Introduction

1.1  Local authorities (LAs) paid an estimated £11.2 billion to 4.5 million people in Housing Benefit (HB) and Council Tax Benefit (CTB) in 1998/99. The National Housing Benefit Accuracy Review 1997/98 (NHBAR) estimated the level of fraud and error to be £840 million a year. This is a huge sum of money and consequently the government is committed to reducing fraud and error by ensuring that the right money goes to the right person.

1.2  A new contract for welfare: SAFEGUARDING SOCIAL SECURITY sets out the government’s strategy for achieving this. It calls for sustained and detailed effort across 4 fronts:

• getting it right – benefit payments should be correct from day one
• keeping it right – ensuring payments are adjusted as circumstances change
• putting it right – detecting when payments go wrong and taking prompt action to correct them with appropriate penalties to prevent a recurrence
• making sure things work – by monitoring progress, evaluating the strength of defences and adjusting them in the light of experience.

1.3  The Benefit Fraud Inspectorate (BFI) is an integral part of this strategy. Through our reports on LAs and DSS agencies we aim to:

• identify areas where improvements can be made to raise overall standards of benefit administration and counter fraud operations
• make recommendations to address weaknesses
• identify and spread good practices among administrators.

1.4  This report on Barnet follows our on-site inspection conducted between July and August 1999.

Main conclusions and recommendations

1.5  While we found a failure on the part of management to deal with problems promptly, including those that have been identified for a considerable time, Barnet’s benefit administration is operationally satisfactory with much commitment and some good initiatives on the ground. However, these initiatives lack depth and therefore effectiveness. For example, a Pilot Visiting Team (PVT) was formed in October 1998, but procedures for dealing with failure to make contact with the claimant were not established until May 1999.

1.6  Counter fraud performance on the other hand is very poor, particularly in the areas of quality of investigations and management performance. This has been the situation for a number of years.

1.7  Our key areas of concern in Barnet are as follows:

• structural divisions that create ineffective administration and inefficiency
• failure to effectively manage a secure benefits system
• lack of co-ordination between the Benefits section and Barnet’s Anti-Fraud Investigation Service (BAFIS), which compounds the failure to ensure security in the benefits system
• incorrect classification of fraudulent overpayments by the Benefits section, and the doubt this casts on the validity of Weekly Benefit Savings (WBS) claimed by BAFIS
• minimal audit activity in administration and no recent activity in BAFIS
• Internal Audit (IA) and External Audit (EA) recommendations not being implemented, resulting in the same failures being identified over the last 3 years and again in this report
• failure to effectively manage BAFIS, including a lack of HB and CTB expertise
• failure to adequately resource BAFIS
• poor quality of investigations and under-performance of BAFIS.

1.8  We have set out below, against the aims of the government’s fraud strategy, our main findings and conclusions following the inspection.

Getting it right

1.9  Barnet has excellent customer service access points. Claim clearance performance is also excellent, being well in excess of the average national performance, but we are concerned that this performance is at the expense of proper verification.

1.10  Before our inspection, Barnet reviewed and revised its claim form. The new form is a significant improvement in terms of collecting all possible evidence to establish the validity of a claim. Barnet is keen to improve the form further by implementing BFI recommendations.

1.11  Barnet is committed to implementing the Verification Framework (VF) by April 2000. The establishment of the PVT in October 1998 was a major step towards this goal, but Barnet needs to improve the performance and the effectiveness of the team. There is also significant room for improvement in verifying claims, particularly on identity and residency.

1.12  Barnet has delivered training on payslip verification to benefit processors, but our examination of earned income cases revealed significant weaknesses in this area, both in terms of verification and follow-up action.

1.13  A good number of management checks are made on determinations. However, our findings cast doubt on their depth and effectiveness.

1.14  Liaison with external organisations is good, but there is room for improvement, particularly with Employment Service (ES) in terms of developing a Service Level Agreement (SLA), and in delivering HB and CTB awareness sessions for ES staff.

1.15  Our recommendations will:

• improve the effectiveness of the PVT
• give better assurance about the accuracy and integrity of claims
• enhance awareness of the HB and CTB schemes amongst ES staff.

Keeping it right

1.16  Barnet’s Benefits section has successfully obtained ISO9000, and all staff have access to a detailed operational procedures manual. Despite this, staff are inconsistent in setting benefit periods.

1.17  Despite being part of IA, BAFIS was excluded from the ISO9000 accreditation that IA received and has no detailed operational manual.

1.18  Barnet has a dedicated team to deal with requests for internal and further reviews, but its effectiveness has been reduced, both by a restriction in staff resources and non-availability of team members.

1.19  We are satisfied that Barnet is making efforts to focus resources on keeping payments right, but found that it needs urgently to improve identification, classification and recovery of overpayments.

1.20  Barnet maintains contact with claimants. Computer-generated reminders are issued midway through the benefit period to ask about any change of circumstances. Unfortunately, the effectiveness of this check is undermined because claimants are not asked to submit nil returns.

1.21  BAFIS uses data matching exercises where appropriate, but needs to review the prioritisation of referrals to counter unacceptable delays in clearance.

1.22  A management failure to deal with problems as they arise has affected communication between the Benefits section and BAFIS.

1.23  Barnet has been slow to develop preventative and deterrent measures. Some are in draft form, but are inadequate. The Do Not Redirect initiative is the only one to have been implemented to date, but we were concerned about the absence of data on results achieved so far, and the doubt that this casts on the management of the initiative.

1.24  Our recommendations will:

• improve Barnet’s preventative and deterrent measures
• help it develop its operational procedures to deter fraud and error
• encourage a co-ordinated approach to improving efficiency and security in service delivery.

Putting it right

1.25  BAFIS has no formal training programme, has not carried out a training needs analysis and is missing the opportunity to use the corporate appraisal system to identify training needs.

1.26  The fraud awareness training that Barnet gave to its benefit staff just prior to our inspection was the first in 6 years. No training has been given to other council employees. This raises questions about the effectiveness of quality control checks on fraud referrals, and consequently about Barnet’s ability to detect internal fraud.

1.27  BAFIS has an internal newsletter (one issue to date) to publicise the outcomes of investigations and to highlight fraud trends. We commend BAFIS for this initiative but recommend that it should be part of a comprehensive and formal publicity strategy.

1.28  We were concerned to find that BAFIS sometimes fails to pass on experience and information about investigation cases to other internal and external investigators.

1.29  The staffing resources on BAFIS are totally inadequate.

1.30  SLAs have been signed with Benefits Agency (BA) and Chiltern’s Benefit Fraud Investigation Service (CBFIS), but achievement against the agreed standards is not monitored.

1.31  Our recommendations will:

• help BAFIS do what they should be doing—reducing the stock of fraud in the benefits system
• give a better level of assurance as to the integrity and correctness of decisions and determinations.

Making sure things work

1.32  Barnet is going through a period of change following a management restructure in April 1999. There is an urgent need for Barnet to develop a strategic approach to securing benefits service delivery and improving counter fraud measures. This should include a review of the current structural divisions which reduce Barnet’s ability to deliver a secure benefit service.

1.33  Barnet should consider the following key issues in developing a strategy and the supporting strategies, policies, procedural guidance and officer’s key work objectives:

• securing benefits service delivery
• counter fraud measures to support secure delivery and to prevent and deter fraud
• the government’s fraud and security strategy
• the recommendations in this report.

1.34  We are concerned that the lack of standards, targets and management information, particularly within BAFIS, seriously restricts managers’ ability to make informed decisions about service delivery. Barnet has not clearly specified the standards of secure benefit delivery and counter fraud activity it wants, nor can it measure achievement or identify whether its actions help to deliver the government’s fraud and security strategy.

1.35  IA activity is a key means of assuring the effectiveness of benefits and counter fraud work. We are very concerned at the very low level of IA activity in benefits administration and the complete lack of it in BAFIS. We would expect to see a more scientific approach to the allocation of IA time and are therefore pleased to note that for 2000/01, IA plans to undertake a risk analysis before determining the work programme.

1.36  Our recommendations will:

• enable Barnet to support central government’s fraud and security strategy
• help Barnet measure the effectiveness of strategies and policies developed to support the government strategy
• offer both the Secretary of State and elected Members a greater level of assurance as to the correctness and legitimacy of payments made
• help to develop remedial action against weaknesses in operational procedures.

Summary

1.37  Our main concerns centre on the poor performance of BAFIS and on Barnet’s failure to deal with issues that have been raised several times in EA and IA reports, particularly in relation to secure delivery of benefit.

1.38  Barnet acknowledges that there is much to be done, confirms that it will learn from our findings and has told us that the deficiencies will be rectified. In our view, improved verification should be central to this process.