Organised crime widens grant fraud operation

19th January 1996 at 00:00
Police uncover bogus student rings, report David Walker and Clare Dean. Provincial cities and counties may be targeted by student grant fraudsters who have switched their attention away from London. A specialist team has reduced fraud in London using sophisticated computer methods, but its success may be forcing false claimants to try their luck elsewhere.

Growing numbers of cases are coming to light across the country. West Midlands police recently uncovered a nationwide ring involving "students" from 23 local education authorities.

The head of the new anti-fraud unit at the Audit Commission has warned councils outside London that they may be targeted by organised crime syndicates.

The warning from Derek Purdy came as councils accused ministers of undermining their attempts to crack down on fraudulent claims for student grants.

Council leaders said the Department for Education and Employment was inhibiting progress, particularly with regard to persuading universities to adopt more rigorous checks.

They said it was not in the institutions' financial interest to draw attention to non-attendance of students because they stood to lose fee income and government grants.

Neither is it in councils' financial interest to draw attention to successful fraud as LEAs who pay grants to bogus students are required to reimburse the Government.

But the Council for Local Education Authorities said LEAs were not influenced by such considerations.

Mr Purdy praised London councils for their data-matching initiatives which use computers to check applications for housing benefits and education grants to find out if the same address was being used.

He said: "Only in rare circumstances can you legally claim both, so a match of addresses on the two would alert investigators.

"Grant fraud has dropped considerably in the London area because fraudsters fear they will be detected."

Police forces and council auditors outside London are now being encouraged to mount tracking exercises in co-operation with the Universities and Colleges Admissions Service and local education authorities.

UCAS recently installed specialist computer software, paid for by the Department for Education and Employment.

Local authorities pay Pounds 1.3 billion a year in maintenance grants to students in further and higher education, and a further Pounds 1.7 billion in fees is paid direct to colleges and universities. Last month a report from the Audit Commission complained that an "anti-fraud culture" had yet to be established in many local authorities. It noted that in 1994-95 the number of cases involving fraudulent claims against local authorities rose to 83, 000, costing Pounds 34m.

But some experts think these figures understate the problem. Housing benefit fraud has been estimated at more than Pounds 1 billion a year - more than 10 per cent of the total housing benefit budget of Pounds 10.3bn.

If a similar ratio applied to student maintenance grants, it could mean the annual cost of fraud would top Pounds 10m in further education, where all grants are discretionary, and more than Pounds 120m for higher education grants, most of which are mandatory.

However, the UCAS estimates grants fraud in higher education at no more than Pounds 2m. It accepts that some colleges - notably the former polytechnics and colleges of higher education - have been slow to adopt effective tracking of students.

So far, fraud against the Student Loans Company - which manages government-backed loans to higher education students - seems small in scale. One recent study found only 422 suspect applications for loans out of a total of 1.75m.

Fraud syndicates are targeting mortgage lenders as well as public bodies.

One problem is that different auditors scan the books of local authorities, grant-maintained schools and higher and further education colleges and do not always co-operate with each other.

Grant-maintained schools, FE colleges and training and enterprise councils appoint their own auditors from the private sector. Councils are audited by the Audit Commission.

But Whitehall departments and the higher and further education funding councils come under the National Audit Office.

The Cabinet Office is currently studying the often competitive relationship between the Audit Commission and the National Audit Office.

Council finance officers are setting up their own regional networks to target benefit fraud and support prevention work being undertaken by LEA awards officers.

The Government has expressed interest in grants to help set up regional fraud investigation teams as well as a feasibility study into a national student award database.

However, councils want official recognition of the work they are already doing, and that it has a cost.

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