Would You Report Someone For Welfare Fraud?

Lots of people are interested in my post a while back about welfare fraud in the USA. So I thought I’d do a follow up. First, I’ve got some current figures from reliable sources. Here’s part of a 2011 paper. If figures bore you, skip to the interesting stuff below:

Overseas findings The UK Department for Work and Pensions estimated that in 2008-09, approximately 2.2 percent of all benefit expenditures, or 3b [pounds sterling], was overpaid as a result of fraud and error (DWP 2009). Half of this, about 1.1b [pounds sterling], was attributed to fraud, although this was based on a sampling procedure rather than convictions. The figure represented an increase, from a low of 0.6b [pounds sterling] in 2005-06, despite concerted efforts by the department to stop fraud (NAO 2008). In the United States in 2008-09, the Social Security Administration Office of the Inspector General (2009) received 129,495 allegations of fraud and closed 8,065 cases, with 1,486 criminal prosecutions. These activities involved over US$2.9b in ‘questioned costs’; with US$23.3m in recoveries, US$2.8m in fines and a further US$25.5m in settlements, judgement and restitution orders.

Australian data
The following section presents data supplied by Centrelink on its compliance and fraud-related activities and outcomes. Unlike the UK Department for Work and Pensions, Centrelink does not provide estimates of fraud but reports on detected errors and fraud prosecution actions and outcomes.
Formal fraud investigations are usually initiated through compliance and eligibility reviews. Reviews occur in large numbers each year. There is a crossover of triggers and methods, including routine data-matching, random sampling, identity checks and public tip offs.

Table 1 reports on the outcomes of reviews for the three year period 2006-07 to 2008-09. Of note is the fact that typically, only 15.7 percent of reviews led to cancellations or reductions in payments. Of these, as few as 0.8 percent were referred to the Commonwealth Director of Public Prosecutions (CDPP); with 0.5 percent being prosecuted. Prosecutions resulted in a 98.8 percent conviction rate. Overall, in the three years, 0.04 percent of customers were convicted of fraud. For the same period, fraud investigations were estimated to have produced $380.6m in gross savings and amounts targeted for recovery. This compares with $1.4b in overpayments identified and debts generated from the review process. Fraud therefore accounted for approximately 26.2 percent of invalid payments. Furthermore, on average, only 15.1 percent of investigations resulted in a prosecution referral. In 2008-09, Centrelink referrals accounted for 69 percent of defendants prosecuted by the CDPP (2009: 115-116).

Table 2 provides a snapshot of fraud across the top 15 benefit types. Within this group, the Single Parenting Payment and Newstart Allowance (unemployment benefit) together accounted for 72 percent of convictions and $33.5m of debt. The Disability Support Pension and Partnered Parenting Payment together accounted for a further 14.7 percent and $7.6m of debt.
Figure 1 shows longer term trends for compliance reviews and adjustments for the 12 year period from 1997-2008 (when Centrelink was established) to 2008-09.
They show that, in terms of the number of Centrelink customers, compliance reviews increased by 54.5 percent from an average of 41.1 percent of customers up to 2001-02, to an average 63.4 percent subsequently, while cancellations or adjustments more than doubled from 4.3 percent to 10.1 percent.
Figure 2 shows that referrals to the CDPP have increased less dramatically, with prosecutions and convictions at a fairly stable rate.

Exerpt from Prenzler, Tim. “Welfare fraud in Australia: Dimensions and issues.” Trends & Issues in Crime and Criminal Justice (2011)

Be careful in how you read the figures above, as it isn’t always clear what they mean. Also, these figures don’t tell the whole story. I haven’t fully absorbed the paper, but in essence, it supports my previous claim that less than 2% of people on welfare commit fraud.

In my last post, a few people queried the definition of fraud in the comments. So here’s the definition I’m using: Fraud is knowingly accepting welfare payments that you are not legally eligible for.

Note that it’s knowingly. Mistakes by the recipient, or the welfare agency are not fraud.

“Abuse of the system” is not fraud. If Bob is lazy and doesn’t want to work, but the welfare system has evaluated him fairly and allocated him funds, this is not fraud. You may wish to reform the system so that people like Bob can’t get money, but it’s not fraud. In New Zealand, where I live, it is not at all easy to get welfare, and it is not at all easy to live on welfare. It’s not a “cushy life”. Another paper I read suggests we feel more strongly about welfare fraud than we do about tax fraud or white collar fraud, arguably more serious crimes. I wonder why this is?

A few commenters assert that fraud is much more widespread than my figures show. Again, I reply: Show me the evidence.

Some commenters give anecdotal evidence, eg, “My sister has a baby and she hasn’t told them who the father is so she can get welfare, even though they are living together.” My question is, if you are so concerned about welfare fraud, why don’t you report them to the authorities? I know someone who has probably been collecting more welfare than she is entitled to for many years. Yet, if I report her, her son might suffer financially. Maybe we get the welfare system we deserve?

Would you report someone close to you for welfare fraud? If not, why not?

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