Councils 'lose £7m in false bank account scam'

keyboard and credit card Creditor information published on council websites is being used by criminals from the UK and overseas
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Councils have been conned out of more than £7m by criminals using information put on their own websites under transparency drives, a survey says.

The Audit Commission said officials were being tricked into making payments - intended for building firms and other contractors - into false bank accounts.

The problem emerged from the survey of 480 public sector organisations.

It found councils across England detected more than £185m worth of fraud last year - up 37% on 2009/10.

Councils said fraud cases were rising because the current economic climate was putting pressure on people's personal finances; council staff numbers were reduced, weakening their fraud controls and criminals were using information published on council websites to defraud them.

The report highlighted cases where criminals from the UK and overseas had sent legitimate-looking letters based on creditor information published on the internet to persuade officials to change account details.

In some cases, firms' phone lines were temporarily diverted to fool staff trying to check original records.

Several such cases cost councils £7m, but similar scams - which would have cost councils a further £20m - were discovered before payments were made.

Among those duped were Cumbria County Council and South Lanarkshire Council.

The Audit Commission now wants stronger warnings across the public sector to stop the problem from spreading.

Other findings from the survey included:

* More than £22m of false claims for student and single person council tax discounts were made
* Some 1,800 homes were recovered as a result of tenancy fraud - where people live in council houses to which they are not entitled, or illegally sub-let them
* Fraud involving council staff rose from £6.6m to £19.5m this year
* False insurance claims doubled in a year, and cost councils £3.7m in 2010/11
* More than 100 cases of abuse of care budgets - amounting to £21,000 each on average - were dealt with last year

Total fraud committed against local authorities is believed to be more than £2bn, according to the National Fraud Authority.

Chairman of the Audit Commission Michael O'Higgins said councils were acting on fraud but warned the figures in the survey may be "just the tip of a very large iceberg".

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