A survey of 480 public sector organisations by the Audit Commission has found that councils have been conned out of more than £7 million.
Officials were tricked into making payments intended for contractors into false bank accounts, according to the survey.
The survey found that councils across England had found more than £185 million worth of fraud, which is a raise of 37% from the 2009/10 fiscal year.
When asked, councils explained the rise in fraud cases by citing the current economic climate. With pressure mounting to make ends meet under pay freezes, pay cuts, and benefit cuts, councils said that people were “tempted” to commit fraud much more.
They also said that internal controls on fraud have been weakened due to a cutbacks and reduction in staff numbers.
The report also said that councils’ noble efforts to increase transparency in procurement were being used by fraudsters. By sending legitimate-looking letters based on the creditor information published on the internet, scammers have tried to get officials to change account details and redirect their payments to new, false bank accounts.
Knowing how to make the situation look “real,” fraudsters have called and irately followed-up with the staff to chase after their payments.
These cases cost councils £7 million, with Cumbria County Council and South Lanarkshire in Scotland being among the number of duped councils.
However, while £7 million seems an outrageous number to lose, similar scams were discovered before payments were made. Protection measures have saved at least £20 million in fraudulent payments, said the report.
One case in particular was spotted before the £5 million payment was made.
In that instance, the fraudster used a real invoice from a supplier that was published online in order to try and get his bank details swapped out for the legitimate account.
Other findings from the survey included £22m of false claims for student and single personal council tax discounts. Fraud involving council staff also rose from £6.6 million to £19.5 million this year.
Additionally, some 1,800 homes were discovered to be under tenancy fraud. Tenancy fraud involves people illegally sub-letting council housing, or living in council housing to which they are not entitled.
According to the National Fraud Authority, a total of £2 billion in fraud is committed against local authorities.