopt a “zero-tolerance” approach
to fraud operating within a strong, widely publicised, counter
fraud culture but warns that:
“The question we all have to answer is not
whether we are doing something, but that we are doing enough” (Mr.
Ian O’Donnell, Director of Corporate Resources in the London
Borough of Ealing)
Although the total figure for the sums of
money involved in fraud cases, across all sectors of the UK
economy, brought before the Courts in 2008 exceeded £1 billion
there remains a substantial element that passes undetected with the
proceeds reaching unscrupulous individuals for personal gain or, of
far greater concern, organised criminal gangs for use in drug,
firearms and human trafficking operations and bank rolling serious
criminal activity.
However the report goes beyond addressing the
potential financial savings that may be made through improvements
(for example £90 million for single person discount fraud on
council tax) and notes the very “personal impact it can have on
victims” particularly those reliant upon “essential services such
as social care, housing and education” when already stretched
resources are diverted from those services and into the pockets of
the fraudsters.
As housing waiting lists continue to rise (up
by over 50% in the last 6 years) the potential for returning 50,000
properties to meet the need for social housing provides a real and
tangible benefit to an increasing sector of society, there are
currently 64,000 families in temporary accommodation, in addition
to reducing the cost of temporary accommodation estimated to cost
local government on average £11,000 per year for a single
family.
Notwithstanding the weight the report attaches
to the three target areas identified it also emphasises that focus
and vigilance should be maintained in continuing to address fraud
in other areas for example benefit and insurance claims,
procurement, direct payments for social care, abuses of position in
public office and disabled parking concessions again providing
essential guidance and advice to the practitioner to improve
prevention and detection.
Among its conclusions the Commission outlines
its own objectives and its interaction with the National Fraud
Authority, and recommends fifteen steps that Councils should adopt
in continuing the “fight against fraud” while also providing a
handy check list against which local public bodies can measure the
effectiveness of their existing counter fraud strategy and
determine and subsequently implement opportunities for
improvement.
The full text of report, an executive summary
and overview can be obtained from the Audit Commission web site at:
http://www.audit-commission.gov.uk/localgov/nationalstudies/Pages/20090915protectingthepublicpurse_copy.aspx
For further information about
Weightmans or to discuss any of the issues in this update please
contact Andrew Gillett - Partner at Weightmans on 0121 200 7566 or
at andrew.gillett@weightmans.com