Audit, Inspection and Safety

Protecting our public purse

Debbie Dansey, local government lead at TEICCAF (The European Institute for Combatting Corruption and Fraud) and national chair of the Local Authority Investigation Officers Group, explains why councils need to review their counter-fraud arrangements.

In autumn last year, TEICCAF published the first ‘Protecting the English Public Purse’ (PEPP 2015) report. This was developed by the former counter fraud team of the Audit Commission, now part of TEICCAF. One of the major recommendations is for councillors, senior officers and others responsible for audit and governance to urgently review their counter-fraud arrangements. 

You may ask why? Regional and local fraud detection results suggest an emerging divergence in the capacity, capability and commitment of some councils to play an effective part in the fight against fraud. In two regions, fewer than half of all councils had corporate fraud teams, and both detected proportionately fewer frauds. 

Unfortunately, as a result of the roll-out of the Single Fraud Investigation Service (SFIS), announced by the Department for Work and Pensions in 2010, the majority of local government investigation officers have been transferred from their local authorities into SFIS. The migration was completed in March 2016. PEPP 2015 found that 45% of local authorities are without a corporate fraud investigator and are, therefore, vulnerable. 

This was evidenced in the report which stated: 

• English councils detected fewer cases of fraud in 2014-15 compared with the previous year
• The number of detected cases of corporate fraud decreased by more than 8%
• Councils detected fewer housing tenancy frauds in 2014-15. In particular, 2,993 tenancy frauds were detected, a more than 1% decrease on the previous year; and London continues to detect more tenancy fraud than the rest of the country combined 

London has remained vigilant in its fight against fraud and financial irregularity by retaining and funding Corporate Fraud Teams within the majority of local authorities – hence why they detect more tenancy fraud. 

Local government fraud losses 

The latest Annual Fraud Indicator 2016 was recently published by Experian, PKF Littlejohn and the University of Portsmouth’s Centre for Counter Fraud Studies, who have created a partnership to help consistently gauge, analyse and quantify the true scale of fraud in the UK. The total estimated fraud losses for local government amounted to £7.3bn. 

Their conclusion stated: “There’s no question fraud in Britain is taking place on an industrial scale. Fraudsters are fast, inventive, adaptable and willing to quickly exploit new opportunities.” 

What are high risk areas for local authorities? 

Right to Buy fraud has emerged as a significant area of fraud risk. Last year, detected Right to Buy fraud cases more than doubled and their value increased by nearly 145% to more than £30m. PEPP estimated that at least 3% of Right to Buy applications in London are fraudulent, and at least 1.5% in the rest of the country.  

No Recourse to Public Funds is a new sub-category of fraud. Relatively few councils proactively targeted this type of fraud in 2014-15, yet there were still 444 cases detected with a value totalling more than £7m. 

TEICAFF recommends that local authorities assess their own strategy in the context of fighting fraud.  We must consider the social harm that is caused by fraud when determining overall strategies to tackle corporate fraud. It is essential that local authorities assess their exposure to Right to Buy and No Recourse to Public Funds fraud risk. And, finally, all local authorities should celebrate and promote their performance in detecting fraud and corruption – this is a good thing and should be reported as such.

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