Cracking down on fraud in Sefton

The National Fraud Authority estimates that single person discount fraud costs councils and taxpayers £92m a year. Margaret Rawding, head of corporate finance & ICT from Sefton MBC, pictured, tells how Sefton recovered over £300,000 with help from arvato and Experian.

Council Tax fraud is estimated to cost councils and taxpayers £130m of which £92m is undetected single person discount fraud according to the latest NFA indicators in April. This figure is based on earlier work by the Audit Commission which estimated that the rate of Single Person Discount fraud is around 4 per cent of council tax claims. Whatever the true figure, it is clear from our experience at Sefton, that investigating single person discount fraud represents a significant opportunity to raise additional income for local authorities, and one that can be achieved cheaply, legally and efficiently with the right approach.

Along with many other councils, Sefton has tackled the problem of single person discount fraud through the use of data matching. This approach, which uses external data from credit reference agencies, was recommended by the Audit Commission in 2009 as the most effective way of detecting false claims for single person discounts on council tax. In Sefton alone, we recovered over £300,000 in a single coordinated exercise working with arvato and Experian. This was £127,000 more than we originally envisaged at the outset and amounts to 4 per cent of all claims being cancelled.

However, many local authorities have yet to tackle the problem of single person discount fraud and therefore are not benefiting from the significant additional income readily available for their tax payers and local services. The approach is compliant, uncomplicated and extremely cost effective. Evidence also shows that councils that conduct single person discount checks for the first time stand to gain sizeable cash benefits within only a few months of commencing a programme.

Sefton Council worked closely with its service provider, arvato, and Experian, the credit reference agency. They provided us with best practice advice on compliance as well as useful guidance on how best to communicate with residents using tried and tested letters. We adopted a phased approach which was both effective and proportionate. The first phase of letters enabled many people not entitled to the discount, whose circumstances had recently changed, to renounce their claim of their own accord. Many people only needed reminding. This process enabled our fraud investigators to treat each case differently and move more quickly to identify, prioritise and engage with hardened cases of fraud.

The process was very straightforward. We provided Experian with 25,661 records of people claiming sole occupier status. Experian returned 3,711 records which showed strong evidence of dual or multiple occupancy. We sent out letters to people whose residency check indicated multiple residents. Those receiving letters were asked to provide details of any adult occupant residing at their address. As a result, 2,964 customers responded to the letters providing information on changes within their household. A further 894 reminder letters were issued for non respondents allowing 7 days to respond or lose the entitlement to the Sole Occupier Discount.

During the period of review there have been enquiries from customers having their discount removed. However, although 3 cases have been referred to Experian to enquire about the information on their records, none of the enquiries has resulted in either a formal complaint being raised or an appeal against the cancellation of the discount.

The following table provides a breakdown of the number of accounts which have had their discount entitlement cancelled and the Council Tax property band to which the dwelling was placed in. The table also shows the value of additional collectable debt following removal of the discount.

The number of cancellations represents 4 per cent of those reviewed. The additional collectable Council Tax of £308k per annum was £137k or 80 per cent above the target at the outset of the project. Although the collectable debit was raised we still achieved our in year collection targets for 2011/12 thus ensuring that the increased debit was converted into additional income.

Margaret Rawding, head of corporate finance & ICT from Sefton MBC