The number of fraud cases detected by local authorities fell to 107,000 cases with a total value of £178 million in 2012-13.
This compares with 124,000 cases with a value of £179 million in 2011-12 – representing a 14 per cent drop in the number of cases but a 15 per cent increase in the average value per case to £1,664.
The Audit Commission study found procurement fraud made up just £1.9 million of the total, but in the report the commission cited National Fraud Authority estimates that such fraud was worth £876 million in 2012-13, making it “the single largest area of financial loss to fraud in local government”.
The report said: “This suggests that far greater attention should be given to tackling procurement fraud.”
According to the report, examples of procurement fraud included collusion between staff and bidders, collusion between bidders, and bidders failing to tender in accordance with contract specifications and then submitting false claims for extra costs under the contract.
Once a contract is in place, examples of fraud included providing goods and services of inferior quality to lower costs, ignoring minimum pay and health and safety regulations for financial gain, providing inflated performance information, and submitting false invoices.
Other areas of fraud included schools and illegal subletting of council homes. Housing benefit and council tax benefit together made up more than two-thirds of the total value of fraud detected.
The commission found more than three quarters of all fraud was detected by one quarter of councils, and 79 per cent of district councils detected no non-benefit fraud at all.
Commission chairman Jeremy Newman said: “It’s difficult to isolate the specific factors that cause variations between organisations in the level of detection of different types of frauds. This will be influenced by the actual levels of fraud available to detect, differences in the services that bodies provide and their local approach to prioritising and tackling fraud.
“However, not to detect a single case of non-benefit fraud does raise concerns about the priorities and resources in those councils to tackle fraud. I would urge all councils to review their local policies to ensure they are doing all they can to detect and record fraud cases.”
Paul Guile, CIPS procurement fraud advisor, said: "The first step in tackling procurement fraud is to ensure local councils recognise procurement fraud as a risk formally. They then need to carry out a procurement fraud health check and implement a procurement fraud training programme."