Fraud

Around £6bn a year is being lost to fraud by local authorities according to research published by accountants PKF.

The study – in conjunction with the Centre for Counter Fraud Studies at Portsmouth University - was conducted using the world’s largest database on fraud losses.

It showed that local government bodies are now less resilient to fraud than they were two years ago despite fraudulent activity rising across the economy and budgets coming under increasing pressure due to austerity measures.

‘The Resilience to Fraud of the Local Government Sector’ report used a 50 point scale to assess the fraud resilience of 72 local authorities with a £20bn collective turnover. It found that organisations had average score of 35.1 points, compared with 38.1 points in 2010. Of the 29 factors assessed by the authors, fraud resilience has declined in 26 instances, and improved in only three.

Report co-author, Jim Gee, PKFs director of counter fraud services and chair of Portsmouth University’s Centre of Counter Fraud Studies, said:

‘The results of the report should be of significant concern to local authorities. There is a large body of evidence showing that organisations are more at risk of fraud during economic downturns, yet the local government sector seems to be cutting back on its counter fraud measures at exactly the time when it should be strengthening them.’

‘Put simply, if local authorities are cutting the cost of fraud as they should be, then this would make budgetary reductions less painful. The public will want to know that they are getting the quality of public services that they pay their taxes to get, rather than such services being undermined by the unnecessary cost of fraud.’

‘Local authorities should invest more in fraud defences at the moment because it is not unusual for an organisation to save up to 12 times the cost of the counter fraud work, and for fraud losses to be cut by up to 40%.’