Countering Fraud in Social Benefit Programmes

Executive summary

Fraud in social benefit programmes (SBP) diverts taxpayers’ money away from essential services and reduces benefits for well-meaning recipients. When individual beneficiaries or private providers defraud SBPs, they jeopardise the integrity of these programmes and, in some cases, prevent governments from delivering adequate services and products. When fraud schemes are uncovered, the public’s trust in government is put into question.

Through SBPs, governments provide support to families, individuals and businesses in areas such as health, employment benefits, and pensions. To ensure that governments continue to improve societal well-being and provide a safety net for those who need it, effective anti-fraud measures should be in place. Recognising the need to develop a broader understanding of this issue and the current approaches that governments are taking to counter fraud in SBPs, this report takes stock of what is currently being done and identifies areas for future research and collaboration. The report builds on the OECD’s work on public sector integrity, and seeks to support policy makers and practitioners in maintaining the accountability of SBPs by highlighting good practices and areas for improvement.

Developing effective prevention measures

This report emphasises preventive measures, including control activities, as cornerstones of governments’ efforts to counter fraud in SBPs. It demonstrates how overarching strategies, when communicated to the public, can help organisations lay out their strategic vision for tackling fraud. Such strategies clearly define how an organisation envisions addressing fraud and error, and provide a roadmap for staff to counter fraud in high-risk areas. For instance, a risk-based approach would lead governments to target preventive controls at the claimant registration phase, where SBPs are most vulnerable. By focusing on preventive measures at this stage, such as simplifying processes for declaring additional income and re-registering for benefits, public organisations can minimise fraud risks at the entry point of SBPs and therefore at later stages. Ensuring that these measures are proportional allows public organisations to deliver SBPs efficiently, reducing the burden on beneficiaries where possible while countering fraud.

Alongside developing a strategy and conditions for early detection, fostering a better understanding of what motivates individuals to commit fraud helps public organisations design communication campaigns in a nuanced way, and potentially changes their approach to fraud deterrence. Governments tend to rely on punishment-oriented messaging that communicates the penalties for committing fraud. While necessary, such approaches are not entirely effective in deterring fraud. By testing and adapting fraud deterrence messaging, public organisations can ensure that control activities and public campaigns are responding to the reality of how and why individuals commit fraud.

Improving detection tools

Technology has revolutionised the way that governments access and use data to meet policy objectives and deliver services. When it comes to SBPs, data-driven approaches have transformed how public organisations manage programmes, including preventing and detecting fraud. Through investment in intelligence capabilities and the application of data analytics techniques, data is increasingly used as a strategic resource in anti-fraud initiatives. While public organisations face challenges in leveraging data, there are opportunities to strengthen fraud prevention and detection in SBPs. In line with data protection regulations, public organisations can adopt explicit strategies to increase access to data and to allow data sharing across relevant bodies. By establishing dedicated units with the necessary skills to apply data analytics techniques, governments can ensure that data are used effectively to strengthen anti-fraud measures while promoting efficiency in service delivery.

Fraud detection can be improved by gauging how different actors play a role. Internal and external audit bodies contribute to fraud detection, and there are opportunities for public organisations to make better use of audit findings to refine their anti-fraud measures. For example, internal audit functions can identify control weaknesses that may suggest fraudulent activity or abuse, while supreme audit institutions (SAI) can provide a broader view of how effective anti-fraud measures in SBPs are. By undertaking subject-specific studies, SAIs can assess fraud and error prevention measures within public organisations, and may draw attention to systemic deficiencies in anti-fraud practices.

In SBPs, the public provides valuable information regarding suspected or potential fraud, and governments should ensure that appropriate mechanisms are in place to facilitate reporting. By making sure that hotlines and online portals are available to the public, with the option of reporting anonymously, public organisations can obtain information on potential fraud that they may not otherwise have access to. Furthermore, governments can encourage reporting by communicating the negative impact of fraud in SBPs.

Enhancing evaluation to foster continuous improvement

Evaluation activities are crucial for improving fraud prevention and detection. If measures are ineffective, evaluations help determine alternatives and inform resource allocation. To ensure that evaluations are accurate, public organisations need to measure fraud in SBPs, which poses a number of challenges. The hidden nature of fraud and unreliable data render this process difficult. Acknowledging the variation in measurement methods used by governments and the challenges that measurement poses, public organisations can nevertheless seek to evaluate the effectiveness of their anti-fraud measures and the scale of fraud in SBPs.

As data become more readily available, there are increasing opportunities to measure fraud levels in SBPs. Establishing a baseline allows public organisations to monitor changes in the rate of fraud based on changes in the control environment, which is a critical feedback loop for managerial decision making. Once a baseline is established, the data can be used to determine the impact of control activities and whether the nature of fraud in SBPs has changed. Regularly evaluating control activities helps direct resources towards those that are cost-effective. Through analysis of evaluation results and by monitoring baselines of fraud, public organisations can produce evidence-based fraud reduction targets to support continuous improvement of fraud prevention measures.

Looking ahead, the report concludes by outlining areas that would benefit from further analysis to improve the knowledge base of the most effective anti-fraud measures. These include, but are not limited to, considering how behavioural insights can be applied to fraud prevention in SBPs, the use of data analytics and innovative methods for detecting fraud, and looking in greater depth at the link between prevention, audit and investigations.