Housing Association Fraud

Fraud in housing associations – how to identify it and mitigate your risk

“Fraud is a problem that undermines the stability and financial health of organisations across the economy. It is not a victimless crime and can be hugely damaging to any organisation – especially so to social housing organisations where it often has the sort of direct, negative impact on the quality of life that is not found elsewhere ”

[i] According to the Centre of Counter Fraud Studies at the University of Portsmouth. Housing associations are among the most vulnerable sectors when it comes to fraud. In 2018 alone, an estimated £216m was lost in the UK due to tenancy fraud – including £55m through illegal subletting and £82m through fraudulent rights to buy applications[ii].

Some common types of fraud in housing associations:

1. Tenancy Fraud

This occurs when a tenant breaches certain terms in their agreement or misleads a housing association in order to secure a tenancy agreement. In this scenario, fraud can become apparent in numerous ways:

  • Application fraud – where false information is provided by a tenant with hopes of securing a property or where multiple applications are submitted for different properties, in different locations, by the same tenant.
  • Right-to-buy fraud – this occurs when a tenant applies for a discount to purchase their council home, while providing false information, knowing the property has been subject to another tenancy fraud or signing a third-party contract to purchase a property on another’s behalf.
  • Key-selling fraud – where a tenant or housing association employee sells the keys for a property to someone who does not have the rights to live there.
  • Subletting fraud – where a tenant rents out some, or all, of a property without the landlord’s knowledge or consent.
  • Succession fraud – this occurs when a person moves into a property after the legal tenant moves on or passes away, without consent from the housing association or landlord.

2. Corporate fraud

Although not exclusive to housing associations, corporate fraud is common throughout the social housing sector. Some of the common types include:

  • Bribery and collusion – where an employee conspires with a third-party contractor or supplier for personal gain.
  • Cybercrime – where an organisation falls victim to phishing emails or other malicious software, which is specifically designed to damage systems, obtain data or cause the re-direction of money.
  • Supplier fraud – this occurs when false, duplicate or inflated invoices are submitted by a supplier or where information is falsified during a tender process.
  • Mandate fraud – where an organisation is contracted by a third-party impersonating a supplier to request a change to bank details to divert all future payments.
  • Payroll fraud – where an employee corrupts the payroll system to receive funds which they are not entitled to.
  • Finance function fraud – this might include financial statement fraud, bribes within the finance team or misappropriation of assets.
  • Recruitment fraud – when someone misrepresents themselves as an employee of an organisation to offer a false job opportunity.

Reducing the risks

Preventing fraud is about finding the balance between having the appropriate processes and procedures in place to identify fraud and allowing employee autonomy and a positive workplace culture which can prevent fraud from occurring in the first place.

Here are three ways in which housing associations can mitigate the risks they face:

1. Whistleblowing and other counter-fraud policies

Relevant anti-fraud policies can help you to ensure any suspected instances of fraudulent activity are identified, investigated and remedied quickly.

It is essential to consider stakeholders such as employees, tenants, local councils, suppliers and contractors when designing your organisation’s anti-fraud policies. Stakeholders are your organisation’s front line and will often be the first to witness any dishonest activity.

In order for these policies to be effective, it is crucial anonymity of the process is trusted, the policies are communicated clearly throughout your team, reviewed on a regular basis and frequent training is provided for employees.

2. Get your culture right

Policies alone are not sufficient to ensure protection. Your organisation’s culture is heavily influenced by your leadership – leaders are responsible for setting the tone for those they manage.

If your leaders get their culture right, their teams will be motivated to help the organisation achieve its goals. This engagement is crucial in protecting you against fraud, as disenchanted employees hold little loyalty towards protecting your business.

Your team are your eyes and ears. If you look after them, they will look after your business.

3. Promote information sharing and best practice

Once you have the right culture in place, promote trust and information sharing throughout your organisation. If employees feel comfortable around their leaders – they’re more likely to speak with them when they see something that doesn’t seem right.

Share best practice and emphasise the importance of compliance to all employees and shareholders. Leaders should demonstrate a rigorous attitude to compliance for their employees to follow.

Protecting business, reputation and vulnerable tenants

In housing associations, fraud goes beyond financial losses. It is also about protecting the people you are trying to help. The impact of any fraud in this sector can be substantial as it can cause a loss of funds, which may result in a tenant losing the opportunity for an affordable home.

By having the right culture in place, encouraging employee and stakeholder engagement and promoting trust, you will see a reduced risk of fraud.

If you would like more information on how you can act to reduce the risk of fraud within your housing association, get in touch.

[i] Centre for Counter Fraud Studies at the University of Portsmouth (2010). The Resilience to Fraud of the UK Charity Sector. PKF Accountants & business advisers, p.1.

[ii] Veritau (2019). The cost of tenancy fraud #TFAW2019 | Veritau. [online] Veritau.co.uk. Available at: https://veritau.co.uk/news/cost-tenancy-fraud-tfaw2019.

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