Institute of Criminal Justice Studies
Social Housing Fraud Costs £2 Billion
Wed, 07 Dec 2011 11:19:00 GMT
The report, published by the University of Portsmouth and PKF Accountants and Business Advisers today, reveals fraud in the social housing sector could be costing in excess of £2bn a year.
‘The Resilience to Fraud of the UK Social Housing Sector’ survey – the most comprehensive study of its type ever undertaken – looks at how well the industry protects itself against fraud, highlighting where it is getting it right and identifying areas for improvement.
Combining the report’s conclusions with the results of a separate study by the same authors, PKF and University of Portsmouth estimate that fraud in the social housing sector could involve up to 228,000 properties that are not being occupied as intended.
The report has been published at a time when the government has just announced its proposals for the future of the sector in 'Laying the Foundations - A Housing Strategy for England', which commits the Department for Communities and Local Government to 'increasing the number of houses available to rent, including affordable housing' by 'increas[ing] the efficiency and flexibility of the social housing sector'.
Using a 50 point scale to assess the fraud resilience of 69 social housing organisations, the report finds that the social housing industry achieved an average score of 32.3 points. This compares favourably with the results achieved by the private sector (30.6) and charities (24.4), but is not as high as the 34.4 posted by the public sector.
The results reveal that social housing organisations performed strongly in a number of key areas. For example, all respondents stated that they had arrangements in place for prompt reporting of suspected fraud and 92 per cent undertook vital work to design out fraud from processes and systems. However, there are identified a number of areas where organisations could improve their pre-emptive counter fraud activities. In particular, the authors discovered that only 16 per cent of those surveyed used losses estimates to make judgements about how much to invest in countering fraud and just 23 per cent reviewed the effectiveness of counter-fraud work. In addition, only 29 per cent of social housing organisations ensured that their counter-fraud staff were professionally trained. The report calls for urgent progress in these areas.
Dr Mark Button, Director of the university’s Centre for Counter Fraud Studies and co-author of the report, said: “The development of the fraud profession over the past decade has enabled organisations to treat fraud as a business issue like any other – something to be quantified and assessed, with clear metrics showing the speed of progress in reducing its cost and impact.
“Historically, this has not been the case. Hoping that fraud will not happen, or just reacting when it inevitably does, simply does not constitute a viable approach in today’s world. Social housing organisations are clearly on the right track in this regard but there is still work to do if the sector wants to protect its increasingly scarce resources against the dishonest minority who try to defraud it.”
Fraud is a serious issue for organisations operating within the social housing sector and one that has far reaching consequences including the reduction in the availability and quality of homes, according to Hamid Ghafoor, National Social Housing Partner at PKF.
He said: “Traditional issues such as tenancy fraud, including illegal subletting, non occupation, or submission of false information continue to be problems that organisations tackle on a day-to-day basis. However, the problem is broader than this, with expenditure on repairs, procurement and other areas also affected. And as technology continues to advance, criminals devise new and imaginative ways to target the sector and recent real life examples have seen providers transfer significant amounts directly via BACS into the bank accounts of criminals. Furthermore, as the economy continues to suffer and wages don’t stretch as far as they once did, the threat from within also increases.
“We welcome the government’s plans for the future of social housing but there is a real danger that fraud in the social housing sector will undermine these intentions. The good news is that the government has made clear its desire to 'look closely at the case for strengthening powers in existing legislation on tenancy fraud', with a consultation document due to be issued by DCLG in the next few weeks.”
Jim Gee, Director of Counter Fraud Services at PKF, Chair of the Centre of Counter Fraud Studies at the University of Portsmouth and co-author of the report, said: “Fraud is a problem that undermines the stability and financial health of organisations across the economy. It is not a victimless crime, and can be hugely damaging to any organisation – especially so to social housing organisations, where it often has the sort of direct, negative impact on the quality of life that is not found elsewhere.”
“Being serious about providing quality social housing surely must include ensuring that it is not deprived of the funding that is intended for it. We encourage social housing organisations to look at the weaknesses identified by this report and take pre-emptive action to minimise fraud losses in the future.”
The Resilience to Fraud of the UK Social Housing Sector report is published by PKF (UK) LLP and University of Portsmouth and written by Jim Gee, Dr Mark Button, Graham Brooks and Nicola Higginbottom.