Open government leaves town halls vulnerable to fraud

The warning from the Audit Commission came as figures showed a 37 per cent leap in the level of fraud being detected against town halls and other local public bodies to £185m last year.

Total fraud committed against councils is believed to be upwards of £2bn annually.

The report from the spending watchdog showed the reported losses in the Yorkshire and Humber region in 2010/11 totalled £11.2m. But this figure was down from £13.4m the previous year. The number of reported cases of fraud in the region was also down from 15,900 to 10,300.

The survey showed procurement suffered the biggest rise in cases – up four and a half times on the previous year to £14.6m. Fraud involving staff also rocketed from £6.6m to £19.5m.

But one of the biggest areas of concern is mounting efforts by fraudsters to con the public sector into diverting legitimate cash into false bank accounts.

At least £7m was successfully siphoned off by criminals using legitimate-looking letters based on creditor information available on local authority websites to persuade officials to change the bank account details of building firms and other contractors.

Another £20m worth of such scams were discovered before payments were made.

Increasingly sophisticated methods are being employed to get around checks – including temporarily diverting the firms’ own phone lines to fool staff.

Local Government Minister Grant Shapps described the sums as “shocking” and added: “Far more can be done by town halls to save money, and so protect front-line services – such as better credit checks on benefits and proper vetting of staff that handle money.”

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