Counter-fraud
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Fig. 7.1: Results of BFI’s assessment for Counter-fraud |
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Source: BFI analysis
For an explanation about how to read this radar chart see Executive summary.
7.1 This section reports on the efforts to deter, prevent and detect fraud, and to deal with it when it is detected.
7.2
London Borough of Bromley had entered into a Partnership Service Agreement
with London Borough of Greenwich Anti-Fraud team to provide an HB counter-fraud
service. The team was managed by the London Borough of Greenwich Anti-Fraud
team Manager. This agreement came into force in
April 2002. It provides for a team of 3 dedicated Fraud Investigators and
an officer providing clerical support. London Borough of Bromley’s Internal
Audit manages the Partnership Agreement.
Policies and procedures
7.3 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 for the Anti-Fraud team to ensure effectiveness, compliance with legislation and consistency in:
· investigations
· recovery action
· prosecutions and sanctions.
7.4 London Borough of Bromley was at Standard in this element and met all but one above Standard component.
7.5 London Borough of Bromley’s strategy had not been reviewed since its inception and did not mention the agreement with the London Borough of Greenwich. Following the on-site phase of our inspection London Borough of Bromley advised us that it was reviewing this strategy. It needs to do this annually to reach above Standard for this element.
7.6 At the time of our first inspection London Borough of Bromley had yet to develop an Anti-Fraud and Corruption Strategy. In February 2001 Members adopted a comprehensive policy and strategy that encompassed the following:
· standards in public life
· disclosure in the public interest (whistleblowing)
· HB fraud
· the prosecution policy.
7.7 The strategy had been publicised both internally and externally and was available in full from London Borough of Bromley’s website.
7.8 There was a Partnership Service Agreement and a service level agreement between London Borough of Bromley and London Borough of Greenwich which set out the expectations for sanctions and performance against the Security Against Fraud and Error scheme.
7.9 The Fraud Investigators worked to a complete set of operational procedures that had received ISO9002 accreditation. The Anti-Fraud team obtained ISO9000 accreditation in December 2003. The procedures were available to all Fraud Investigators in both electronic and paper format. They were regularly reviewed to ensure their compliance with any changes in legislation or guidance from the Department.
Fraud referrals
7.10 Good quality fraud referrals are important as they:
· are essential to detect and deter fraud
· establish an authority’s reputation for rigour in claims processing
· indicate the type of fraud which may be prevalent in an area
· can identify weaknesses in benefit 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.
7.11 At the time of the first inspection London Borough of Bromley had split responsibility for fraud work between its own in-house team and its Service Provider. The subsequent partnership with London Borough of Greenwich concentrated all fraud work into one team.
7.12 London Borough of Bromley was not at Standard in this element because:
· feedback was not always given to Benefit Assessors at the conclusion of investigations
· fraud awareness training was not provided to all Benefit Assessors either at induction or on an annual refresher basis.
7.13 Benefit Assessors told us they did not receive written feedback at the conclusion of an investigation but did receive verbal feedback on the progress of a referral if requested. Benefit Assessors were given written reasons if a referral was not accepted for investigation. However, London Borough of Bromley’s managers told us that reports regarding closed investigations were available to staff via the Document Management system.
7.14 Fraud awareness training had been provided to 23 Benefit Assessors and Customer Service Advisers. This training was provided in July 2003. Customer Service Advisers told us that the standard of the training provided was poor as it was anecdotal rather than instructive.
7.15 London Borough of Bromley planned to provide refresher fraud awareness training on an annual basis. However, at the time of the on-site phase of our inspection it had not put in place a structure for this training to take into account the comments from the sessions held in July 2003.
7.16 However, London Borough of Bromley had:
· a standard referral form
· a dedicated fraud hotline available for 24 hours each day.
7.17 The telephone hotline was publicised on London Borough of Bromley’s website and full-page advertisements in the local press.
7.18 There was written guidance available to help staff make a referral to the Anti-Fraud team. The guidance included likely indicators of possible fraud and what information a Fraud Investigator would require to commence an investigation.
7.19 All referrals were sifted according to a set of criteria and given a risk score. Even if a referral did not receive a high enough score, it could still be investigated if the Fraud Manager felt there was a possibility of a fraud being established. From a sample of 30 fraud cases we established that all referrals were sifted within 5 days of receipt.
7.20 London Borough of Bromley sought referrals from all sources. Figure 7.2 shows the sources of referrals from April 2002 - 23 October 2003.
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Fig. 7.2: Source of referrals from April 2002 - 23 October 2003 |
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Source |
2002/03 |
Percent |
2003/04 - 23 October 2003 |
Percent |
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HB staff |
126 |
21 |
120 |
25 |
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Fraud staff including proactive fraud drives |
20 |
3 |
0 |
0 |
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Other local authority staff |
5 |
1 |
1 |
Less than 1 |
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National Fraud Initiative data matching |
29 |
5 |
11 |
2 |
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Housing Benefit Matching Service data matching |
300 |
50 |
279 |
57 |
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Housing associations and other landlords |
5 |
1 |
0 |
0 |
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The Department, Counter-Fraud Investigation Service, Jobcentre Plus |
26 |
4 |
24 |
5 |
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Hotline |
59 |
10 |
33 |
7 |
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Public |
25 |
4 |
13 |
3 |
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Other external sources including the police |
7 |
1 |
7 |
1 |
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Total |
602 |
100 |
488 |
100 |
Source: London Borough of Bromley
7.21 We analysed the data provided from April 2002 - 23 October 2003 to identify which referrals led to a fraud being identified. We found that 102 (13%) of the 804 closed investigations had led to a fraud being established or benefit being reassessed.
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Fig. 7.3: Source of
referrals leading |
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Source: London Borough of Bromley |
7.22 Figure 7.3 shows that data matching was the most productive source of referrals. We look at this more closely under Data matching.
7.23 We were concerned that the number of referrals leading to a positive outcome from HB staff was very low. Only 3 out of 246 referrals had led to a fraud being established or benefit being reassessed. This may have resulted from a lack of fraud awareness training.
7.24 We looked more closely at the number of referrals made by HB staff and found that 118 (48%) had not been accepted as a referral as they were assessment issues, 34 (14%) had been referred to Jobcentre Plus for investigation with the remaining 91 (38%) being investigated.
7.25 The Anti-Fraud team told us that many referrals were rejected because they were assessment issues, such as changes of circumstances that had been notified by the customer or another agency and had not been acted upon because of the previous backlog.
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Recommendation |
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We recommend that London Borough of Bromley introduces: |
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· a planned programme of fraud awareness training for Benefit Assessors and Customer Service Advisers · formal written feedback on the outcome of referrals. |
Data matching
7.26 London Borough of Bromley undertakes data matching through participation in the Housing Benefit Matching Service and National Fraud Initiative schemes.
7.27 London Borough of Bromley was not at Standard as there had been no data matching against internal authority records. However, London Borough of Bromley:
· participated in the Housing Benefit Matching Service and National Fraud Initiatives
· sifted referrals in line with its own policies and procedures
· initiated investigations within 14 days of receipt
· recorded and analysed outcomes of investigations.
Housing Benefit Matching Service
7.28 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 Tax Credit.
7.29 We commented in our first report that London Borough of Bromley was achieving a success rate of 14% for Housing Benefit Matching Service referrals. This was against a national average of 40%. In London Borough of Bromley’s most recent exercise, in April 2003, 33% of matches led to either a fraud being established or the claim being reassessed. The details are shown in Figure 7.4.
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Fig. 7.4: Housing Benefit
Matching Service referrals and results from the |
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Results |
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Referrals received |
294 |
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Referrals cleared and returned |
294 |
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Sanctions applied |
0 |
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Claims reassessed |
97 |
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Total fraud overpayments recorded |
31 |
Source: London Borough of Bromley
7.30 London Borough of Bromley advised us that the reason for the low rate of success with Housing Benefit Matching Service referrals was because many matches concerned changes of circumstances that had been reported to London Borough of Bromley but had not been acted upon because of the previous backlog.
National Fraud Initiative
7.31 The Audit Commission runs the National Fraud Initiative that 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.
7.32 The last National Fraud Initiative exercise took place in October 2002. The results of this are shown in Figure 7.5.
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Fig. 7.5: National Fraud Initiative referrals and results October 2002 |
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Amount |
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Referrals received from National Fraud Initiative |
1,167 |
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Referrals cleared and returned |
1,152 |
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Referrals outstanding |
15 |
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Sanctions applied |
12 |
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Positive results* |
21 |
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Total Weekly Benefit Saving/Weekly Incorrect Benefit Saving claimed |
£670 |
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Total overpayments reported |
£113,569.40 |
*Note: Positive results means overpayments identified and raised.
Source: London Borough of Bromley
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Recommendations |
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We recommend that London Borough of Bromley data matches HB records against other council records. |
‘Do Not Redirect’
7.33 Section 182A of the Social Security Administration Act 1992 provides a local authority with the opportunity to require Royal Mail, or other providers of postal services, to return redirected HB or CTB post. The aim of the scheme is to identify possible fraudulent HB and CTB claims when post is being redirected to another address.
7.34 London Borough of Bromley had introduced the ‘Do Not Redirect’ scheme in April 2000. At the time of our first inspection there was no process for logging returned post or ensuring that it was referred for investigation. Only one item of post had been returned and this had been in error.
7.35 London Borough of Bromley was not at Standard because:
· items returned under the scheme were not recorded
· there was no named contact with Royal Mail
· post was not received by the Anti-Fraud team on the day it was returned.
7.36 Although all items of HB and CTB post were sent in ‘Do Not Redirect’ envelopes, only one item of post had been referred to the Anti-Fraud team in the 12 months prior to the on-site phase of our inspection. In addition, the scheme was not operated according to procedural guidance issued by the Department.
7.37 While we were on-site London Borough of Bromley agreed to introduce procedures to ensure it complies with the ‘Do Not Redirect’ scheme.
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Recommendations |
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We recommend that London Borough of Bromley: |
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· operates the ‘Do Not Redirect’ scheme in accordance with the Department’s procedural guidance · records all items returned under the scheme · establishes a named contact point with the Royal Mail to ensure good liaison · ensures that ‘Do Not Redirect’ post is sent to the Anti-Fraud team on the day it is returned to London Borough of Bromley. |
Authorised individuals
7.38 Section 110A of Social Security Administration Act 1992 provides for local authorities to authorise individuals to exercise the powers under sections 109B and 109C of the Act. Authorised individuals can only use these powers when it is reasonable to do so. And they will ensure that each decision made relating to the use of the powers is documented and records are available for checking by management. To comply with provisions in the Human Rights Act 1998, these powers should be used as a last resort. 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.
7.39 Obtaining information is an important tool in the investigation of fraud. These powers are not intended to place additional burdens on organisations, but to encourage everyone to provide information to combat fraud.
7.40 London Borough of Bromley was not at Standard in this element because it did not maintain central records to show when and why authorised individuals had used their powers.
7.41 However, we found the following strengths:
· it appointed authorised individuals in accordance with legislation
· it only appointed trained Fraud Investigators
· appointments were reviewed for relevance and need
· compliance with legislation and statutory codes of practice was monitored.
7.42 At the time of our first inspection authorised individuals were known as inspectors. London Borough of Bromley had appointed 3 Fraud Investigators as inspectors. We were advised that inspectors’ powers had been used on 3 occasions. As no central records had been kept we were unable to verify this.
7.43 During our second inspection we were advised that 2 of the 3 Fraud Investigators were authorised individuals, we considered this number adequate.
7.44 We were told London Borough of Bromley had not yet needed to use powers to obtain entry to premises or secure documents. In our sample of 30 fraud cases there were no examples where the use of authorised individuals’ powers should have been used to progress an investigation.
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Recommendations |
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We recommend that London Borough of Bromley maintains central records to show when and why authorised individuals’ powers have been used. |
Quality fraud investigations
7.45 It is important that investigations are focused to make best use of the resources available, each case is thoroughly investigated and proper consideration is given to recommending closure or sanction.
7.46 At the time of our first inspection there were inconsistencies in the quality of investigative work and delays at all stages of investigation.
7.47 London Borough of Bromley was not at Standard in this element as it failed to commence activity on referrals within 5 days of cases being sifted.
7.48 It took an average of 45 days to carry out the first action in our sample of 30 fraud cases. We were told the delays occurred when London Borough of Greenwich took on the task of managing London Borough of Bromley’s fraud work. Delays occurred as it could not deal with all outstanding work at once. This backlog had been cleared by the time of the on-site phase of our inspection. Referrals were risk scored and allocated on a priority basis.
7.49 London Borough of Bromley was close to Standard in this element as it:
· operated a code of conduct for Fraud Investigators that complied with legislation
· maintained fraud files for each case, separate from the HB files
· kept records in compliance with all appropriate legislation
· gathered sufficient evidence to support conclusions, admissible to criminal standard
· carried out interviews under caution in accordance with the Police and Criminal Evidence Act 1984.
7.50 A separate fraud file was held for each case. In most cases, we found the fraud files easy to follow with a narrative report and supporting documentation. In all cases sound reasoning backed up the conclusions reached.
7.51 Where an interview under caution had taken place a transcript was placed in the file. The interviews complied with all relevant provisions of the Police and Criminal Evidence Act 1984.
7.52 All Fraud Investigators used notebooks to record their duties, actions, conversations with customers and witnesses and as aide-memoirs.
7.53 We also found that London Borough of Bromley:
· involved Fraud Investigators from other agencies
· kept these officers updated on the progress of investigations on a regular basis
· took remedial action on any weaknesses identified.
7.54 Fraud Investigators had worked jointly with the police, Counter-Fraud Investigation Service and National Investigation Service, who deal with organised fraud.
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Recommendation |
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We recommend that London Borough of Bromley commences action on referrals within 5 working days of being sifted. |
Management of investigations
7.55 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.
7.56 London Borough of Bromley was not at Standard in this element as it had not achieved its Security Against Fraud and Error scheme threshold. The threshold was set at £149,987 for 2003/04. As at 31 January 2004 London Borough of Bromley had achieved £105,210 towards this amount.
7.57 However, London Borough of Bromley:
· carried out management checks to ensure compliance with:
– criminal law
– social security legislation
– Human Rights Act 1998
· used a computerised management information system
· allocated referrals to specific Fraud Investigators
· monitored caseloads on a regular basis
· held fraud files in a secure location.
7.58 Local authorities are rewarded for the number of sanctions and prosecutions that are carried out. This is awarded by additional subsidy payments under the Security Against Fraud and Error scheme.
7.59 In 2002/03 London Borough of Bromley achieved £15,000 in additional subsidy under the Security Against Fraud and Error Scheme. However, from April - July 2003 £29,200 of additional subsidy was generated by the increase in the number of sanctions.
7.60 During our first inspection there was no management control or intervention, and no direction of investigations. This had led to investigations being allowed to drift and long delays between opening and closing cases.
7.61 During our second inspection, there was no written policy for the checking of fraud files but our sampling revealed that guidance was given to Fraud Investigators by the Anti-Fraud team Manager. This was recorded in the fraud files. In our sample of 30 cases, we found 20 where there was evidence of management control and guidance.
7.62 Caseloads per investigator were also monitored to ensure that Fraud Investigators had manageable caseloads. At the time of our inspection each investigator had a caseload of between 30 and 40 cases.
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Recommendations |
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We recommend that London Borough of Bromley achieves 100% of the Security Against Fraud and Error scheme threshold. |
Training for Fraud Investigators
7.63 Counter-fraud officers should be fully trained in:
· relevant social security legislation and regulations
· relevant legislation, such as:
– Police and Criminal Evidence Act 1984
– Criminal Procedure and Investigations Act 1996
– Regulation of Investigatory Powers Act 2000
– Human Rights Act 1998
– Theft Act 1968
· professional standards such as Professionalism in Security
· good practice such as that contained in Performance Standards and in the Department’s Fraud Investigators’ Manual.
7.64 At the time of our first inspection Fraud Investigators had only just begun to undertake professional training and we found that training was inadequate.
7.65 Our second inspection revealed that London Borough of Bromley was not at Standard in this element as Fraud Investigators did not have work objectives that were specific, measurable, achievable, realistic and timed.
7.66 However, London Borough of Bromley had the following good practices:
· a policy to provide ongoing formal and ad hoc training
· professionally trained Fraud Investigators
· training logs and development records.
7.67 Fraud Investigators received quarterly feedback on their performance from their line manager as part of the annual appraisal process.
7.68 The Department produces many circulars concerned with HB and CTB administration and, in particular, fraud. These were immediately distributed to Fraud Investigators both electronically and in hard copy.
7.69 The training provisions for Fraud Investigators were set out in London Borough of Greenwich’s corporate training plans. The service level agreement between the 2 parties stipulated that Fraud Investigators should be fully trained.
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Recommendations |
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We recommend that London Borough of Bromley provides Fraud Investigators with work objectives that are specific, measurable, achievable, realistic and timed.: |
Liaison with Counter-Fraud Investigation Service and National Investigation Service
7.70 The ability of local authorities to administer HB and CTB claims securely, effectively and efficiently depends on good working relationships with the Counter-Fraud Investigation Service. This is because both organisations are often involved with investigating persons in receipt of benefit administered by both local authorities and the Department.
7.71 London Borough of Bromley was at Standard in this element as it:
· had a Fraud Partnership Agreement with the Counter-Fraud Investigation Service
· ensured that cases were not unduly delayed
· monitored the Fraud Partnership Agreement.
7.72 Counter-Fraud Investigation Service told us it had a very good working relationship with the Anti-Fraud team. In addition to formal meetings, held to discuss the workings of the Fraud Partnership Agreement, there were also frequent informal meetings and most problems were dealt with over the telephone. Joint investigations had taken place with both the Counter-Fraud Investigation Service and the National Investigation Service.
Formal cautions
7.73 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.
7.74 To be able to offer a 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 goes on to prosecute if the caution is refused.
7.75 London Borough of Bromley was above Standard in this element as it:
· considered issuing cautions in all cases that complied with its defined policy on sanctions
· checked the Department’s database and police records for any previous offences
· notified the Department when a caution was issued for recording on the central database
· set a target for the number of cautions to be issued
· monitored the offering of cautions against its policy criteria and accounted for any inconsistencies found.
7.76 At the time of our first inspection London Borough of Bromley had not offered any cautions.
7.77 During our second inspection, the Audit subcommittee had set a target of 6 cautions for 2003/04. This target had been met by November 2003.
Administrative penalties
7.78 Section 115A of the Social Security Administration Act 1992 provides local authorities with an opportunity to offer a customer an administrative penalty as an alternative to a prosecution. The penalty is 30% of the value of the overpayment. The full amount of penalties recovered by an authority may be retained as additional revenue.
7.79 London Borough of Bromley was not at Standard as it did not:
· inform the Debt Recovery team of all administrative penalties so that recovery could be made
· recover the penalty and its associated overpayment.
7.80 However, London Borough of Bromley:
· considered issuing an administrative penalty in all cases that complied with its policy on sanctions
· recorded the administrative penalty details to ensure that prosecution would be considered if there was another attempt to defraud by the same person
· set a target for the number of administrative penalties offered.
7.81 At the time of our first inspection London Borough of Bromley had not issued any administrative penalties.
7.82 The Audit subcommittee set a target of 6 administrative penalties to be carried out in 2003/04. By November 2003 this target had been met.
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Recommendations |
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We recommend that London Borough of Bromley informs the Debt Recovery team of all administrative penalties so recovery can be made. |
Prosecutions
7.84 The ultimate sanction is to prosecute a fraudster.
7.85 London Borough of Bromley was above Standard in this element as it:
· considered prosecution in all cases that complied with its policy on sanctions
· publicised cases to send out a suitable deterrent message to fraudsters
· set a target for the number of prosecutions to be carried out
· monitored the securing of prosecutions against its policy criteria and accounted for inconsistencies found.
7.86 At the time of our first inspection no prosecutions had been carried out.
7.87 The Audit subcommittee had set a target of 9 prosecutions for 2003/04. By November 2003 8 successful prosecutions had been carried out.