Creditor fraud in local government remains a worrying issue

fraud

Local government organisations are under tremendous pressure to reduce spending and cut costs, so the last thing they need is to see money leak out by fraudulent means.

But the bad news is that creditor fraud in local government remains a worrying issue, with reports of one authority falling victim to a £102,000 scam in 2010.

In June 2010, the Communities and Local Government Secretary Eric Pickles instructed local authorities to publish details of all spending over £500 in full online, saying the move would unleash an army of armchair auditors.

Such transparency and openness should have a positive effect, improving accountability and rooting out problems. So, six months on, what progress has been made towards that objective and what has been the impact of the publication of spending details?

Two months after Pickles’ deadline of January 2011, reports suggest all but three councils have published their information. Yet the transparency provided through the publication of spending details is far from an end in itself.

The availability of such data – whilst illustrating how money is actually spent – could provide another avenue for deception. Fraudsters could potentially adopt the identity of any of the listed suppliers.
Such adoption would lead the fraudster to notify the authority with a change in bank details. The hope is that the body would then change the information in their finance system and make payments to the fraudster’s bank account.

Public sector organisations, therefore, have no choice. They simply must take steps to ensure that technology is being used to safeguard financial information. And that technology must make use of fraud detection and prevention tools.

Business intelligence tools, such as spend analytics software, will help your organisation to identify spending patterns and potential weak spots that could provide a loophole for fraudsters. In addition, document management will provide an electronic audit trail that allows invoices, purchase orders and other financial documents to be securely stored.

Transparency is a good thing, but only if your technology systems can cope. The publication of spending details means now is the time to be certain.

Dean Dickinson is Managing Director of Advanced Business Solutions, formerly COA Solutions. Dean has been in the finance software business since 1990. He was part of the senior management team at QSP/Arelon prior to the acquisition by COA Solutions at which time he became Deputy Managing Director for the business as a whole. Since the acquisition of COA Solutions by Advanced Computer Software Group in February 2010, Dean has become Managing Director for Advanced Business Solutions. He is a specialist in consultancy and has a strong knowledge of business processes within a high volume/high value environment.