Fraud is costing your city money. How to get it back

By Jennifer Robinson, SAS

As local governments across the country continue to recover from the recession, many city and county leaders are weighing the options of raising revenue or cutting services.  But, now is a good time to look at a third option: cutting expenses by identifying fraud.

Historically, fraud has been found after clues start adding up or when a criminal makes an obvious mistake.  Now, analytics software is being employed to more quickly and thoroughly identify fraud.

SAS Fraud Framework assists governments in uncovering various forms of fraud.  It consists of advanced analytics, social network analysis, alert management, and case management.

The State of North Carolina implemented SAS Fraud Framework to detect fraud in its Division of Employment Security programs.  Within 18 months of operation, the software helped identify 105 fictitious employer schemes through 672 fraudulent unemployment insurance claims.  Not only was the State able to pursue the recovery of $2.7 million in fraudulent benefits, it blocked $5.2 million in additional fraudulent benefits that were scheduled to be paid.   

While state and federal governments and private companies have been the primary users of analytics fraud software, local governments are beginning to use technology to identify deceptive practices that drain valuable resources from worthy projects and recipients.

Fraud can occur in many ways, but it is often identified in:

  • Revenue-generating programs
  • Programs in which state or federal money is passed through a local government
  • Software systems from which information is stolen

At the forefront of using analytics technology, Los Angeles County employed SAS to detect, prevent and deter fraud in its Department of Public Social Services (DPSS) public assistance programs. The DPSS offers temporary financial assistance, employment services, free/low-cost health insurance, food benefits, and in-home supportive services for the elderly and disabled.

To combat fraud, LA County first needed a data integration solution and a powerful analytical engine to bring together numerous internal and external data sources to build and run predictive models. The social network analysis and analytics for DPSS predicts which benefit recipients and service providers are most likely to engage in fraudulent activity and reveals collusive fraud rings.  By identifying historical patterns of fraudulent activity, investigators can focus on cases with a higher probability of fraud.

Since deploying its fraud system, LA County has significantly improved efficiencies, uncovered more fraud and accelerated investigations. Approximately 10-15 cases per month are referred, with more than 40 percent being positive for fraud. This has not only helped the county recover funds and prevent fraudulent payouts, it has also curtailed large collusive fraud rings.  That cost avoidance is incalculable.

Neither raising taxes and fees, nor cutting services, is going to go over well with citizens. However, using their money more responsibly and efficiently by reducing fraud is something everyone will appreciate.

Jennifer Robinson is Director for Local Government Solutions at SAS, a Smart Cities Council Lead Partner.