A new ten point counter-fraud blueprint for tackling criminals and dishonest people who are costing the country billions of pounds in fraudulent local government claims was published today by Communities and Local Government Secretary Eric Pickles.
According to the National Fraud Authority Annual Fraud Indicator, Local government could be saving taxpayers £2.1 billion a year by cracking down on fraud in housing tenancy; procurement; pay, pensions and recruitment; council tax; grant; and blue badge schemes. Money currently lost to fraud and error equates to around £95 for every household in England.
The ten point checklist was compiled, at the request of Mr Pickles, by experts in the National Fraud Authority. The recommendations include councils using credit rating agencies to stop tax evasion and benefit fraud; staff background checks to prevent fraudsters and organised criminals infiltrating key posts.
The Government’s Counter Fraud Task Force was launched last year to develop a new strategic approach to tackling fraud across the public sector with a focus on prevention. It will report in May.
Many councils and housing associations are already tackling fraud and error in housing tenancy claims with the departments help. £19 million has been committed to 51 councils to help recover unlawfully occupied homes. Last year they recovered nearly 1,600 properties worth around £240 million.
Eric Pickles said:
“It’s time to get tough and take on the fraud cons. At a time when we need to cut the national deficit and government waste, cleaning up fraud could save the taxpayer over £2bn in recovered cash currently being fraudulently stolen or lost to tax cheats.
“Better prevention, detection and recovery of fraud will help reduce the financial pressure on councils and help protect frontline services. Today I am publishing the top ten plays for cracking down on council finance fraud.
“Councils should carry out better credit checks through credit rating agencies before giving over discounts or benefits. They should properly vet staff in key positions and put stricter controls on who can use the council credit card.”
Bruno Rost, from Experian, added:
"Using Credit Reference Agencies can make a real difference. We’ve already saved local authorities tens of millions of pounds on council tax fraud but much more can be achieved through a better joined up approach.
"There are over 2,000 different providers of social housing in the UK and they don’t share their data. It’s an open charter for fraud. We think social housing tenancy fraud could be reduced by £200m. If the same methods were applied across the whole of the UK this would result in savings to the tax payer in excess of £600m. If you add the cost of temporary accommodation, the potential savings are well in excess of £1 billion."
Top ten tips for tackling local authority fraud:
1. Measure exposure to fraud risk;
2. More aggressively pursue a preventative strategy;
3. Make better use of data analytics and credit reference agency checks to prevent fraud;
4. Adopt tried and tested methods for tackling fraud in risk areas – such as blue badge scheme misuse;
5. Follow best practice to drive down Housing Tenancy and Single Person Discount fraud;
6. Pay particular attention to high risk areas such as procurement and grant awards;
7. Work in partnership with service providers to tackle organised fraud across local services;
8. Maintain specialist fraud investigative teams;
9. Vet staff to a high standard to stop organised criminals infiltrating key departments.
10. Implement national counter fraud standards developed by the Chartered Institute of Public Finance & Accountancy;
Estimates indicate that over 400,000 people could be wrongly claiming for single person discount at a cost of £100m a year to councils in lost council tax. Birmingham City Council has identified £6.8m worth of fraudulent and incorrect claims for single person council tax discounts.
Some councils are already seeing the benefits of using credit rating agencies. Cheshire East Council found nearly 2000 people had wrongly claimed using Experian credit data. It cost £80,000 but will recover half a million pounds in new income.
Kent County Councils is pioneering a contract framework for credit rating agencies which all councils can buy into. This will keep costs down and tackle those that are wrongly claiming services. Mr Pickles believes other councils should take advantage of Kent’s example and sign up to it.
Local Government employs around 2 million permanent, temporary and agency staff. Ealing found that 6 per cent failed proper vetting checks but that the figure was higher for temporary staff at 13 per cent.
One council found an agency worker put in charge of a large budget had set up a fictitious company and made false claims totalling £110,000. The person had used a false CV and was later sentenced to two years in prison. The insurance company refused to pay compensation. London councils have been targeted by a group of sophisticated and organised false identity fraudsters using fake passports to falsely
claim £700,000 of services. Oxford Council hired a dedicated fraud officer last year and recovered 25 properties in the first six months. In 15 of these cases the unlawfully sub-letting tenant was still claiming housing benefit, the total cost of which was £1500 per week. The Department for Communities and Local Government has committed £19 million to helping 51 councils tackle social housing fraud.