Unacceptable cost of fraud

Of all the revelations in last week’s overlapping Audit Commission/National Audit Office reports on housing benefit fraud, the most shocking was the commission’s revelation that one in four councils have identified fraud by their own officers and members.

Fraud by council members typically occurs where councillors fail to declare allowances they receive for public service. Kate Flannery, associate director for the commission, acknowledges this hardly sets a good example when councils are preaching to the public on the consequences of benefit fraud. ‘This cast a huge shadow over the reputation of those authorities involved,’ she says.

More than #11bn of housing benefit is paid out by local authorities to almost five million people a year in England, Scotland and Wales. While housing-benefit fraud will never be eradicated, central and local government are making significant inroads to stem this drain on public resources.

The social security department estimates that during 1997/1998, more than #800m – 7% of expenditure – was paid out in error or as a result of fraudulent claims. Additionally, 10% of those payments are incorrect because of claimant or administrative error, rather than deliberate fraud.

‘The cost to the public purse remains unacceptably high,’ warns commission controller Andrew Foster. He urges councils to work with central government to continue the fight.

Investigations into fraudulent housing-benefit claims follow earlier reports published by the commission and the NAO in 1997. These warned that local councils needed to improve the weapons they used both to detect and prevent fraud. For its part, the DSS pledged to simplify the administration of housing benefit, improve its co-operation with councils and reward fraud-prevention success.

There have been improvements. Anti-fraud units are increasing in size.

The average number of staff has risen from 1.6 officers per council in 1993 to 4.1 in 1998. The new findings also show 48% of councils have now established anti-fraud strategies. Many of these include a new DSS verification framework which provides a rigorous check on benefit entitlements, though, so far, less than a quarter of councils have adopted one.

This low take-up puzzles Flannery. ‘It is surprising that some councils have not put into place anti-fraud strategies yet,’ she says. ‘If the councils’ perception is that fraud is not big in their areas, then prevention and detection are not given a high priority.’

The department has also launched a range of measures to tackle fraud.

But it still has no overall plan for assessing their impact. ‘The department has made important progress and has taken steps to tackle the problems set out in our earlier report,’ says NAO director Jane Wheeler.

Benefit simplification

Among the initiatives it has taken are a long-term review aimed at improving the administration of housing benefit and simplification of the benefit itself. Improved co-operation should also be achieved through new service-level agreements to be set between the Benefits Agency and local authorities.

Additional methods of joint working between local and central government will be established with networked computer terminals helping benefit claims to be checked.

Fraud occurs mainly where a genuine claim is submitted and paid before a change in a claimant’s circumstances removes their eligibility. Often the claimant fails to notify their authority of the change – triggering the fraud.

‘This is opportunistic rather than deliberate fraud,’ says Flannery. Another common method is a failure to declare, or in some cases under-declare, their income.

The NAO and the commission are clear about some of the problems that have helped create the current climate. In the battle against fraud, speed of processing, rather than quality, remains the main target. Training of investigators remains under-resourced, and only one in three councils have a policy of prosecuting when fraud is discovered.

The reports highlight the need to develop more detailed plans to obtain regular and up-to-date information on fraud, simplify housing benefit, and place greater emphasis on the prevention of fraud.

As Wheeler explains: ‘Too much is at stake for the DSS and councils not to keep up pressure on fraud.’