Welfare Fraud in Australia: Dimensions and Issues

Article excerpt

This paper reports on key aspects of welfare fraud in Australia. It begins by outlining the basic aims of welfare systems that provide direct economic support, the vulnerability of these systems to fraud and issues around culpability and appropriate responses to suspected fraud. The paper also describes problems experienced when attempting to measure fraud and provides an analysis of available data about the size and dimensions of the problem, including case studies of major frauds. Overall, demonstrable fraud represents a very small fraction of all welfare transactions, but it also represents significant losses, demand for prosecution and loss recovery action. Overall, there is a need for greater consensus on the best ways to prevent fraud and deal with offenders.

The welfare state and the challenge of fraud

Welfare fraud-or ?benefit' or ?social security' fraud-is a controversial problem that has accompanied the growth of the welfare state. The modern welfare state developed in conjunction with the post World War II economic boom. It was designed, often in an ad hoc fashion, as a comprehensive system through which governments provide support for all citizens in need, with a view to eliminating poverty and enhancing health and wellbeing (McMahon 2005). Welfare systems frequently entail a wide range of living allowances paid to the elderly, unemployed, those with intellectual and physical disabilities, sole parents and students. Support also normally includes a range of partial, indirect or in-kind government funded benefits, such as child support payments and free or discounted medical services and childcare.

The welfare state has been the target of numerous criticisms. One standard critique is that it attracts fraud. There can certainly be little doubt that early benefit systems were highly vulnerable to abuse (Reeve 2006). It was not without justification that the terms ?dole bludger' or ?welfare queen' became part of the social and political discourse in many countries in the 1970s and 1980s.

Anecdotes about people feigning illness or disability, living on welfare while avoiding work, or collecting benefits while working, became a standard part of social gossip (Bradbury 1988). The right to apply for welfare and the availability of money created intrinsic temptations for people to attempt to obtain benefits fraudulently (Kuhlhorn 1997).

Welfare is usually organised around two main criteria-universal eligibility or means testing. Under universal eligibility, all persons fitting general criteria receive a benefit. For example, anyone over a specified age receives an old age pension. Conversely, means testing involves a second set of criteria related to income and assets. Recipients must meet a criterion, such as age, and also have income and assets below a specified threshold. Means testing is the primary form of welfare provision in Australia. It appears to be less costly, by reducing the number of recipients, and appears to be fairer in providing income only to those in genuine need. Alleged disadvantages of means testing include the requirement for a more complex bureaucracy and the creation of temptations for some applicants to understate or hide income and assets (Kuhlhorn 1997).

Something of the scope for fraud can be seen in statistics for Australia's federal welfare agency Centrelink (located in the Department of Human Services portfolio). In 2008-09, Centrelink distributed approximately $86.6b to 6.8 million customers, including $10.4m in individual entitlements, across 140 benefit types on behalf of 27 government departments and agencies. It approved 2.7 million new claims, operated over 1,000 service delivery centres, employed just under 28,000 staff and made over six billion transactions on customer records (Centrelink 2009a: 28).

Ensuring payment integrity

A number of factors have led to reassessments of liberal access to welfare and a concern for ? …