Fraud experts question accuracy of statistics

28 Jan 10
Cases of public sector fraud are much higher than official estimates, experts have warned.

By Lucy Phillips

28 January 2010

Cases of public sector fraud are much higher than official estimates, experts have warned.

Jim Gee, former chief executive of the NHS Counter Fraud Service, told Public Finance the National Fraud Authority’s estimates of the cost of fraud to the UK were ‘puzzling’, with figures for the health service ‘extraordinary’.   

The NFA published its first annual fraud indicator on January 21, claiming that deception and scams cost the country £30bn a year.  Some 58% of fraud was in the public sector, at a cost of £17.6bn, with the NHS accounting for £263m of the losses.

But Gee, who is director of counter fraud services at MacIntyre Hudson LLP and is chair of the Centre for Counter Fraud Studies, said the fraud calculated by the NFA in the NHS equated to 0.27% of its budget. This is compared with a global average of 5.59% for health care systems, according to a recent study by Macintyre Hudson.

‘I would be very interested in how that was calculated. If we assume the NHS is at the bottom of the global range of losses and as good as or better than any other country then it should still be losing £3.3bn,’ he said.

The NHS has not published figures from measured fraud losses since the end of 2006, when Gee left the Counter Fraud Service. Average shortfalls up to that time stood at just over 4%.

‘The amount is quite key because the aim is not to frighten people but to be clear about the potential for practical savings from reducing the losses,’ Gee added.  

The MacIntyre Hudson report put fraud losses at an average of 4.57% across all sectors, which would equate to more than £27bn in the public sector. 
 
The NFA said their new indicator was the most accurate and comprehensive yet, but admitted that it was ‘likely to underestimate the full financial impact of fraud’ because figures were not available for some industry areas or data only included reported losses.

Anne Jefferies, the NFA’s head of measurements and analysis, added: ‘As improvements are  made in the quality and availability of fraud loss estimates, it is likely that the overall fraud estimate will increase.’

Andrew Davis, head of public sector fraud at credit-checkers Experian, told PF that fraud in local authorities was much more widespread than implied by the NFA indicator, which concentrated mainly on social housing tenancy and single person council tax discounts.

‘There’s leverage [for fraudsters] wherever you look,’ he said, adding that fraud data was rarely shared among public sector organisations as was the case in the private sector.  

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