Counter-fraud
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Source: BFI inspection assessment
For an explanation about how to read this radar chart see Strategic Management.
7.1 This section deals with the efforts to deter, prevent and detect fraud and to deal with it when it is detected.
Background
7.2 In September 2001 one of the Department’s Counter-Fraud Investigation Service Fraud Investigation Managers was seconded to London Borough of Hackney for a period of 12 months. The purpose of the secondment was to support London Borough of Hackney in rebuilding its HB Fraud team following an adverse report by BFI and a damaging internal enquiry into corruption.
7.3 A decision was made to replace the Audit and Special Investigations Unit with a new unit known as the Audit and Anti-Fraud Division. In April 2002 the new intelligence-led investigation structure was implemented. This structure divides HB investigation into 2 teams. The first of these teams (Intelligence/Risk team) sifts allegations of fraud using pre-determined criteria for selection, gathers more information to confirm or refute the allegation and makes proposals on whether the allegation should be investigated. The other team (HB Fraud Investigation team) deals with investigations that are referred to it by the first team. These 2 teams, together with the HB Visiting and Legal Support teams, make up the Counter-Fraud team.
7.4 By the time of our inspection London Borough of Hackney had developed a number of measures to help ensure that benefit fraud was tackled effectively.
Policies and procedures
7.5 Local authorities should have specific counter-fraud policies, built on the policy objectives for the Benefits service as a whole. These policies should be supported by comprehensive procedures to ensure effectiveness and consistency in:
- investigations
- recovery action
- prosecutions and other alternatives.
7.6 London Borough of Hackney was not at Standard for this element. However, it had implemented strong foundations to enable it to reach Standard in the future.
7.7 It had, for example, developed a clear vision for its Counter-Fraud team, which stated that:
Within two years the London Borough of Hackney Counter-Fraud team will be recognised as a leading example in the detection, investigation, deterrence and prevention of fraud and corruption in the administration of Local Authority funds and Housing Benefits.
7.8 The Audit and Anti-Fraud Division’s Mission Statement reads:
We will detect, investigate, deter and prevent fraud and corruption in the administration of the London Borough of Hackney and its Housing Benefit payments and sanction those we prove to have committed fraud against this council.
7.9 Members ratified London Borough of Hackney’s anti-fraud and corruption strategy in November 2002. It contained a high level policy statement as well as practical measures to prevent and deter, detect and investigate, and take sanction action against internal and external perpetrators of fraud and corruption.
7.10 The strategy set out the factors to be considered when making decisions on whether or not a sanction is appropriate. A separate prosecution policy document added more practical detail and specifically set out financial levels of HB overpayment to be taken into account in the decision-making process.
7.11 Publicity for the anti-fraud and corruption strategy had been limited to an article in Hackney today in December 2002. The article did not make reference to the content of the strategy, but stated that it was to be made available on the council’s website and in the Customer Services area of the Benefits service. The anti-fraud and corruption strategy was not available at either location at the time of our inspection, 3 months after the article appeared. Standards recommend that local authorities make sure that such strategies are communicated to all Benefit and housing staff, and provide awareness of these strategies to other local authority staff. As the article did not make reference to the content of the strategy, and the strategy itself had not been made available, we conclude that London Borough of Hackney had not communicated its anti-fraud and corruption strategy to benefit, housing or other staff. Its intention to do so was included in the Audit and Anti-Fraud Division’s work plan for 2003/04.
7.12 The Audit and Anti-Fraud Division produced an annual work plan. This fed into the Finance Directorate service plan. It was also broken down into quarterly planning documents.
7.13 Neither the 2002/03 nor the 2003/04 service plans set targets for the value of Weekly Incorrect Benefit or number of sanctions cases the Audit and Anti-Fraud Division expects to attain each year. London Borough of Hackney told us that its Benefits IT system, which processed all Weekly Incorrect Benefit returns, was unable to distinguish between fraud and claimant error Weekly Incorrect Benefit, preventing effective target setting. The new Benefits IT system will separate fraud Weekly Incorrect Benefit from claimant error Weekly Incorrect Benefit. London Borough of Hackney also told us that it had not previously set targets for the number of sanction cases because it was starting from a position of having taken no sanction action and so felt it had no information on which to base a realistic target.
7.14 The Audit and Anti-Fraud Division used a computer system, which detailed various processes and procedures as process diagrams. The process diagrams were interactive, offering the user the ability to connect from the diagram to the related part of the fraud data-tracking database. This meant that new or inexperienced staff could follow the process diagram relating to their job, click on the connection to the fraud data-tracking database, carry out the database-related functions detailed in the process and then return to the process diagram to continue to the next stage of the process.
7.15 While the documenting of local procedures in this way had not been completed by the time of our on-site inspection, the system included an electronic version of the Department’s Fraud Investigators’ Manual. We commend London Borough of Hackney for its innovative approach to capturing processes and enabling user interaction.
7.16 To reach Standard for this element, London Borough of Hackney needs to:
- communicate its anti-fraud and corruption strategy to Benefit and housing staff and to provide awareness of the policy to all other staff
- amend its 2003/04 service plan to include targets for the value of Weekly Incorrect Benefit and the number of sanctions to be achieved in that year.
7.17 In our first inspection we recommended that London Borough of Hackney reviewed its policy not to prosecute people for benefit fraud offences. We were pleased to note that this policy had been reviewed and a prosecution policy had been introduced, with 7 successful prosecutions being carried out by the time of our follow-up inspection.
7.18 We also recommended that London Borough of Hackney develop an overall project plan to manage new counter-fraud initiatives and practices in a structured way. The Department’s secondee developed a project plan, which fed into an overall plan forming London Borough of Hackney’s response to the recommendations made in our first inspection report. The project plan was also used by the Audit and Anti-Fraud Division to develop its work plan for 2002/03 and its quarterly plans for that year.
We recommend that London Borough of Hackney: |
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Fraud referrals
7.19 Good quality fraud referrals are important. They:
- are essential to detecting and deterring fraud
- establish an authority’s reputation for rigour in claims processing
- indicate the type of fraud which may be prevalent in an area
- identify weaknesses in benefits administration systems and the remedial action necessary
- influence the allocation of fraud investigation resources
- assure management that verification processes operate to identify fraud and error effectively.
7.20 London Borough of Hackney was not at Standard for this element because it did not provide:
- a stock of referral forms and guidance on how to make referrals to all departments that deal with the public
- fraud awareness training for staff across the council
- feedback, where appropriate, to those making referrals on the outcome of any investigation
- sufficient publicity for its hotline
- procedures to monitor the outcome of referrals received by source quarterly.
Referral form
7.21 A standard fraud referral form was used to record details of the:
- claimant
- claimant’s partner/second person
- person making the allegation
- suspicion of fraud
- reason for the suspicion of fraud
- origin of the suspicion (telephone call, letter, examination of local authority records).
7.22 The form did not prompt the user to complete the following details:
- description of suspect
- hours worked
- place of work
- any vehicle details.
7.23 The Intelligence/Risk team received all referrals and assessed these against a matrix, which was used to evaluate the source and validity of information. The Intelligence/Risk team made decisions on whether or not to accept the referral. It also gathered further information to help confirm or reject the allegation of fraud. A final decision was then made on whether or not to pass the case to the HB Fraud Investigation Manager to be assigned for an investigation. Prior to this stage, referrals were not seen by any of the fraud investigation officers.
7.24 In our first report we recommended that the counter-fraud team made sure that feedback on investigations was given to the originator of the referral. The Intelligence/Risk team acknowledged receipt of referrals from the Benefits service and other departments. However, London Borough of Hackney did not have a system to ensure that the person who made the referral received feedback on the outcome of any investigation that may result.
7.25 We also recommended that London Borough of Hackney extended the use of its standard referral form to all other departments within the council that have contact with the public, particularly the Housing Directorate. At the time of our follow-up inspection no other department held a stock of standard referral forms.
We recommend that London Borough of Hackney: |
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Fraud awareness
7.26 Standards recommend that a local authority has a fraud awareness training programme, to ensure staff are equipped to minimise fraud entering the system and to maximise the probability of fraud being detected quickly.
7.27 All those involved in the administration of HB and CTB should be aware of fraud. Fraud officers should work closely with their Benefit colleagues so that they become more aware of fraud and provide better quality referrals. Benefit staff should understand the functions and duties of the Counter-Fraud team and how to identify fraud.
7.28 In our previous report we recommended that London Borough of Hackney introduced a fraud awareness programme to include the training of staff from the Benefit teams, HB Visiting team, Customer Services team and the Housing Directorate.
7.29 The Audit and Anti-Fraud Division conducted a series of fraud awareness training sessions in June 2002. This training covered all staff in the Benefits service in post at the time. It did not include staff from the Enquiries or Call Centre teams or Housing Directorate staff.
7.30 London Borough of Hackney acknowledged that this training was designed to raise awareness of the new intelligence-led investigations structure and did not focus on improving the quality of referrals from the Benefits service, despite the fact that London Borough of Hackney had identified this as an issue at the time.
7.31 While London Borough of Hackney told us that it had intended to continue and develop this training for new staff, this had not happened by the time of our on-site inspection. After our on-site inspection London Borough of Hackney told us that it had developed plans to introduce induction and refresher training for Benefits service staff.
We recommend that London Borough of Hackney: |
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Liaison
7.32 Staff and managers at London Borough of Hackney told us that there had been a lack of communication between the Counter-Fraud team and the Benefits service. The same officers reported that communications had begun to improve in the weeks before our on-site inspection and that protocols had been introduced to improve liaison. Benefit and counter-fraud staff had no forum to meet and discuss operational issues. The Benefits section and Audit and Anti-Fraud Division managers had their first liaison meeting 2 weeks after the end of our on-site inspection.
7.33 We would encourage London Borough of Hackney to build on the initiatives designed to improve communication.
Fraud Hotline
7.34 In our first report we recommended that London Borough of Hackney introduced a telephone hotline for referrals from the public. We also recommended that this hotline be publicised through posters and in literature sent to residents’ homes. London Borough of Hackney had advertised its telephone hotline in Hackney today, which was sent to every household in the borough.
7.35 The direct line was available during working hours only. There was no answer phone. London Borough of Hackney told us that it purchased an answer phone 2 weeks after the end of our on-site inspection. It said that it had not done so sooner as it was a corporate policy not to use answer machines.
7.36 Fraud referrals received on the direct line were not recorded separately so no analysis of the effectiveness of this line had been carried out.
7.37 A letter was issued to local authority Chief Executives in October 2002 asking for expressions of interest in the National Shared Fraud Hotline scheme. London Borough of Hackney had expressed an interest in this scheme.
We recommend that London Borough of Hackney: |
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Analysis of referrals
7.38 The source of referrals was recorded on the fraud data-tracking database. Figure 7.2 details the source of fraud referrals received since April 2000.
Source |
2000/01 |
2001/02 |
2002/03 |
|---|---|---|---|
Benefit staff |
667 |
55 |
706 |
Fraud staff including proactive fraud drives |
100 |
6,679(1) |
26 |
Other local authority staff |
14 |
3 |
192 |
National Fraud Initiative data matching |
56 |
0 |
8,470(2) |
Housing Benefit Matching Service data matching |
597 |
12 |
668 |
Housing associations and other landlords |
27 |
0 |
0 |
The Department |
38 |
2 |
96 |
Total |
1,499 |
6,751 |
10,158 |
Source: London Borough of Hackney
(1) 90% of counter-fraud staff and managers employed in proactive visiting programme to boost figures at end of year.
(2) This is the number of matches, rather than fraud referrals resulting from the matches.
7.39 London Borough of Hackney did not analyse referrals to see which was the most productive source for detecting fraud or how referrals might be improved through provision of training. This type of analysis can also be used to target resources.
7.40 In our first report we recommended that London Borough of Hackney used risk analysis techniques to establish the stock of fraud and high-risk groups. We further recommended that the results of this analysis be used to implement further counter-fraud measures and exercises to improve the security of its benefits system. Risk analysis techniques had not been used by the time of our follow-up inspection.
We recommend that London Borough of Hackney: |
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Data matching
7.41 The Housing Benefit Matching Service is a service run by the Department. It provides an authority with the opportunity to identify discrepancies between its HB and CTB records and records for other benefits such as:
- IS and JSA(IB)
- Incapacity Benefit
- Disability Living Allowance
- Working Families’ Tax Credit.
7.42 The Audit Commission runs the National Fraud Initiative, which matches the data held by different local authorities. It provides English and Welsh local authorities with an opportunity to identify discrepancies between HB and CTB records and other records such as:
- student awards
- staff loans
- private pensions
- payrolls.
7.43 London Borough of Hackney was not at Standard for this element because it did not:
- data match internally against other council records
- start investigations within 14 days of receipt of the referral
- assess data matches to identify if weaknesses in the administration of benefits led to the error
- make amendments when weaknesses had been identified in its policy and procedures.
Housing Benefit Matching Service
7.44 London Borough of Hackney told us that it dealt with many of its Housing Benefit Matching Service referrals administratively. This meant that most of these cases were passed from the Intelligence/Risk team to benefit assessment staff to deal with. The file notes on the Housing Benefit Matching Service cases in our sample were of a very low standard and contained no detail relating to actions taken.
7.45 Audit and Anti-Fraud Division managers told us that they had expected any resulting overpayment to be classified as claimant error because they had not intervened. However, our sample containing cases from the April and November 2002 Housing Benefit Matching Service exercises showed no consistency in the way in which resulting overpayments were classified.
7.46 Our sample showed that in 3 of the November cases the overpayment had been classified as claimant fraud by benefit assessment staff despite the fact that the claimant had not been interviewed and no intervention had been made by Audit and Anti-Fraud Division staff.
7.47 There were 2 cases from the April exercise that had overpayments of more than £3,000, which had been classified as claimant error. This classification was correct because Audit and Anti-Fraud Division staff had not intervened on these cases. However, we were concerned that there had been no intervention to establish whether or not the claimant had intended to defraud London Borough of Hackney.
7.48 Standards recommend that a local authority amends its benefits administration policy and procedures when weaknesses have been highlighted by involvement in data matching exercises. This had not been done. London Borough of Hackney acknowledged that a large number of its resulting matches related to a failure to declare an increase in Working Families’ Tax Credit. Neither Audit and Anti-Fraud Division nor Benefits section managers had taken action to ensure that benefit periods were tailored to prevent overpayments of this nature. If each benefit period was tailored to end at the point of a possible increase in Working Families’ Tax Credit (26 weeks from the start of the Working Families’ Tax Credit claim) this type of overpayment would be prevented.
7.49 Figure 7.3 shows a positive result in 51% of the 220 cases investigated as a result of the November 2002 Housing Benefit Matching Service exercise. However 59 cases were still outstanding some 5 months after the date of the data match.
November 2002 Housing Benefit Matching Service |
|
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Referrals received from Housing Benefit Matching Service |
279 |
Referrals cleared and returned |
220 |
Referrals outstanding |
59 |
Sanctions applied |
0 |
Positive results |
112 |
Total overpayments recorded |
£84,419.54 |
Source: London Borough of Hackney
Note: Positive results means overpayments identified and raised.
7.50 Housing Benefit Matching Service cases accounted for 12 of the 30 fraud cases we sampled. While the poor level of record keeping made our assessment of time taken between referral and first action difficult, in all cases where this could be determined, this was greater than the 14 day period recommended by Standards.
7.51 London Borough of Hackney failed to return the results of the April 2002 exercise to the Department’s central Housing Benefit Matching Service section. We saw evidence that complete returns were made for the November exercise.
We recommend that London Borough of Hackney: |
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National Fraud Initiative
7.52 We have not reported on the detail of the investigation of National Fraud Initiative cases as the last complete National Fraud Initiative data matching exercise was in autumn 2000. The investigations following this report were too old to reflect the performance of London Borough of Hackney in 2003.
Internal data matching
7.53 London Borough of Hackney had not undertaken any internal data matching of benefit claimants against other local authority data. However it had set up a sub-group of officers to explore the possibility of internal data matching. The sub-group met for the first time in January 2003 and consisted of representatives from the departments that would match information if the council accepted its proposals.
We recommend that London Borough of Hackney: |
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Do Not Redirect
7.54 Section 182A of the Social Security Administration Act 1992 allows local authorities to require providers of postal services not to redirect HB or CTB post. This can help identify possible fraudulent HB and CTB claims.
7.55 Instead the mail should be returned to the local authority for further investigation.
7.56 London Borough of Hackney met the Standard for this element.
7.57 Any returned HB cheques identified on post opening were referred directly to the Audit and Anti-Fraud Division on the day of receipt. Although records were kept of files where a subsequent investigation was undertaken, there had been no analysis of the results of the Do Not Redirect initiative.
7.58 London Borough of Hackney would be above Standard for this element if it was to review the results of Do Not Redirect referrals to identify trends and patterns in fraudulent activity and inform risk analysis.
We recommend that London Borough of Hackney: |
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Authorised individuals
7.59 Section 110A of the Social Security Administration Act 1992 provides for local authorities to authorise individuals to exercise the powers under sections 109B and 109C of the Act.
7.60 The individuals so authorised have powers to:
- enter certain premises
- require a person to provide information, including the delivery of documents
- question persons on premises that have been entered under the powers.
7.61 The Act requires these powers to be exercised reasonably and at reasonable times. The powers help the proper investigation of suspected fraud and error. London Borough of Hackney was using the powers effectively and was very nearly at Standard. To achieve the Standard, the HB Fraud Investigation Manager needs to review appointments of authorised individuals for relevance and need.
7.62 London Borough of Hackney’s Intelligence/Risk team staff recorded each request for information using authorised individual’s powers on file and on the fraud Data-Tracking Database.
7.63 London Borough of Hackney had 6 staff in its Counter-Fraud team who were formally designated as authorised individuals. All held a relevant certificate authorised by the Director of Finance confirming their powers, and had completed the relevant Professionalism in Security module as required.
7.64 London Borough of Hackney had not complied with HB/CTB Fraud circular F11/2001, which requires local authorities to notify the Department with details of authorised individuals. The HB Fraud Investigation Manager sent a notification during the on-site phase of our inspection. However, since this list included an officer who had not had responsibility for carrying out HB investigations since April 2002, we conclude that the HB Fraud Investigation Manager had not reviewed appointments for relevance and need.
We recommend that London Borough of Hackney: |
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Quality fraud investigations
7.65 It is important that investigations are focused to make best use of the resources available and that each case is thoroughly investigated.
7.66 London Borough of Hackney was not at Standard for this element, but we noted that improvements had been made since December 2002. To meet Standard, London Borough of Hackney needs to further reduce the time taken to start work on referrals once they have been sifted, and to further improve evidence gathering and record keeping. The quality of investigation had improved as a result of management intervention, Professionalism in Security training and joint working with the Counter-Fraud Investigation Service.
Start of investigation target
7.67 Our sampling showed a delay of, on average, 53 days between a referral being received, sifted, and then accepted for investigation. The range was between 0 days and 176 days.
7.68 However, we were pleased that management had identified this problem and had taken steps to tackle it. Our sample was divided between 21 cases which were closed between 1 April 2002 and 31 December 2002, and 9 cases closed between 1 January 2003 and 17 March 2003. We chose this second sample to reflect the efforts London Borough of Hackney had made to reduce the unnecessary delays on cases.
7.69 The average time between a referral being sifted and accepted for investigation and investigative work starting was 75 days in our sample of older cases. The range was between 0 and 176 days, with 7 cases taking over 100 days.
7.70 Our later sample of 9 cases showed that the average time taken had reduced to 8 days. The range was between 2 and 26 days. Performance Standards require investigation work to begin within 5 days of accepting a referral for investigation.
We recommend that London Borough of Hackney: |
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Record keeping
7.71 Performance Standards require separate fraud files to be kept. London Borough of Hackney’s fraud records were kept in clerical files. The Intelligence/Risk team had input access to the fraud data-tracking database, but Fraud Investigation Officers had view-only access to this system. This ensured that Fraud Investigation Officers could not close cases prematurely or delete records from the system. The fraud data-tracking database was not used to record case notes. This meant that case notes were only recorded manually on files.
7.72 Failure to present a fraud file that is clear to read and contains an audit trail of events will result in:
- wasted resources
- ineffective investigations
- problems with prosecutions.
7.73 The quality of record keeping on file varied considerably on the cases that we sampled. The file notes on Housing Benefit Matching Service cases were very poor and contained no detail of activity undertaken. The 4 prosecution cases that we looked at had very thorough and detailed activity logs and documentary evidence held on file was cross-referenced.
7.74 Overall our sample showed that in 18 out of 30 cases (60%) the activity log was incomplete. However, when we compared our earlier sample with the later sample, as in Figure 7.4, the improvement was clear.
Sample |
Yes |
No |
Total |
% with complete activity log |
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Cases closed between 1 April 2002 and 31 December 2002 |
6 |
15 |
21 |
29 |
Cases closed between 1 January 2003 and 17 March 2003 |
6 |
3 |
9 |
67 |
Source: BFI analysis
We recommend that London Borough of Hackney: |
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Investigation quality
7.75 Performance Standards require records to be kept in accordance with the Police and Criminal Evidence Act 1984, Criminal Procedure and Investigations Act 1996, the Data Protection Act 1998, and the Regulation of Investigatory Powers Act 2000. The Professionalism in Security course attended by the fraud investigators covers in detail the requirements of these Acts.
7.76 The Criminal Procedure and Investigations Act 1996 requires that all avenues of investigation be pursued. Our sample showed that all avenues of investigation had not been pursued in 8 cases (27%).
7.77 In those cases where further investigation was required the following omissions were noted:
- leads had not been followed up to establish the actual date of vacation on a residency case
- the police were not asked about their involvement in a case, which would have helped establish non-residency and possible living together at another address
- a partner was not pursued in a living together case, despite his details being available
- the possibility of fraudulent intent was not pursued on Housing Benefit Matching Service cases, despite overpayments in excess of £3,000
- investigations were pursued to establish information already held by the council.
7.78 These cases were discussed with the HB Fraud Investigation Manager who agreed that further action should have been taken in these specific cases.
7.79 With effect from 25 September 2000 all surveillance must be in accordance with the Regulation of Investigatory Powers Act, Part II (Directed Surveillance) and the statutory Code of Practice attached to the Act.
7.80 None of the cases in our sample required surveillance activity. Any surveillance activity has to be appropriately authorised as required by Regulation of Investigatory Powers Act 2000. At the time of our inspection London Borough of Hackney had not undertaken any directed surveillance. It had developed process diagrams for surveillance cases and told us that it would select a small sample of cases to deal with in the future and monitor the effectiveness of such authorisations.
Fraud incentive claims
7.81 The Benefits section processed all claims for Weekly Incorrect Benefit through the Benefits IT system. System reports did not distinguish between Weekly Incorrect Benefit resulting from fraud and those resulting from claimant error. The Audit and Anti-Fraud Division had started to record fraudulent Weekly Incorrect Benefit on its fraud data-tracking system. Our sample showed that all of the Weekly Incorrect Benefit claims made were correct.
Interviews under caution
7.82 Performance Standards require investigators to interview a suspect under caution where a suspicion of an offence exists. In 3 of the cases we examined there was sufficient evidence to undertake an interview under caution. In all 3 cases, interviews under caution were undertaken. The Police and Criminal Evidence Act 1984 requires interviews under caution to be recorded on tape, wherever possible, and a master tape to be made and sealed. Our sample showed that in the 3 appropriate cases, a record of the interview under caution was noted on the file and a master tape of the interview was held.
7.83 The Department’s Security against Fraud and Error scheme introduced in April 2002 emphasises quality investigations and rewards for successful sanctions. Managers said the scheme had led to more rigorous investigation and a higher volume of interviews under caution.
7.84 In our first report we recommended that London Borough of Hackney instructed its fraud investigators to carry out interviews under caution in all appropriate circumstances. Our sample showed that these interviews were being conducted in all appropriate circumstances.
Code of conduct
7.85 Benefit investigators in London Borough of Hackney were provided with a code of conduct. The code formed part of the council’s anti-fraud and corruption strategy. It gave comprehensive and detailed guidance, instructing investigators to:
- refer to the council’s Code of Conduct for Employees
- declare any interest in cases referred for investigation
- risk assess cases against incompatibility with the Human Rights Act 1998
- treat all persons under investigation with respect and courtesy
- familiarise themselves with relevant legislation
- strictly adhere to the Data Protection Act 1998
- declare membership of any secret organisation
- respect the rights of those being investigated and not make conclusions based on intuition or supposition
- seek advice from a senior officer before carrying out unaccompanied visits in prescribed circumstances
- avoid putting themselves at risk
- show members of the public identification when visiting them
- deal with the public fairly and assertively
- provide interpretation services where necessary.
7.86 The code of conduct spelt out the behaviour expected of investigation staff and stated that investigators who breach the rules would be subject to the council’s disciplinary procedures. The code of conduct met the requirement of Standards.
Management of investigations
7.87 Proper management of investigations:
- focuses resources on the reduction of fraud
- identifies and rectifies administrative and investigative weaknesses
- assures Members and senior officers of the integrity and quality of investigations.
7.88 London Borough of Hackney was very close to Standard for this element. Further work was required to ensure that the fraud service plan included targets and that results were monitored against it.
Fraud management checking
7.89 The Intelligence Manager undertook a 100% check on the work of the Intelligence/Risk team.
7.90 Once the Intelligence/Risk Manager had approved referrals for investigation, they were passed to the HB Fraud Investigation Manager, who allocated them individually to the appropriate investigator.
7.91 The fraud data-tracking database was used to maintain records of key dates regarding an allegation and its investigation and to produce a list of all open investigation files. This allowed the HB Fraud Investigation Manager to check all open cases fortnightly to ensure that:
- all avenues of investigation had been pursued as required by Criminal Procedure and Investigations Act 1996
- enquiries made had been clearly recorded on the file as required by Criminal Procedure and Investigations Act 1996
- any interviews under caution had been conducted correctly and taped as required by Police and Criminal Evidence Act 1984.
7.92 The HB Fraud Investigation Manager’s comments and recommendations were passed to the investigator and discussions were held to agree the way forward. A central electronic record was maintained of all management checks.
7.93 A further check was made on closed files to ensure that the appropriate action had been taken and any Weekly Incorrect Benefit had been claimed correctly. This regular review of the quality and progress of investigations supplemented by the Weekly Incorrect Benefit check complied with the requirements of Standards.
7.94 In our first report we recommended that London Borough of Hackney instigated random checks on fraud files to ensure that all investigation actions were fully recorded and remedial training provided where necessary. We were pleased that a management checking regime had been introduced by the time of our follow-up inspection.
Security of fraud records
7.95 XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XX XXXX X
Legal advice
7.96 Fraud Investigation Officers were encouraged to seek legal advice where appropriate. Audit and Anti-Fraud Division included a Legal Support Supervisor and Legal Support Officer to supply legal advice and act as a liaison point for the council’s Legal section. Advice on all possible sanctions cases was sought formally from London Borough of Hackney’s Legal section.
Training for fraud investigators
7.97 Fraud investigators should be fully trained in:
- social security legislation and all relevant regulations
- relevant legislation, such as the Police and Criminal Evidence Act 1984, Criminal Procedure and Investigations Act 1996, Regulation of Investigatory Powers Act 2000, Human Rights Act 1998 and Theft Acts 1968
- professional standards such as Professionalism in Security
- good practice such as that contained in the Department’s Fraud Investigators’ Manual and Performance Standards.
7.98 London Borough of Hackney was almost at Standard for this element. To meet Standard, London Borough of Hackney needs to ensure that its Counter-Fraud team staff and managers maintain training logs and personal development records to measure the effectiveness of all training provided. Personal development records should be used together with a training needs analysis to help develop a training plan for the service.
7.99 All of London Borough of Hackney’s Fraud Investigation Officers had either completed Professionalism in Security training or had dates to start this training. Managers told us that prior to Professionalism in Security, its counter-fraud officers received no training. We saw evidence that the Audit and Anti-Fraud Division had also introduced additional training for its HB Fraud Investigation team and Intelligence/Risk team.
7.100 In our first report we recommended that London Borough of Hackney conducted a training needs and skills analysis using data collected from personal development plans and staff appraisals. We further recommended that it developed a training plan to address the deficiencies identified in the analysis. At the time of our follow-up inspection the Audit and Anti-Fraud Division had not conducted a training needs and skills analysis, nor had it developed a training plan.
We recommend that London Borough of Hackney: |
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Liaison with Counter-Fraud Investigation Service and Counter-Fraud Investigation Division Operations
7.101 A local authority’s ability to administer HB and CTB claims securely, effectively and efficiently depends on good working relationships with Jobcentre Plus, including the Counter-Fraud Investigation Service and The Pension Service. These organisations are often involved with investigating persons in receipt of benefits administered by both local authorities and the Department.
7.102 London Borough of Hackney was not at Standard for this element. To meet Standard, London Borough of Hackney needs to develop a way of formally monitoring performance against the Fraud Partnership Agreement it has with the Counter-Fraud Investigation Service.
7.103 In our first report we recommended that London Borough of Hackney and Counter-Fraud Investigation Service’s service level agreement made reference to keeping each other informed. As a result, the 2 parties held quarterly meetings to discuss joint working arrangements. One of these meetings identified that the Counter-Fraud Investigation Service was not informing London Borough of Hackney of cases that contained an element of HB. As a result, a protocol was developed to help ensure that all such cases were identified and London Borough of Hackney notified accordingly.
7.104 In addition to performing joint interviews under caution and undertaking 7 successful joint prosecutions, London Borough of Hackney had shared information and investigative work with the Counter-Fraud Investigation Service on National Fraud Initiative cases and on an exercise involving traders at a local market. At the time of our on-site inspection they had successfully bid for joint funding to undertake National Fraud Initiative 2002 work.
7.105 The Department’s circular F14/2002 describes the new arrangements for the counter-fraud joint working partnership. The agreement takes into account the introduction of the Social Security Fraud Act 2001 and the involvement of the Operational Intelligence Units in data handling issues.
7.106 At a meeting between London Borough of Hackney’s Audit and Anti-Fraud Division and the Counter-Fraud Investigation Service on 6 November 2002, the minimum service and performance requirements detailed in the new Fraud Partnership Agreement were discussed and the agreement was signed.
7.107 We were pleased to note the nature of the relationship between London Borough of Hackney and the Counter-Fraud Investigation Service. In our first report we recommended that London Borough of Hackney and the Counter-Fraud Investigation Service introduced a programme of exchange visits to help develop an understanding of each other’s working practices. Such an exchange programme had been introduced. Both parties told us that they believed exchange visits had improved understanding of their respective roles.
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Formal cautions
7.108 In England and Wales a local authority may offer a formal caution as an alternative to prosecution as long as certain criteria are met and the case is one the local authority would wish to see in court if the caution was refused.
7.109 To be able to offer a formal caution the authority must have the same standard of criminal evidence as for a prosecution. A caution should only be offered if the local authority would then go on to prosecute, should the caution be refused.
7.110 London Borough of Hackney was not at Standard for this element. Our sample contained one case where London Borough of Hackney would have administered a formal caution if it had followed its prosecution policy, but it did not. London Borough of Hackney had not issued any formal cautions by the time of our inspection, despite having a prosecution policy in place since November 2002.
7.111 The criteria for applying a caution were well documented in London Borough of Hackney’s prosecution policy.
7.112 London Borough of Hackney had not set a target for the number of cautions to be administered in a year.
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Administrative penalties
7.113 Section 115A of the Social Security Administration Act 1992 provides local authorities with an opportunity to offer a claimant an administrative penalty as an alternative to a prosecution. The penalty is 30% of the value of the overpayment.
7.114 London Borough of Hackney was not at Standard for this element because:
- our sample showed that it did not offer administrative penalties in every case that met its policy criteria
- there was no specific target in the business plan
- there was no mechanism in place to vigorously recover administrative penalties.
7.115 Administrative penalties require the same level of evidence as a prosecution. At London Borough of Hackney a sanction authorisation form was completed in all potential sanction cases. This captured the circumstances of the case and a recommendation as to the appropriate sanction. The HB Fraud Investigation Manager had the responsibility of authorising the application of the appropriate sanction.
7.116 The legal criteria for administrative penalties were set out fully in London Borough of Hackney’s prosecution policy. Our sample showed that it did not offer administrative penalties in every case that met its policy criteria.
7.117 During the on-site phase of our inspection London Borough of Hackney attempted to offer an administrative penalty but the customer failed to attend the interview.
7.118 It is important that local authorities have systems in place to ensure that administrative penalties are rigorously recovered. XXXX XXXX XXXX X XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXX XXXX XXXX XXXX XXXX XXX
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Prosecutions
7.119 London Borough of Hackney had brought a number of successful prosecutions but did not meet the Standard because no specific target for the number of prosecutions was set and it had not publicised suitable cases to send out a deterrent message to fraudsters.
7.120 Until 2002/03, London Borough of Hackney had not prosecuted anyone for benefit fraud. In 2002/03 it had contributed towards 7 successful joint prosecutions with the Counter-Fraud Investigation Service.
7.121 Both London Borough of Hackney and the Counter-Fraud Investigation Service staff and managers told us that joint working in this way had helped to improve Audit and Anti-Fraud Division’s competency in dealing with sanctions cases. Our sampling of 4 prosecution cases confirmed this view.
7.122 In our first report we recommended that London Borough of Hackney’s prosecution policy (in draft at the time of our first inspection) included a statement on the use of publicity for the activities of the service. The anti-fraud and corruption strategy did not contain a statement on the use of publicity. Publicity for the anti-fraud and corruption strategy had been limited to an article in Hackney today in December 2002.
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