Supplier payment fraud up by 40%, says commission

15 February 2001
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15 February 2001 | David Arminas

The value of fraudulent payments to suppliers and contractors by local councils has increased by 40 per cent in the past year, according to local government spending watchdog the Audit Commission.

Its annual report, Protecting the Public Purse: Ensuring Financial Probity in Local Government, shows a rise in detected fraud from £1.7 million in 1998/99 to £2.4 million in 1999/00.

The average fraud was valued at £32,000, while the total fraudulent payments to contractors alone amounted to £1.4 million.

In one instance, the contract manager of a council-owned cleaning direct labour organisation (DLO) set up a company to provide labour to it. He allegedly awarded his company the exclusive contract to the DLO without declaring his interest.

Checks made later on found that many of the staff were non-existent. A prosecution is pending for fraudulent claims of £40,000.

The report says the suspected fraud was possible because of "a lack of separation of duties and the manager's ability to override the checks and balances that should have been operating".

The Audit Commission said any increase is disturbing. But Derek Purdy, the author of the report, acknowledged that it could not be sure whether there is more fraud being perpetrated or that the commission has simply got better at detecting it.

Its anti-fraud and corruption unit is developing risk-based software to help its auditors direct their work to areas of contracts that show a high risk of fraud.


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