How Levels of Fraud within Local Authorities Could Be Measured - Coursework Example

Housing Benefits Fraud Abstract Benefit fraud constitute the biggest single abuse of public funds within the UK. Individuals who intentionally claim benefits when they are not entitled to the benefits are committing a criminal offense. Benefit fraud occurs when claimants deliberately fail to report a change in personal circumstances, or where the claimants are dishonest about information supporting benefit claim. The fight against housing benefit fraud needs to be re-energized including doing more to know what works well, sharing information to prevent fraud, and spotlighting new approaches to new threats such as those posed by the increased utilization of, dependence on, technology. As such, the core strategic objectives in responding to case of housing benefit fraud should rest on awareness, prevention, and enforcement. The paper explores how levels of fraud within local authorities could be measured. Housing benefits Fraud Introduction Benefit fraud represents scenarios in which people claim benefit such as housing benefit and council tax support, which they are entitled to by presenting false information or not informing the authorities when circumstances change. Examples of benefits fraud include individuals who work but fail to declare work when they claim benefit; individuals who claim benefits as a single person but actually reside with a partner; and, individuals who fail to disclose where they live, but claim from an address they do not live. There are numerous forms of fraud against Housing Benefit; however, the most prominent kinds of housing benefit fraud entail: claiming benefit for an address while not resident there; claiming benefits while working; and understating capital and income (Farrell & Yeo, 2007). The bulk of fraud (close to 70%) does not emanate from fraudulent initial claims, but rather the failure of claimants to report a change within their circumstances that could impact on entitlement status (Department for Work & Pensions, 2012). Housing benefit fraudsters usually fail to disclose earnings, either by failing to state the right amount they earned, or failing to state that they were working. In terms of groups, the highest incidence of housing benefits, fraud is reported among the unemployed, followed by lone parents. Discussion Despite the improvements that have been made to local authorities, the threat from fraud persists to have a damaging impact on the country. Minimizing fraud and error can be regarded as one way in which local authorities can make real savings and protect front-line services, primarily at the time in which local authorities are expected to do more with less. Presently, England has 433 local authorities that are responsible for the provision of a wide range of services such as social care, education, roads and transport, highways, planning and development, and protective services. The new austerity measures that were introduced by the government consequent to the 2008 recession have seen a reduction in central funding for local authorities. This yielded to cost-cutting measures being introduced or being considered by a majority of local authorities (Button & Gee, 2013). One of the most pressing issue facing UK centres on the need to minimize budget deficit. Tackling fraud has been highlighted as one of the most significant ways of putting finances back on a stable footing, and guaranteeing that tax-payers hard earned money is employed to safeguard resources for frontline services. Fraud presents a severe challenge on all parts of the economy and costs of the UK in the region of £73 billion every year. The costs of fraud to local government are estimated to stand at £2.2 billion per year, monies that could be utilized to offset other local services. Official statistics indicate that this is an increase from £684 million reported in 2010. The biggest losers arose from housing tenancy fraud (£900), payroll and recruitment fraud (£152 million), and procurement fraud (£855 million) (Fraud Advisory Panel, 2012). Fraud losses were attributed to council tax, grants and pensions and the blue badge scheme. Improved prevention, recovery, and detection of fraud will aid to minimize the financial pressure faced by councils. Increasingly, councils and housing associations are already combating fraud and error in housing tenancy claims. Local government is turning to fighting fraud locally and addressing the need for enhanced prevention and better enforcement (Vona, 2008). Since 2010, the government has instituted more proactive approaches directed towards tackling fraud against the public purse as demonstrated by the establishment of counter-fraud task force. Each local authority should institute suitable mechanisms (processes, systems, and policies) to manage the risk associated with fraud within their organization. Local government bodies have increasingly targeted their investigative resources more effectively and efficiently. In 2011/12, local govern bodies detected over 124,000 cases of fraud with a value amounting to £179 million (Audit Commission, 2012). Tenancy fraud still accounts for the biggest losses from fraud in local government. Studies estimate that 98,000 social housing homes within England are subject to housing tenancy fraud; the councils in 2011 recovered close to 1,800 homes from tenancy fraudsters with a total replacement value of nearly £264 million (Fraud Advisory Panel, 2012). The most detected tenancy fraud (69%) is in London, although the capital accounts for only 27% of all council housing in England (Audit Commission, 2012). Fraud is not essentially a new crime; however, the ways in which fraudsters operate have significantly evolved in recent years. As such, local government cannot solve the challenge of housing benefits fraud by utilizing the same policies. Taking immediate and vigorous action in the event that fraud is detected is essential to combating the problem of housing benefits fraud (Kranacher, Riley, & Wells, 2011). Fraud against local government cannot be regarded as a victimless crime given that its impact is regularly felt much more broadly than the financial impacts (Farrell & Yeo, 2007). Fraud against local government yields to social and emotional harm perpetrated against the most vulnerable and genuinely in need members of the society. The pitfalls of strategies used in measuring housing benefit fraud One of the biggest impediments to the effective reporting and measurement of fraud at local authorities stems from the definitional issues relating to what constitutes fraud. This is mainly evident in particular internal departments in which the identification of fraud is considered as ancillary to the department’s primary functions, for particular forms of fraud, or where political influences are reluctant criminalizes certain forms of behaviour such as false declarations (Great Britain, 2008). Both the local government and the central government are at the front in combating housing benefit fraud out of the realization that countering fraud should be awarded the same weight with the control of public expenditure. Concerns have been raised regarding the possible impact that proposals to amalgamate benefit investigators into a sole fraud investigation service can have on individual local authority’s investigative capacity. Other pitfalls that manifest on these proposals arise from the knock-on effects emanating from reductions to local policing numbers, as well as the evident low priority characteristically awarded to fraud offense (Goldmann & Kaufman, 2009). Fraud deterrence necessitates taking proactive steps to highlight and eliminate the causal and enabling factors that lead to housing benefits fraud. Fraud deterrence derives from the premise that fraud is not essentially a random occurrence given that it occurs under favourable conditions. Fraud deterrence can be short term (procedural) and long-term (cultural) initiatives. The causal factors that ought to be addressed and removed to deter fraud include: motive (pressure); rationalization; and, opportunity. Breaking the fraud triangle is central to fraud deterrence and necessitates that the local authorities remove one of the elements in the fraud triangle, so as to minimize the probability of fraudulent activities (Smith, Button, Johnston, & Frimpong, 2010). The prevention and detection of fraud should centre on better utilization of information and technology; improving fraud controls and processes; and, establishing highly efficient anti-fraud culture. Local government has also appreciated the importance of prioritizing fraud recovery through the utilization of civil sanctions; establishing capability and capacity to punish fraudsters; and, collaborating across law enforcement and local authorities. The collaboration between different entities seeks to better co-ordinate counter fraud activity so as to prevent fraud, enhance awareness, and reporting while at the same time delivering a more effective enforcement response (Brytting, Minogue, & Morino, 2010). In the public sector, governments’ response to fraud has centred on the establishment of a cross-Whitehall taskforce by paying attention to tackling fraud, debt, and error in public services. Tackling fraud necessitates a new partnership between local government and central government. Although, the local government can be successful in tackling fraud by embracing best practice, the central government should create the right environment to allow local government tackle fraud more efficiently. The central government should introduce positive incentives for local councils to counter fraud, especially in cases where the main beneficiary the society or the government. The central government has a role to play in creating the right framework to stimulate more efficient information sharing within and between local authorities, the private sector, and the central government (Jones, 2004). Professional and competent staff working at local authorities should be availed with powers they need to safeguard public funds. Conclusion The core elements that any successful anti-fraud program should feature include: generating and sustaining a culture of honesty; appraising the risks of fraud and implementing processes, controls, and procedures required to mitigate the risks; and, instituting suitable oversight process. Councils should review benefit claims to ensure that the right amount of benefits is paid; furthermore, councils should probe allegations of benefit fraud. Minimizing complexity would aid in restricting opportunities for fraudsters to exploit the confusion faced by claimants regarding their entitlement and obligation. This can also reduce the propensity of errors made by Department staff in paying benefits. There are diverse means of calculating the cost of tenancy fraud. The core direct costs emanates from the need to house homeless families within temporary accommodation. The value of tenancy fraud should also mirror social housing administration and housing management costs; annual safety, adaptation, repair, and maintenance costs; and any long-term borrowing costs incurred to avail social housing. Recommendations Local authorities should: Review their counter-fraud strategies in light of a national strategy for local government fraud; Apply best practice guidance and tools to match the success of the best of practice within the sector; Actively pursue ways to reduce the complexity associated with benefits system should be reduced in order to make real, sustained progress in minimizing fraud; Refresh local strategies to tackle housing benefit fraud and reflect on finding on research on the nature of fraud; Utilize tools produced by other counter fraud partners to help prevent and detect fraud; Maintain robust internal controls to guard against housing benefits fraud; Remain vigilant to mandate fraud and share investigative resources with other housing providers with the aim of tackling tenancy fraud; Lastly, councils should consider incentivising efforts to tackle tenancy fraud. References Audit Commission (2012). Protecting the public purse 2012: Fighting fraud against local government. Retrived from: http://www.audit-commission.gov.uk/wp-content/uploads/2012/11/20121107-ppp2012.pdf Brytting, T., Minogue, R., & Morino, V. (2010). The anatomy of fraud and corruption: Organizational causes and remedies, Farnham, Gower. p.4 Button, M., & Gee, J. (2013). Countering fraud for competitive advantage: The professional approach to reducing the last great hidden cost. Chichester, UK:John Wiley and Sons, Inc. Department for Work & Pensions (2012). Fraud and error in the benefit system: 2011/12 Estimates (Revised Edition). London: Crown Copyright. Farrell, S and Yeo, N (2007). The Fraud Act 2006. Oxford: oxford University Press. Fraud Advisory Panel (2012). Fraud in local authorities: Past, present, and future (Occasional Paper: 12/11). London: Fraud Advisory Panel. Retrieved from: https://www.fraudadvisorypanel.org/pdf_show_172.pdf Goldmann, P., & Kaufman, H. (2009). Anti-fraud Risk and Control Workbook: Epub Edition. New York, NY: John Wiley & Sons Inc. Great Britain. (2008). Department for Work and Pensions: Progress in tackling benefit fraud : report, London, Stationery Office. Jones, P. (2004). Fraud and corruption in public services. Aldershot: Gower. Kranacher, M.-J., Riley, R., & Wells, J. T. (2011). Forensic accounting and fraud examination, Hoboken, N.J, John Wiley. Smith, G., Button, M., Johnston, L., & Frimpong, F. (2010). Studying Fraud as a white collar crime. Basingstoke: Palgrave. Vona, L. W. (2008). Fraud Risk Assessment: Building a Fraud Audit Program, Hoboken, NJ: John Wiley & Sons. Read More