Millions saved through anti-fraud pilots

Anti-fraud pilots launched by the Government are already delivering millions of pounds in savings, with up to £1.5 billion expected to be saved over the next four years, according to a new report by the Cabinet Office Counter Fraud Taskforce.

The report claims tax fraud is the highest area of fraud loss for the public sector, including £7 billion from tax evasion, £3 billion lost through "the hidden economy", and £5 billion from criminal attacks. The National Fraud Authority also estimates up to £2.4 billion is lost to procurement fraud on an annual basis, and includes collusion to fix the price of goods, and the duplication of invoices.

The taskforce revealed the implementation of a tool at HMRC that analyses tax credit claimants and compares the information with internal and external data, before deciding on the likelihood of the application being fraudulent, has already prevented losses in excess of £10.6 million. The organisation expects to save £256 million over the next four years by deploying the tool - procured following contract renegotiations with an IT supplier - across new tax credit applications.

The commissioning of a data analytics company by the Department for Transport to complete an audit on group procure-to-pay systems and detect overpayments to suppliers has already delivered £500,000 in savings. The taskforce report speculates that with Whitehall spending around £66 billion in procurement in 2009/10, up to £264 million could be recovered in a single year. A similar exercise at the Home Office recovered £4 million in savings.

According to the taskforce, four priorities should be established in order to "prevent, detect, deter, correct, and punish fraud":

• Collaboration: Silos must be removed; all parts of public sector must work together by sharing intelligence on fraudsters, developing cross-cutting capabilities, initiating joint projects using data analytics, and ensuring we jointly procure data analytics to drive down costs.
• Assessment of risk and measurement of losses: Fraud risk must be assessed before projects and programmes are underway. Losses should also be recorded and reported via the quarterly data summary.
• Prevention: Investment and resource should go into prevention, not just detection and punishment. When vulnerabilities are detected as part of risk assessment, they should be designed out.
• Zero tolerance: There is no acceptable level of fraud.

"Combating fraud will be difficult without a clear understanding of the scale and type of the problem," said the report. "The Taskforce is firmly of the view that departments need to measure fraud loss, and properly assess their fraud risk.

"All departments need to determine the extent of their fraud losses so that there is a pan-government understanding of the threat; departments then need to understand their fraud risk in the context of the overall public sector fraud threat to determine the appropriate response."

The Minister for the Cabinet Office, Francis Maude, described the estimated annual £21 billion lost to the public sector through fraud as "totally unacceptable".

He continued, "Which is why I'm really pleased to see our zero-tolerance approach to tackling fraud is working. We will no longer allow a culture of ignoring or accepting fraud. It is time to turn the tide on fraudsters and stop Government being seen as a soft touch by criminals. Every pound defrauded from the Government means that there is less to spend on frontline services like healthcare, education, policing and defence.

Maude added, "The Taskforce has made a good start and has already demonstrated that immediate cashable savings can be made from doing fairly simple common sense checks. Going forward we must take this further and work together to combat fraud across all public sector organisations."

"At a time when the Government is looking to press on swiftly with its public sector cost-cutting and efficiency measures, it's difficult to ignore the £21 billion hole in our public finances caused by fraud. Today's Counter Fraud Taskforce report points the way towards more effective prevention and enforcement," said Vicki Chauhan, Director, Government Practice at Detica.

"As Government increasingly takes its services online, it will be important that criminal behaviour is better understood - drawing on expertise and existing data from across sectors can spot suspicious activity early on and successfully prevent fraud before it occurs."