Audit Commission

England's councils have succeeded in detecting £185 million worth of fraud in 2010/11, an improvement of 37 per cent on last year's figure of £135 million. This is equivalent to a year's funding for around 700 libraries or the wages of up to 11,000 care workers.

The country's only annual survey of detected frauds against councils, Protecting the Public Purse, shows that 121,000 scams were detected in 2010/11, including false benefit claims, council tax discount cheating, and unlawful use of social housing.

Chairman of the Audit Commission, Michael O'Higgins, says:

'Councils are certainly acting on fraud, and it is now firmly on the government agenda. But our latest survey of detection rates shows that we may be seeing just the tip of a very large iceberg.

'Our research shows high rates of council tax discount fraud and widespread unlawful occupancy of council houses. Now, for the first time, we are also able to publish details of fraudsters targeting care payments to the elderly and vulnerable. Also scams involving fraudulent student council discounts and fraud that goes to the heart of councils' multi-million pound procurement budgets.'

This year's Protecting the Public Purse report shows:

• 1,800 homes recovered from tenancy fraudsters by councils. This fraud costs at least £900 million a year;
• More than £22 million worth of false claims for student and single person council tax discounts;
• 145 cases of council procurement fraud involving losses of £14.6 million, a 400 per cent increase on 2009/10;
• 59,000 cases of housing or council tax benefit fraud valued at £110 million;
• 102 cases of proven social care budget fraud worth over £2.2 million.

Fraudsters blocking social housing: This is the largest category of fraud loss across local government. Housing tenancy fraud is the use of social housing by someone not entitled to occupy it. At its worst, fraudsters sub-let for profit. Although councils have increased the number of properties recovered by 75 per cent in the last three years, the vast majority of these are in London. Over half of councils outside London with housing stock failed to recover a single property. There are nearly four million social housing properties in England. In 2010 almost two million families were waiting for council houses, with temporary housing for homeless families costing nearly £1 billion a year.

Fraudsters claiming council tax discounts: Fraudulent claims for discounts directly increase the amount of council tax that everyone pays. We estimate that Single Person Discount fraud alone costs taxpayers at least £90 million each year. Investigations by Bristol City Council have also uncovered widespread abuse of Student Discount, with 34 per cent of a sample of 4,500 exemption applications proving to be fraudulent, worth £1.9 million.

Fraudsters cheating on council contracts: Councils spend over £50 billion each year buying goods and services from suppliers and funding multi-million pound construction projects. In doing so, they are vulnerable to a range of frauds such as cartels skewing bidding processes, contractors providing shoddy goods or services, inflated performance claims and false invoicing. Losses in individual cases can be large - the total value of just two in 2010/11 was £6 million.

Fraudsters not entitled to benefits: The report shows that there are more detected Housing Benefit and Council Tax Benefit frauds than any other type. In the last year they comprised over half of all fraud detected by councils. In the last three years councils have detected almost 210,000 cases of benefit frauds worth more than £310 million.

Fraudsters targeting care budgets: Councils increasingly make adult care payments directly, for example to the person receiving the care, to independent care providers, or to family members. This increases the recipient's choice and control, but it can be exploited by fraudsters. This year's report is the first to track the rising value of this hard-to-detect fraud, showing that councils proved 102 cases this year valued at an average £21,000 per case. This represents a 101 per cent increase in the average cost of detected social care fraud.

Emerging risks: Criminals, including some based outside the UK, are now using details of key creditors from the transparency information that councils now publish on their websites. They use data to mislead and to redirect payments to and from public bodies. The fraudsters have sent letters to council finance teams that appear legitimate and often follow them up with phone calls to chase payments. Last year councils reported several detected frauds of this type amounting to some £7 million. Through greater sharing of information and awareness of risk public bodies have put in place controls preventing a further £20 million of such attempted fraud.

Michael O'Higgins adds:

'We are all victims of fraud against councils. It is heartening to see councils making inroads, and improving detection rates in areas like council tax discounts. But they need to do more to tackle housing tenancy and procurement frauds.

'Huge amounts of public money are still being diverted from the public purse into fraudsters' pockets. National figures suggest that over £2 billion a year is lost to councils by fraudsters, so it is clear that only a small proportion of frauds are being detected.

'Our report shows fraudsters will exploit any system weaknesses, from an individual's care budget to a multi-million pound building contract. In these tough times councils need to maintain the strongest possible anti-fraud defences to safeguard jobs and services.'

Notes to editors

1. Download the report Protecting the Public Purse.
2. In addition to monitoring councils' success in this annual report, the Audit Commission's National Fraud Initiative is a major resource in the fight against fraud. It compares data sets from around 1,300 organisations - including councils, the police, hospitals and nearly 100 private companies - and spots inconsistencies or circumstances that might suggest fraud or error. The National Fraud Initiative is expected to be continued in a successor organisation.
3. The Audit Commission is a public corporation set up in 1983 to protect the public purse.
4. The Commission appoints auditors to councils, NHS bodies (excluding NHS Foundation trusts), police authorities and other local public services in England, and oversees their work.
5. We also help public bodies manage the financial challenges they face by providing authoritative, unbiased, evidence-based analysis and advice.
6. In August 2010, the government announced plans to disband the Audit Commission and put in place new arrangements for auditing England's local public bodies.
7. The Commission is undertaking a procurement exercise to outsource the work of its in-house Audit Practice. Beginning in 2012/13, the Commission will award contracts of three to five years to private audit firms.
8. The government is currently considering responses to its consultation on the 'future arrangements for local public audit' that are intended to replace the Audit Commission.

For further information please contact:

Mark Nicholson
Media Relations Manager,
Audit Commission
Millbank Tower, London SW1P 4HQ
Direct line 0844 798 2135 / 0207 166 2135
24hr Press line 0844 798 2128
Mobile 07813 038132
E-mail: m-nicholson@audit-commission.gov.uk