Procurement fraud identified by local councils quadruples

10 November 2011

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10 November 2011 | Adam Leach

The amount of money obtained by fraudsters from local council procurement has risen by more than 440 per cent in the past year, according to a report.

Protecting the Public Purse, published today, revealed that while the number of cases of fraud identified by local councils has dropped by 20, the amount of money obtained by fraudsters rose to £14.6 million, compared with last year’s figure of £2.6 million.

While the rise may cause alarm, the Audit Commission, which conducted the report, said the figures do not necessarily indicate an increase in fraudulent activity. It said factors such as better recording and increased resources for identifying potential frauds could mean councils are just better at spotting it.

Audit Commission chairman Michael O’Higgins, said: “Councils are certainly acting on fraud, and it is now firmly on the government agenda. But our latest survey of detection rates shows that we may be seeing just the tip of a very large iceberg.”

The report goes on to explain that the key areas of procurement fraud include collusion among companies to not bid for specific contracts to drive down competitiveness, contractors presenting false invoices and also providing inflated performance assessments in order to receive bonus payments.

An earlier report by the Audit Commission explained that Cumbria County Council had been the victim of a £581,000 fraud. In February, the council changed the bank account details for a supplier when asked to do so. However, it turned out that a fraudster, rather than someone representing the supplier, made the request. Once the issue had been identified, £460,000 was recovered and a man was charged.

The latest report from the commission indicated that the recent push to improve transparency and accountability over local council spending might be a welcome development for fraudsters. The report said: “Criminals, including some based outside the UK, are using details of key creditors from the transparency information that councils now publish on their websites. They use data to mislead and redirect payments to and from public bodies.”

The Audit Commission will cease to exist from some time in 2012/13. Its functions will be distributed among government departments and the audit element will be taken on by the private sector.

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