Tales of audacious benefit fraud frequently make front page news. Most recently, a Welsh body builder has been jailed after collecting nearly £30,000 in disability benefits by claiming that he was too weak to walk. Mr Wales managed to fraudulently claim the highest possible level of Disability Living Allowance for eight years without being detected, despite attending the gym on a daily basis and competing in competitions all over the UK.
Although less likely to grace the front pages, non-benefit fraud can be just as damaging to the public purse. A startling example is the recent case of a Chelmsford City Council’s Play Services Manager and former “employee of the year” who siphoned off more than £230,000 over a six year period by diverting funds intended for playground equipment and youth projects into his own accounts. His defence lawyers labelled the lack of control in the local authority as “extraordinary”.
Changes in government policy intended to help tenants to buy their home have also attracted unscrupulous applicants and detected frauds relating to the Right to Buy Scheme have increased by 144% over the last three years. A similar trend has emerged in social care, following the implementation of policies designed to give people greater choice in care providers.
Recent figures published by the Audit Commission in its report, “Protecting the Public Purse”, suggest that non-benefit fraud costs local authorities at least £2.1 billion annually, with fraud involving Right to Buy, social care, insurance, procurement and abuse of position topping the charts when it comes to cost.
Local authorities have a duty to protect the public purse and these figures are likely to become all the more pressing given that wholesale changes to the current counter-fraud landscape, prompted by the Local Audit and Accountability Act 2014, which is designed to promote localism, decentralisation and transparency. These changes are due to take place over the next few years and will include the closure of the Audit Commission and the National Fraud Agency.
Perhaps the most important change for local authorities is the transfer of most of their benefit fraud investigators to the Single Fraud Investigation Service (SFIS), which is managed by the Department for Work and Pensions (DWP). The transition to the SFIS began in July 2014 and will be complete by March 2016. From this point, local authorities will be asked to focus entirely on non-benefit fraud.
Identifying and investigating non-benefit fraud is clearly a difficult task. This is demonstrated by the fact that, despite the increased emphasis on this type of fraud, 39 councils failed to detect a single case of non-benefit fraud in 2013/14.
Local authorities surveyed by the Audit Commission identified a number of issues faced when attempting to tackle fraud. Perhaps unsurprisingly given the increasing financial pressures faced by local authorities, capacity was an issue highlighted by 77% of those surveyed, and with the migration of many fraud investigators to the SFIS, capacity to investigate is likely to suffer.
With resources so scarce, a lack of corporate appreciation of the financial benefit to tackling fraud is also a concern. The Audit Commission was clear in its report that, “even where councils obtain no direct financial benefit from preventing frauds, they should still fulfil their duty to protect the public purse by pursuing fraudsters”. Furthermore, it is important to recognise that the cost of fraud is not just financial; reputational damage and loss of morale are very real consequences which can be equally detrimental to any organisation.
Capability was another area where local authorities felt they faced difficulties. Effectively addressing fraud requires regular development and review of policies and procedures and local authorities may lack the expertise to do this efficiently.
Pro-actively seeking to prevent loss from fraud is far better than having to deal with the cost of reaction and recovery. If a situation arises where recovery is necessary, organisations need to be in a position to respond quickly in a co-ordinated manner.
With this in mind, DWF has developed Fraud Response, a product providing specialist fraud prevention and reaction advice from our team of experts in dealing with fraud to ensure that your organisation is better placed to prevent and react swiftly to acts of dishonesty. DWF has many years of experience working with the public sector, and are fully aware of the cost of fraud to the public purse and the need to adopt a commercial approach when dealing with fraud.This information is intended as a general discussion surrounding the topics covered and is for guidance purposes only. It does not constitute legal advice and should not be regarded as a substitute for taking legal advice. DWF is not responsible for any activity undertaken based on this information.