Audit strategy for temporary parental benefit

The aim of this project is to study the possibility to apply audit strategies developed for taxation on fraud and involuntary errors in the social benefit sector. The efficiency of different audit strategies is compared using a computer-based optimization algorithm.

Two types of audit strategies are used in this study. One is to adapt the audit intensity to the propensity for errors and fraud in different segments of the group studied. The other type of audit strategy is based on adaptation of behaviour through information concerning the audit intensity. A model for determination of optimal tax audit strategies of the latter type was developed by Erard & Feinstein in 1994.

This study is based on data from a large study of temporary parental benefit performed by the Institute for Evaluation of Labour Market and Education Policy (Institutet för arbetsmarknadspolitisk utvärdering, IFAU) in 2006.

The study has shown that it is possible to apply the Erard & Feinstein model on benefit fraud. However, the solution method developed by Erard & Feinstein has proven to be non-optimal. A new solution method based on simulation has been developed and used in the study.