As Audit Commission says £14.6m reported fraud in local authorities last year is just the tip of the iceberg

The Audit Commission has reported a 441% increase in reported cases of councils being hit by procurement fraud.

The commission said councils were being hit by scammers posing as building firms, which were then tricking them out of millions of pounds worth of fees.

The revelations emerged from a survey of 480 local authorities, which also showed reported cases of fraud overall at £185m - up 35% during 2010-11, compared to the previous year.

There were 145 reported cases of procurement fraud over the period valued at £14.6m, compared to just £2.7m the year before.

But the Audit Commission said the £14.6m figure underestimated the scale of the problem - the National Fraud Authority estimates that procurement fraud costs councils about £855m a year.

The commission called on councils to properly report cases of procurement fraud, adding that the main areas of procurement fraud were:

  • Cartels involving collusion among some bidders to agree that they will not bid competitively for a particular contract
  • Applicants tendering, but not in accordance with contract specifications, and then submitting false claims for extra costs under the contract
  • Contractors providing inferior goods or services
  • Contractors intentionally overriding minimum statutory pay and health and safety regulations for financial gain
  • Contractors presenting false invoices
  • Contractors providing inflated performance information to attract greater payments than are due

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