Audit Commission: National fraud-busting initiative on course to exceed £1 billion payback to the public purse

The National Fraud Initiative (NFI), a sophisticated data matching system, has already helped to identify £939 million worth of fraud, overpayment or error across UK public bodies since it began 16 years ago.

The Audit Commission is today publishing the results of continuing success in the fight against fraud in the NFI National Report.

The NFI has grown into a partnership of 1,300 participating organisations from across the public and private sectors, including the Audit Commission's sister audit agencies in Scotland, Wales and Northern Ireland.

Chairman of the Audit Commission, Michael O'Higgins, says:

'This process delivers impressive results year after year, and is well on its way to returning a landmark £1 billion to the public purse, money that would otherwise have been lost to fraud, over-payment or human error.'

NFI data matching is carried out continuously, and the Audit Commission reports results every two years. Since the last report in May 2010 the scheme has identified almost £229 million of fraud, overpayments and errors in England, and £47 million worth in Scotland, Wales and Northern Ireland - a national total of £275 million.*

The highest value categories identified in England continue to be Pensions (£98 million), Council tax single person discount (£50 million) and Housing benefit (£31 million). Among other headline figures, the latest report shows:

• 164 employees were identified as having no right to work in the UK;
• 321 false applications were removed from housing waiting lists following a pilot with London borough councils;
• 731 people were prosecuted, 636 of them for housing benefit fraud;
• 31,937 blue badges and 51,548 concessionary travel passes were cancelled.

An increasingly wide range of frauds are signposted by NFI data matching, and then investigated by the participating bodies. This year's report gives details of:

• Immigration fraud work with the UK Border Agency to detect refused and expired visas;
• 398 prevented or detected cases of council payments made to private residential care homes after the residents' deaths, worth £3 million;
• Social landlords recovering 235 properties since 2010 that were unlawfully occupied, and reallocating them to genuine tenants who would otherwise be placed in expensive temporary accommodation;
• NFI working with the Serious Organised Crime Agency to identify 'virtual addresses' used as a front for unlawful activity or scams.
• NFI working with the Metropolitan Police to spot large scale identity theft. A pilot using the Amberhill police database of known fraudsters generated over 200 matches.

NFI can help to detect everything from small scale individual fraud or error to serious organised crime. Fraudsters often target different organisations at the same time, using the same bogus identities. The NFI combats this threat by data matching information held by 1,300 different organisations.

However, the report notes that, across central government, only the Department for Communities and Local Government and the Highways Agency have joined so far.

Michael O'Higgins adds:

'Despite its strong focus on tackling fraud, central government is still not sharing in the obvious benefits of the NFI. Every public body audited by the Commission is required to take part, but government bodies can choose whether or not to do so. And so far most have chosen not to. I have written to Sir Bob Kerslake, Head of the Home Civil Service, suggesting that he makes it a requirement for Whitehall and its arm's length organisations to take part in the NFI.'

Also, only a handful of housing associations are using the NFI to tackle the problem of tenancy fraud. Despite clear evidence that it is a powerful tool for detecting fraudulent occupation of social housing - a driver for increased homelessness costs - fewer than 6 per cent of registered housing associations currently take part in the NFI. If all social landlords had joined it is estimated that the number of unlawfully occupied properties recovered since 2010 would have more than doubled to 487. Michael O'Higgins has written to Lord Taylor, Chair of the National Housing Federation, and Robert Napier, Chair of the Homes and Communities Agency, to alert them to this issue.

Michael O'Higgins says:

'NFI works within a strong legal framework, including the Data Protection Act 1998, to protect individuals' personal data. It is also undeniably cost-effective, helping to recover hundreds of millions of pounds of public money each year against an annual outlay of around £1.3 million. The introduction of real-time data matching marks a shift towards fraud prevention as well as detection. The government has committed to continuing NFI after the Audit Commission is abolished, and the Commission pledges to continue to lead this vital work until data matching powers are transferred to a successor.'

* Where applicable, amounts included in this report have been rounded to an integer, 0.5 and above were rounded up and under 0.5 rounded down. The actual figures are England = £228.695m, Wales + Scotland + Northern Ireland = £46.650m, Total = £275.345m

Notes to editors

1. Link to a copy of the NFI National Report here.
2. Plus, there are case studies online.
3. Copies of the Audit Commission's 'Protecting the Public Purse' annual reports on fraud in local government.
4. The Wales Audit Office is publishing its report on fraud at the same time as the Audit Commission, Audit Scotland publishes on 31 May 2012, and the Northern Ireland Audit Office on 26 June 2012.
5. The NFI collects data from 1,300 participating organisations across the public and private sectors, and welcomes the support that some government departments give by providing data about claimants, deceased people and immigration status. But so far only the Department for Communities and Local Government and the Highways Agency have agreed to receive NFI data matching results.
6. The Audit Commission is also calling on the government to increase NFI's effectiveness by extending its data matching powers to non-fraud purposes - for example, the recovery of debt and arrears owing to public bodies, as already provided for in the Audit Commission Act 1998.
7. The Audit Commission is a public corporation set up in 1983 to protect the public purse. The Commission appoints auditors to councils, NHS bodies (excluding NHS Foundation trusts), local police bodies authorities and other local public services in England, and oversees their work. The auditors we currently appoint are either Audit Commission employees (our in-house Audit Practice) or one of the private audit firms. Our Audit Practice also audits NHS foundation trusts under separate arrangements. We also help public bodies manage the financial challenges they face by providing authoritative, unbiased, evidence-based analysis and advice.

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