The six page 'Welfare fraud in Australia: Dimensions and Issues' (Trends & Issues in Crime & Criminal Justice no. 421) by Tim Prenzler seeks "to help inform the debate about welfare by providing data on the size and dimensions of welfare fraud, including substantiated fraud, as evidenced by criminal convictions".
In contrast to simplistic statements by the Government, redolent of rhetoric about 'the war on fraud' alongside the 'war on drugs, terror, bikies etc' Prenzler offers a nuanced analysis. He comments that -
The official data reported in this study only take us so far. More detailed studies might assist in developing greater consensus about how to respond to fraud. For example, some preliminary research has been done on the range of losses involved in convicted fraud cases and the sentencing outcomes. Marston and Walsh (2008) studied 80 social security fraud cases in two Magistrates’ courts. They found that the average amount involved was just over $10,000. The largest amount was $30,105 and the lowest was $162. There were no cases of identity fraud or elaborate scams.'Detecting and preventing welfare fraud' (Trends & Issues in Crime & Criminal Justice no. 418) by Prenzler finds that "the current suite of anti-fraud measures is successful in detecting numerous frauds and reducing losses through recoveries. At the same time, the enlargement of initial prevention measures is likely to see increasing interest and commitment from government."
In their view, the findings ‘challenge the stereotype of the organised criminal willingly defrauding the Commonwealth Government for large sums of money’ (Marston & Walsh 2008: 297). The researchers concluded that in many cases, it was plausible that circumstances pointed to error rather than criminal intent (see also Hughes 2008). In questioning the value of prosecuting many of these cases they also pointed to the fact that 85 percent of persons had already repaid all or some of the debt, were further burdened with court costs and that very low tariff penalties were imposed in almost all cases. Of 96 penalties, there were only two prison terms. The remainder involved good behaviour bonds (58%), community service orders (16%), suspended sentences (14%), fines (6%), or probation (3%). This study did not include higher courts where more serious cases are prosecuted. Nonetheless, the findings suggest there may be little value in pursuing minor matters in the criminal courts when administrative remedies are available.
A final issue concerns the preventive effects of anti-fraud measures. At present, ‘success’ against welfare fraud appears to lie primarily in the area of ‘secondary prevention’; that is, in detecting and stopping ongoing fraud after it has begun. With secondary prevention, the benefits obtained from halting future losses are enlarged by the recovery of past losses through repayment orders against convicted offenders. However, in terms of the overall picture, something of a paradoxical situation can be seen. As fraud prevention efforts increase, more suspected fraud is uncovered. The result is that there are few signs of substantive reductions in fraud and there is an ongoing ‘roll call’ of offenders convicted in the courts — approximately 3,000 each year (see Table 1). Consequently, the most significant challenge for welfare fraud policy is to make a more decisive shift from secondary prevention to primary prevention; that is, to prevent fraud occurring in the first place and reduce the need for expensive and difficult secondary level processes of detection, prosecution, punishment and restitution. This challenge is recognised by the Australian Government (Ludwig 2008a) and addressed in more detail in another Trends & Issues paper (Prenzler 2011).
The paper claims that in 2008/09 -
• Centrelink conducted four data-matching cycles, involving 53,643 reviews, resulting in the debt recovery actions totalling $112.5 million.That team "investigates identity fraud including offenders stealing, borrowing, fabricating or altering identity documents to obtain illegitimate payments. The team has advanced computer equipment and skills to detect fraudulent identities."
• Tip offs, data-matching and other triggers led to 26,084 formal investigations of possible fraud and a further $113.4 million was recouped.
• 5,082 matters were referred to the Commonwealth Director of Public Prosecutions. Of those cases, 3,388 cases were prosecuted with a conviction rate of 99%. The average saving was calculated at $4,347 per investigation.
• There were 166 referrals for prosecution by Centrelink's Identity Fraud Detection Team
Overall, the recouped money amounts to around 3 days of Defence spending
Prenzler comments that -
Delivery of welfare payments and the prevention of fraud involve a difficult balancing act. On the one hand, there are obligations related to the protection of customers’ privacy, the speedy delivery of benefits and the avoidance of additional hardship to customers through investigation and debt recovery action. Alternatively, there is a legal and ethical duty to ensure taxpayers’ dollars go to genuine recipients.
In that regard, accountability occurs through a number of mechanisms. All Centrelink customers can have their claims reviewed internally as well as appeal to the Social Security Appeals Tribunal and the Administrative Appeals Tribunal. Centrelink’s complaints handling system had been commended by the ANAO for ‘accessibility, responsiveness and objectivity’ (ANAO 2009: 15). Customers can also complain to the Commonwealth Ombudsman, who received 7,226 complaints and approaches about Centrelink in 2008–09. While ‘complaint themes’ included ‘debt management’, they did not specifically include fraud-related matters (Commonwealth Ombudsman 2009: 59). The Ombudsman observed that Centrelink is ‘generally very responsive’ to his interventions and often resolves matters within 24 hours (Commonwealth Ombudsman 2009: 60). Centrelink is also subject to audits by the ANAO and is subject to privacy and freedom of information laws.
Centrelink appears to be in step with best practice in fraud management internationally, including by giving increasing attention to prevention through diverse initiatives such as better initial applicant identification checks and facilitating communication about clients’ changed circumstances (cf ANAO 2006; Reeve 2006; SNCCP 2008). However, the ongoing detection of fraud indicates the need for better methods of primary prevention (Ludwig 2008b; Prenzler forthcoming). Recent initiatives in data-matching with financial institutions and in ‘real time’ identity verification procedures offer considerable potential. A number of other options are available. It is possible that more could be done in the area of diagnostics, by categorising fraud cases in more detail and analysing offender methods. Resources could then be targeted at the most frequent or most expensive types of frauds to close off opportunities. A study of the motivations of offenders would also be useful to identify the extent to which lower end benefit and salary levels, and levels of personal debt, provide incentives for fraud (Marston & Walsh 2008). Questions of the legitimacy and effectiveness of the system would also be well served by more surveys, including surveys of customers (Kuhlhorn 1997). The costs of detection and prevention systems could also be set against estimated gross savings to identify the more effective strategies that might be enlarged (cf Greenberg, Wolf & Pfiester 1986).
