Summary

1.1 Local authorities (LAs) pay over £13.7 billion to 4.5 million people in Housing Benefit (HB) and Council Tax Benefit (CTB). The London Borough of Lambeth (Lambeth) paid out some £146 million in HB and CTB in 1999/2000.

1.2 Lambeth has the largest population of the Inner London boroughs at 269,500 people, and is one of the most ethnically diverse boroughs in Great Britain. It is socially deprived, and was ranked 12th of the 354 English LAs on the Department of the Environment, Transport and the Regions’ index of local deprivation, 1998.

1.3 A new contract for welfare: SAFEGUARDING SOCIAL SECURITY sets out the government's strategy for tackling fraud in benefits. It calls for a 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, and
making sure the strategy works - monitoring progress, evaluating defences and adjusting them in the light of experience.

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

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

1.5 The on-site phase of our inspection of Lambeth took place during September and October 2000. During our inspection, we looked at the administration of HB and CTB and the processes and procedures that Lambeth uses to prevent, detect and investigate HB and CTB fraud. We give our main findings and conclusions below under the 4 headings of the government's counter fraud strategy.

Main findings and conclusions

Getting it right

1.6 We found that Lambeth fails to meet statutory time limits for clearing work, and to reach a satisfactory standard against Best Value (BV) performance indicators. As is made clear elsewhere in this report, we consider that Lambeth's backlog of work is a primary cause of this failure and many others. However, we identified one team (the Red Bag Scheme) where processing performance was significantly better than most. There is an opportunity for Lambeth to disseminate the good practices employed by the Red Bag Scheme team to the other teams responsible for processing HB and CTB.

1.7 At the time of our on-site inspection, we found that Lambeth was giving priority to those benefit claims where the claimant:

contacted the LA to query the progress of their claim
was threatened with eviction
complained, and the case was considered to be a priority
complained to the Local Government Ombudsman (LGO)
sent a letter of complaint through a legal representative.

1.8 Our sampling, interviewing and observations confirmed that Lambeth is failing to provide an adequate benefits service.

1.9 Our greatest concern is the integrity of the gateway into the benefits system, which we consider to be wide open to the risk of internal and external fraud. The backlog of benefit claims, and the impact that it has on Lambeth's day-to-day work, presents a major risk. We found that:

claimants who make enquiries by telephone or persons wishing to be seen and not just handing in a document do not receive a satisfactory service. For example, the average waiting time for callers at Olive Morris House (OMH) was 101 minutes in September 2000
benefit claims are not dealt with promptly, with some claimants having to wait over 6 months for their claim to be processed. Despite these delays, Lambeth fails in its statutory duty to make payments on account.

1.10 The filing system is inefficient, and duplicate files are created if the original cannot be found. In one extreme example, staff assessed a claim without creating a file. Lambeth is aware of the deficiencies of the filing system and is working in partnership with Capita to improve it. Lambeth expects that this will make a significant difference to the efficiency of the system.

1.11 The inefficient filing system has resulted in poor claim control by individual staff. A lack of measurable staff targets and of management checks on the quality of processing work has led to a high proportion of errors, which are allowed to continue without correction. It also provides an opportunity for internal fraud. Without such checks, managers have no assurance as to the competence of staff.

1.12 Lambeth set up the Partnership Board (PB) in response to these issues. It consists of Members, including the Leader of the council, the Chief Executive, Executive Director of Financial and Corporate Services, other officers and Capita representatives, and its principal aim is to improve Lambeth's benefit service.

1.13 As one example of the improvements that the PB has brought about, Lambeth's reception area has recently been equipped with televisions and vending machines. However, we would argue that some of these improvements are directed at the symptoms of much deeper problems, and that Lambeth has not yet dealt with the underlying causes of its failure to provide a good service.

1.14 For example, while the reception area may now be more comfortable, Lambeth continues to close it early so that staff can deal with queuing customers by the end of the working day. The reception monitoring arrangements are poor because Lambeth only records the number of people who attend the interview booths. As a result of this poor management, waiting times remain excessively long and are, in our view, unacceptable.

1.15 Much of Lambeth's benefit operation is managed by a contractor, Capita, including a telephone call centre in Coventry that deals with the telephone enquiries that Lambeth receives. On visiting the centre, we found the service to be efficient. Most calls were from people awaiting payment, and we found that call centre staff generally responded by asking the person to call back later.

1.16 Post opening is an important area of HB and CTB administration. We found that Lambeth needs to tighten up several aspects of its postal procedures and security. For example, we found that staff were allowed to enter and leave the post room during the post opening process.

1.17 The efficiency and security of an LA's benefit processes can be put at risk if its benefit claim forms are not well designed. We found that Lambeth’s 4 claim forms that are poorly designed and unclear, and that the main claim form omits important questions. Lambeth has begun to address this problem and has targeted summer 2001 to change the form.

1.18 Lambeth has not adopted the Verification Framework (VF), which sets minimum standards of verification. Our sampling showed the Lambeth's verification processes are poor, and that it fails to meet VF standards. We were concerned at the infrequency of cross checks, and noted that discrepancies in documents provided by claimants were not always followed up.

1.19 We found that Capita makes few management checks on the work of its staff, thus preventing it from measuring accuracy and from identifying training needs. Where checks are made, Capita fails to use the information produced. It has set targets for assessors that have never been met, and managers tolerate poor performance. This is unacceptable and demonstrates ineffective management.

1.20 Under the relevant legislation, a determination officer must determine benefit claims before payment is made. In our sample of 120 new and renewal claims we found 27 (22.5%) where Capita had paid benefit before determination by the determination officer, thus breaching legislative requirements. The cause of this failing was the poor control of the process between Capita and Lambeth. Since our onsite phase Lambeth has addressed this area and has brought in additional resources to ensure a member of the LA determines all claims.

1.21 Lambeth has a poor record for meeting the statutory time limits for processing claims. Its best performance in recent years was a 48% success rate for HB in 1999/2000. Capita had improved processing times since taking over the contract, but much scope for improvement remains.

1.22 Where an LA fails to pay benefit within the relevant timescales, it is required by law to make payments on account. Our sampling showed that Lambeth fails to carry out this duty in the majority (53%) of cases.

1.23 Sound administration of HB and CTB relies in part on good communication between the LA and other agencies, particularly Benefits Agency (BA). We found that local BA offices were not always able to contact Lambeth, and that Lambeth does not use the Remote Access Terminal (RAT) to its full potential. Lambeth sometimes asked claimants to approach BA for written confirmation of their entitlement to Income Support (IS)/Income-based Jobseeker’s Allowance (JSA(IB)), despite the availability of this information on the RAT.

1.24 Lambeth does not work closely with the Employment Service (ES). There is no Service Level Agreement (SLA) and very little contact between the 2 organisations. ES confirmed to us that it would welcome greater contact with Lambeth so as to improve their working relationship.

1.25 We found that Lambeth fails to comply with the regulations that govern the referral of cases to the Rent Officer (RO). Lambeth has allowed the contractor to create and send referrals without any reference to the LA. It is only the LA who can determine to refer to the RO. There were significant delays in the transmission of referrals to the RO and further delays in entering the values provided by the RO onto the HB IT system. The local RO has expressed concern about the standard of Lambeth's rent referral cases as they are not always complete.

Keeping it right

1.26 We found that Lambeth issues notices of determination to the claimant in only 92% of cases, despite the legal requirement to send them in all cases. We have concerns about the validity of the notices from the old computer system, and set these out in detail in the body of this report.

1.27 Lambeth has tried to improve matters by requiring its benefit processors to tailor notifications to the circumstances of the case. However, we found that inadequate training of staff had hampered this initiative.

1.28 It is important that claimants are given sufficient time to complete and return renewal forms before their current entitlement ends. Lambeth issues renewal forms in good time, but does not make enquiries where claimants fail to return them. This failure could cause hardship to vulnerable claimants, and prevents Lambeth from identifying potential fraud.

1.29 While renewal forms are issued on time, we found that most of the resulting claims are processed well beyond the statutory 14-day timescale. As a result of these delays, there was a break in the claim in nearly 25% of cases.

1.30 Lambeth is required by law to tailor benefit periods, but does not do so. We found that most benefit periods had been set at 52 weeks, even where it was clearly wrong to do so. The terms of the contract do not allow HB to be paid for more than 52 weeks yet the benefit period had been set at 60 weeks in 17% of our sample. We did not find any cases where the assessor had considered the risk of fraud when setting the period.

1.31 Lambeth has little communication with Housing Associations (HAs) and other private landlords. Representatives of HAs do attend the Benefit Board, which is a forum for disseminating information about HB issues, but this group meets infrequently.

1.32 Given Lambeth's problems, we were surprised at its failure to liaise effectively with private sector landlords. Better liaison would, amongst other things, reduce the number of overpayments that occur when the claimant moves.

1.33 Lambeth has a formal agreement with local HAs which governs the handling of enquiries about tenants who are in arrears and are subject to court proceedings. While this is a useful agreement, we consider it to be another example of dealing with the symptoms of a problem, rather than curing it.

1.34 The Lambeth Housing Department (HD) is the largest landlord that Lambeth's HB office deals with. We found that relations between the 2 were poor, and that the HD demanded and got a level of service that a normal private landlord would not be able to request.

1.35 We found that there was pressure from the HD not to suspend claims where there was a suspicion of the claimant leaving the property as invariably the information received was not correct. However we found that HB has been claimed incorrectly where a HD property had been abandoned and unnecessary overpayments have been created. We consider that the relationship between the HD and the HB office needs to be urgently addressed so that unnecessary work is not being generated.

1.36 We did not find any evidence that Lambeth applies risk management to claims. This lapse is surprising, considering the proactive input of Corporate Anti-Fraud Team (CAFT) into counter fraud activity in Lambeth, and can be attributed to the poor working relationship between CAFT and the HB office.

1.37 We examined a sample of review cases and found that, on average, 90% of first stage reviews were resolved. We also found that only 22% of our sample were cleared within the statutory time scale. This too represents very poor service.

1.38 We found good review board procedures with elements of good practice such as use of an independent legal adviser, and well-written notices of the Board decisions. However, delays let down the process.

1.39 Lambeth has a comprehensive complaints procedure, but is slow to resolve complaints. We found delays in 55% of the cases that we sampled. Lambeth's target for resolving a second stage complaint is 28 days but we found the average clearance time was 50 days.

1.40 A large number of complaints have been made to the LGO because of the state of the benefits service and the time it takes for Lambeth to respond to claimants. The LGO has met on many occasions with Lambeth to try and resolve the situation. It is obvious that the situation will not be resolved until the administration of the service improves.

Putting it right

1.41 Lambeth is committed to the prevention and detection of fraud. The CAFT was set up to provide an effective response to the problems that Lambeth had experienced in dealing with fraud during the previous decade.

1.42 We found that the fraud awareness sessions run by CAFT are well designed, but that the delivery programme cannot keep up with staff turnover on the benefits section. We are concerned that the sessions have been stopped, especially in view of the high turnover of staff in the Benefits Service.

1.43 The Fraud publicity is well designed and targeted but requires updating. There has been some promotion of the fraud hotline, although crucially not at OMH. When added to a lack of a Freefone number it is understandable why this facility has not been very effective.

1.44 The quality and volume of training received by investigators was of a good standard. Despite the extensive training, we found that investigations often lacked depth and were of poor quality. We therefore have concerns whether the level of training has been effective.

1.45 Investigations were also subject to undue delay and were inconsistently reviewed by inexperienced management. This poor performance is further compounded by both inadequate and inaccurate information from the benefits section.

1.46 We found that Lambeth has good procedures in place for managing fraud investigations but investigators apply them inconsistently.

1.47 The number of referrals from the benefits assessors has declined significantly and Lambeth has not addressed this. Referrals are not sifted or prioritised nor are they always logged onto the case management system.

1.48 We found that the caseload management system is deficient in its provision of management information and may be compromised by input failures.

1.49 The current visiting programme carried out by CAFT is limited in its effectiveness. Only Rent Allowance (RA) cases are visited and residency is the only criterion for the visit. We were very concerned to find that despite this criterion the information found by the visiting officers was not being fed back to the benefits section. It is critical as we have found the verification of residency to be very poor.

1.50 Surprisingly the full range of sanctions taken against fraudsters is not applied by Lambeth. The number of sanctions carried out is very low.

1.51 The SLA with Benefit Fraud Investigation Service (BFIS) is being formally monitored and there are good day-to-day relations with BFIS. We consider that Lambeth could improve its work with BFIS by establishing a strategy for closer working and encouraging further exchanges of personnel on a regular basis.

1.52 Lambeth must improve its management of overpayments. It ineffectively controls the overall process and there are serious management failings. We believe improvements can be made by utilising all the facilities of the IT system and by setting realistic standards and targets.

1.53 Lambeth has taken some steps to address the problems associated with its rising numbers of overpayments and has carried out some age debt analysis. There is a write-off policy. We were shown the existence of management information to monitor and test performance.

Making sure things work

1.54 We consider it essential that Lambeth should monitor and manage its contract with Capita effectively. The construction of the contract is adequate. We have only recommended a small number of changes. However, we consider the major weakness to be the lack of specific performance targets allied with penalties.

1.55 There were difficulties surrounding the amount of outstanding work soon after the contract was awarded. These difficulties meant monitoring arrangements were not addressed whilst Lambeth built a working relationship with Capita.

1.56 We are not convinced the contract has been effectively managed. Despite the meetings and the statistical information produced for the client side there has been no linking of Capita’s performance to the HB specification included in the contract.

1.57 In addition Lambeth had only issued 3 default notices and they related to minor issues surrounding the communication of information about complaints. No notices have been issued due to the failure of Capita to provide an effective benefit system. We conclude that part of this problem can be traced back to a client side team low on resources that has no specific person solely responsible for monitoring the contract.

1.58 We are concerned that Lambeth have left themselves in a vulnerable position if Capita decided to end the contract as Capita own the IT system and Lambeth would have purchase their own. However the contract does instruct the Capita to provide Lambeth with the full claims database.

1.59 Lambeth has in place a comprehensive and well written corporate counter fraud strategy. Lambeth has made efforts to prevent fraud and error entering the benefit system. For example, in 1996 a high-level anti-fraud policy statement was published and updated in 1998 and 1999.

1.60 In 1998 Lambeth published its prosecution policy. This incorporated a
3-year strategic plan which set out the LA’s objectives of reducing fraud to a minimum by March 2001.This was superseded in July 1999 by a business plan that incorporates Best Value (BV) performance indicators and targets for 2000/01. Yet very few prosecutions have resulted despite uncovering some significant frauds

1.61 Lambeth has allocated considerable resources to much of its counter fraud work. Targets have been set for staff, but more needs to be done to analyse information to ensure they are more effectively deployed.

1.62 We looked at the security of the IT system and found laxity in this vital area of work. We found valid user names for staff who had left. Their access to the system had not been disabled. In addition, staff had access levels that allowed access to parts of the system they had no reason to access. We also found Capita staff not working on the Lambeth site had inappropriate access to the Lambeth’s computer system.

1.63 We were told there is a problem recruiting and retaining staff. Lambeth corporately has a good policy in place for recruiting staff including effective arrangements for checking new staff references and qualifications. XXXX XXXX XX
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1.64 We consider that Capita’s appraisal system is poor, mainly due to a failure to keep to timescales. In addition, training has been affected by the domination of the implementation of the Academy system and new entrant training.

1.65 Lambeth reports regularly to Members through the audit committee. However, the presentation of information is inconsistent and procedures to ensure Internal Audit (IA) and External Audit (EA) recommendations are actioned are ineffective.

1.66 Lambeth should urgently review its management information policies. The internal auditors PricewaterhouseCoopers (PWC) has started by looking at the arrangements in place for identifying outstanding work. We consider that there are many reports and functionality contained in the Academy system that could be used to improve management information. The service cannot be effectively run and the contract cannot be effectively managed until this issue is resolved.