In response to the report into council fraud, a spokesman for the Department of Communities and Local Government said:
Local taxpayers are being ripped off by £2 billion a year because councils are failing to tackle fraud.
Councils need to do far more to raise their game to tackle these crimes.
To help councils, Government is changing the law to allow them to get tough on social housing cheats.
The report into fraud revealed fake housing and council tax benefit claims continue to account for the largest proportion of all council fraud losses - £119 million in the latest survey - however local government counter-fraud teams are spotting new risks.
These include a case uncovered by a council where housing tenants lied about their identities to increase the discount available to them under the Government's Right to Buy housing scheme.
Grants available to individuals, community groups and voluntary organisations have also been targeted by fraudsters making false applications, and evidence is also emerging of fraudulent misuse of business rate relief by companies.
The commission reported that schools are falling victim to internal and external frauds in recent years, including those involving expenses and the altering of cheques, as well as procurement and finance leases.
A new report has revealed details of the scale in which local governments have been targeted by fraud.
– Jeremy Newman, Chairman of the Audit Commission
There is no doubt our findings show councils increasingly out-smarting the fraudsters.
But while they are busy tackling established frauds, new ones keep emerging. Every threat exposed or investigated safeguards money which is needed more than ever.
A spokesman for the Audit Commission added the report, called Protecting the Public Purse 2012 - Fighting Fraud Against Local Government, found the amount of fraud detected by councils was a comparatively small amount.
He said: "There has been an increase in the amount of fraud detected by councils, but the fraud detected is the tip of the iceberg."
Councils battling fraud are detecting "only the tip of the iceberg" as local government is targeted by new forms of deception, a report published today warns.
Research by the Audit Commission has found that while councils were more efficiently tackling long-established frauds, new scams were now emerging in areas such as business rates, Right to Buy housing schemes and at schools.
Between April 2011 and April 2012 councils in England uncovered a total of more than 124,000 cases of fraud adding up to £179 million.
That compares to the 121,000 cases, totalling £185 million, detected the previous year.