The National Fraud Initiative finds £229 million of fraud, overpayment and error

12 June 2014

The National Fraud Initiative (NFI): National Report (June 2014) highlights that the Audit Commission’s sophisticated data matching exercise has identified a further £229 million of fraud, overpayment or error in England, Scotland, Wales and Northern Ireland, since it last reported in May 2012. The highest value categories identified in England continue to be pensions (£74 million), followed by council tax single person discount (£39 million) and then housing benefit (£33 million).

The total value of cases of fraud, overpayment or error identified by the NFI is lower, albeit the number of cases rose by 19.4 per cent over the same period. The Commission believes this potentially indicates that participants are increasingly effective at the early detection of fraud, overpayment and error. This will have been helped by the Commission’s introduction of a new service, NFI Flexible Data Matching, which has made it possible for participants to undertake near-instantaneous data matching at any time.

Chairman of the Audit Commission, Jeremy Newman says: ‘We publish a report from the NFI every two years and continue to produce great results. The national figure for identified fraud, error and overpayment, that would otherwise be lost to the taxpaying public, is down by £46 million compared to the previous report although the number of cases has increased by nearly 20 per cent. This is great news if, as we believe, it is due to improving detection rates. However, we cannot be complacent. The more participants in the exercise, the richer the data for everyone involved and the harder it is for fraudsters to hide from detection. We know there are areas struggling to tackle fraud effectively, such as in the housing sector, and with only 35 housing associations participating in the exercise, we need greater involvement to get even better results in this area.’

In 2012, the Commission highlighted that only two central government departments, the Department for Communities and Local Government and the Highways Agency, were actively involved in the initiative. The exercise now has 13 central bodies taking part. The Commission’s Chairman has warmly welcomed the Cabinet Office, Home Office, Department for Health, HM Revenue and Customs and the Department for Work and Pensions amongst others to the initiative. Their active involvement brings rewards to all participants, and the NFI team hope this will encourage all of central government to be included. In the meantime, the NFI is working with these departments to further develop the initiative in ways to best target their specific fraud risks.

The new Single Fraud Investigation Service will eventually investigate all welfare fraud perpetrated against the Department for Work and Pensions, HM Revenue and Customs and local authorities. During the transition, the Commission is concerned that housing benefit investigations will suffer as responsibilities shift. A decrease in the number of councils utilising an optional data match (housing benefit against student loans data) provides an early indication that this could be the case. The NFI is working closely with the Department for Work and Pensions to mitigate, where possible, negative impacts that result from this change in policy.

In April 2015, the National Fraud Initiative will move to the Cabinet Office. The latest report demonstrates the continued success of the exercise and the Commission has indicated that with the NFI performing so strongly, it is well placed for the handover to the Cabinet Office at the end of next March. The Commission anticipates that the transfer will go smoothly given the already positive and active engagement of colleagues at the Cabinet Office. The commitment of the Cabinet Office will help ensure the NFI team continue to provide, and develop, this valuable service with as little disruption as possible.

Mr Newman concludes: ‘The NFI has identified over £1.17 billion in fraud, error and overpayment since its launch. The overall value of the fraud, overpayment and error found is 82 times greater than the £1.4 million a year cost, representing excellent value for money. I anticipate this consistent success will continue, especially as we transfer the NFI into such safe hands. I would like to thank the Commission’s NFI team for their dedication to the exercise over its eighteen year history. I also thank colleagues at the Cabinet Office for all their hard work and preparation to ensure continuity of service when we close. The NFI team’s knowledge, skills and dedication has ensured a lasting legacy for the initiative and gives me every confidence that the NFI has a bright future.’

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Notes to Editors
1). The figures used throughout the report for detection of fraud, overpayment and error include outcomes already delivered and estimates. Estimates are included where it is reasonable to assume that the fraud, overpayment and error would have continued undetected without the NFI data matching. A more detailed explanation is included in Appendix 1 of the report.

2). Where applicable, amounts included in this report have been rounded to an integer, 0.5 and above were rounded up and below 0.5 rounded down.

3). The headline figure of £229 million represents a  fall in identified fraud, overpayment or error of £46 million (11 per cent) since the national figures were released in May 2002,.

4). Among other headline figures, the latest report shows:

• 86 properties have been recovered for social housing;

• 120 people employed without the right to work in the UK were identified and as a result were dismissed or asked to resign;

• 571 people have been prosecuted;

• 2,394 false applications have been removed from housing waiting lists; and

• 21,396 blue badges and 78,443 concessionary travel passes, identified as invalid, were cancelled

  5). 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.

  6). The Audit Commission’s role is to protect the public purse. We do this by appointing auditors to a range of local public bodies in England. We set the standards we expect auditors to meet and oversee their work. Our aim is to secure high-quality audits at the best price possible. We use information from auditors and published data to provide authoritative, evidence-based analysis. This helps local public services to learn from one another and manage the financial challenges they face. We also compare data across the public sector to identify where services could be open to abuse and help organisations fight fraud.

  7). The central government departments/arm’s length bodies that took part in the 2012/13 initiative are:

• Cabinet Office

• The Department for Business, Innovation and Skills

• Department for Communities & Local Government

• Department of Energy and Climate Change

• Department of Health

• Department for Work and Pensions

• Highways Agency

• House of Commons

• Home Office

• Office for National Statistics

• Ordnance Survey

• HM Revenue and Customs

• Legal Aid Agency

  For further information please contact:
  Nick Rigg, Senior communications specialist
  Direct line: 0303 444 8284
  Press office: 0303 444 8282
  Email: n-rigg@audit-commission.gsi.gov.uk