Overpayments
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Source: BFI analysis
For an explanation about how to read this radar chart see Executive summary.
8.1 This section covers London Borough of Bromley’s efforts to reduce the loss to public funds from fraud and error in the benefits system.
Overpayment policies and procedures
8.2 Local authorities should link their overpayment policies to the strategic Vision for HB and CTB administration. These policies should be underpinned by performance targets that give:
· a clear view of the desired outcome
· accountability for providing effective and efficient debt recovery.
8.3 London Borough of Bromley was not at Standard in this element as it did not:
· include the use of blameless tenant legislation in its Overpayments Strategy
· make overpayments policies and procedures available on every relevant section for staff to refer to
· reflect the Department’s debt management guidance in its procedures
· ensure that staff were trained in all aspects of the overpayment process
· provide awareness training for all staff not directly involved with overpayments.
8.4 The Overpayments Strategy did not set out the use of blameless tenant legislation under the Social Security Administration Act 1992. This legislation enabled authorities to recover overpaid rent allowance from a landlord by making a deduction from HB paid to them in respect of another tenant.
8.5 London Borough of Bromley did not make full use of the Department’s debt management guidance. This guidance explains how local authorities can ask the Department to recover a local authority overpayment from other benefits.
8.6 However, London Borough of Bromley had developed process maps and procedures to minimise overpayments. The Overpayments Strategy:
· reflected the latest legislative changes
· set measurable targets
· ensured overpayments were brought to account and were under appropriate financial control
· was endorsed by Members.
8.7 The Overpayments Strategy included a number of good practices, such as regular meetings with its larger stakeholders to discuss and negotiate old and continuing overpayment liabilities, commencement of legal recovery action through the courts and the use of independent bailiffs. These practices had not been fully implemented.
8.8 This was disappointing, as one of the recommendations from our first inspection was to introduce the full range of recovery powers available, to reduce the level of outstanding debt and help prevent cases from being overlooked or ignored when all other appropriate action had been taken.
8.9 A further recommendation from the first inspection was to make more use of the landlord debt report, by undertaking discussions with the worst debtors to secure a negotiated settlement of debts.
8.10 In January 2004 London Borough of Bromley held 2 meetings with its housing associations to discuss outstanding debt. There were plans to set up further meetings with the other housing associations.
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Recommendations |
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We recommend that London Borough of Bromley: |
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· includes the use of blameless tenant legislation in its Overpayments Strategy and ensures staff implement its use · makes overpayment procedures available to all staff · provides training for staff who are involved in all aspects of overpayment work. |
Identification of overpayments
8.11 The accurate and timely identification of overpayments is important as it:
· ensures the incorrect payment of benefit does not continue
· enhances the prospect of a successful recovery of the overpayment
· reduces the number of complaints and appeals.
8.12 London Borough of Bromley was not at Standard in this element. It did not process changes of circumstances, which resulted in a reduction of benefit or benefit ceasing, before the first payday following the date the local authority received sufficient information for it to act on the error or change of circumstances.
8.13 It took, on average, 29 days for changes to be processed in our sample of 20 overpayment cases.
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Recommendations |
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We recommend that London Borough of Bromley processes changes of circumstances, which result in a reduction of benefit or benefit ceasing, before the first payday following the date it receives sufficient information for it to act on the error or change of circumstances. |
Calculation of overpayments
8.14 The accurate and timely calculation of overpayments is important to:
· provide a quality service to customers and landlords
· meet regulatory requirements
· provide accurate management information on the value of the overpayment debt
· ensure that only the correct overpaid amount is recovered from the debtor
· enable the correct calculation of subsidy claims and avoid subsidy loss.
8.15 London Borough of Bromley was not at Standard in this element as it did not calculate overpayments, on average, within 7 calendar days of the first payday after receipt of written notification of a change of circumstances.
8.16 In all other respects the local authority met the Standard in this element. There was evidence of good performance:
· customers were invited to provide information needed to establish any underlying entitlement
· Benefit Assessors used correct effective dates to accurately establish the period of overpayments
· consideration was given to the effect of any uncashed or returned cheques.
8.17 Before an overpayment of benefit is calculated, the authority must have first established if there was an underlying entitlement to benefit during the period of the overpayment that would affect the final amount of the overpayment.
8.18 Benefit Assessors were aware of the requirement to assess underlying entitlement when calculating an overpayment of benefit. London Borough of Bromley invited customers to provide information about their circumstances during the overpayment period. London Borough of Bromley issued a standard form with its overpayment decision letters that explained underlying entitlement.
8.19 An overpayment must be reduced by the value of any uncashed cheques. London Borough of Bromley had procedures in place for identifying uncashed cheques and reduced overpayments by the value of these.
8.20 London Borough of Bromley had accurately calculated the overpayment in all 20 overpayment cases in our sample.
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Recommendations |
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We recommend that London Borough of Bromley calculates overpayments, on average, within 7 calendar days of the first payday after receipt of written notification of a change of circumstances. |
Decisions on recoverability
8.21 Regulation 99 of the Housing Benefit (General) Regulations 1987 and regulation 84 of the Council Tax Benefit (General) Regulations 1992, govern the recoverability of overpayments, and in the case of CTB, excess benefits.
8.22 London Borough of Bromley was not at Standard in this element, as it did not take account of the Department’s guidance and its own procedures to decide whether an overpayment should be recovered and from whom.
8.23 In our first report we recommended that London Borough of Bromley took steps to revise its overpayment control sheet to ensure that:
· Benefit Assessors provided all relevant facts to show why an overpayment had been raised, giving details of the overpayment calculation and classification
· determination officers clearly stated:
– that the overpayment calculation was correct
– that the classification was correct
– that the overpayment was recoverable
– from whom the overpayment was recoverable.
8.24 During our second inspection, London Borough of Bromley no longer used a control sheet. However, it recorded the information referred to in our previous recommendation directly onto the Benefit IT system.
8.25 When an overpayment is calculated the local authority should consider from whom the overpayment should be recovered. Once London Borough of Bromley had considered recoverability of an overpayment, the Benefit IT system automatically defaulted to request recovery from the person who received the benefit. This decision was only reviewed if a complaint, request for reconsideration or appeal was received.
8.26 Managers told us that guidance had been issued to staff stating that each case was to be considered on an individual basis, but staff told us that they were unaware of this guidance.
8.27 London Borough of Bromley provided a sample of a further 6 overpayment cases to illustrate that it considered each overpayment on an individual basis. All 6 cases were amended as a result of a fraud decision being notified to the Debt Recovery team and not because it was exercising its discretion in deciding from whom to recover the overpayment. The fraud decision was recorded on the notepad section of the Benefit IT system.
8.28 We concluded that London Borough of Bromley needed to take further steps to ensure that staff were made aware of the correct procedures in all cases. We make a recommendation regarding training in Overpayment policies and procedures.
Decision letters
8.29 Regulation 77(1) of the Housing Benefit (General) Regulations 1987 prescribes that local authorities shall notify in writing any person affected by a decision made by it under these Regulations. Decision letters must contain a statement of the matters as set out in regulation 77(1) and Schedule 6 to the Housing Benefit (General) Regulations 1987. Schedule 6 to the Council Tax Benefit (General) Regulations 1992 has like provisions in respect of CTB decision letters.
8.30 London Borough of Bromley was above Standard in this element because:
· decision letters complied with the requirements of the legislation
· were issued within 14 days
· were sent on the actual date of the notice
· overpayment notices were accessible
· it minimised the number of decision letters it sent by covering all points arising in one customised notice.
Recovery of overpayment debt
8.31 The efficient and effective recovery of overpayments is important as it:
· deters fraud and error
· reduces losses to public funds
· is a visible demonstration of London Borough of Bromley’s commitment to accuracy and propriety
· is a source of revenue for the local authority.
8.32 London Borough of Bromley was not at Standard in this element because it did not:
· set a target to achieve top quartile performance against other authorities
· make use of all recovery methods
· actively pursue recovery, including old debts
· prioritise fraud overpayments.
8.33 Performance
Standards require authorities to set a target to achieve recovery equivalent
to the top quartile of authorities. This equates to a recovery rate of 61%
of overpayments raised. London Borough of Bromley had set a Best Value Performance
Indicator target of 65% for 2003/04. In
July 2003 the authority adjusted its internal target to 50% in light of the
revised interpretation issued by the Department and the Audit Commission on
the calculation of the Best Value Performance Indicator. In January 2004,
the authority estimated that it would achieve performance of 38% for 2003/04.
8.34 In our first report we recommended that London Borough of Bromley introduced the full range of recovery methods available.
8.35 London Borough of Bromley’s Overpayments Strategy stated that all possible means of recovery should be used. At the time of the on-site phase of our second inspection the only methods that were being used were:
· recovery from ongoing benefit
· recovery by sundry debtors invoice
· limited recovery from other social security benefits.
8.36 London Borough of Bromley had prepared 80 cases for County Court, but instead of continuing with this process and taking them to court, the authority passed them to a debt collection agency. It only began using a debt collecting agency in early November 2003. At the time of the on-site phase of our inspection, no overpayments had been recovered using this method.
8.37 Records of all outstanding overpayments were held on the Benefit IT system enabling recovery from any future awards.
8.38 London Borough of Bromley applied the correct rates of deduction from ongoing benefit, applying a higher rate of recovery for fraudulent overpayments. The recovery rates for non-IS and JSA(IB) cases had been correctly calculated in our sample of overpayment cases. However, staff told us that they did not prioritise fraud overpayments.
8.39 The Service Provider was aware that recovery from other social security benefits could be made by the Department’s Debt Management organisation and a standard form for referring overpayments to the Department was held on the Benefit IT system. However, for the period April 2003 - November 2003 it had only used this method of recovery on 3 occasions.
8.40 Following our inspection London Borough of Bromley told us that it had been included in a pilot with the Department giving local authorities greater access to information via the Remote Access Terminal.
8.41 Figure 8.2 shows that no recovery action was being taken on 52% of the outstanding HB overpayment cases.
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Status |
Rent allowance |
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Number |
% |
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Fully recovered |
3,207 |
57 |
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Recovery ongoing |
1,176 |
21 |
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No ongoing recovery action |
1,269 |
22 |
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Total |
5,652 |
100 |
Source: London Borough of Bromley
8.42 London Borough of Bromley had a high number of outstanding landlord debts which, at November 2003 totalled £1.2 million. Our analysis found that 3 housing associations owed 70% of the total outstanding landlord debt.
8.43 Figure 8.3 provides details of the 3 housing associations with the highest outstanding HB debts.
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Landlord |
Amount outstanding £ |
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XXXX XXXX XXXX XXXX XXXX XXXX |
681,452 |
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XXXX XXXX XXXX XXXX XXXX |
92,952 |
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XXXX XXXX XXXX XXXX XXXX XX |
69,992 |
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Total |
844,396 |
Source: London Borough of Bromley
8.44 London Borough of Bromley advised us that it had been considering introducing the following recovery options:
· a separate exercise to target the top 50 debtors
· regular meetings with larger stakeholders to discuss and negotiate their old debts and continuing overpayment liabilities
· inviting customers to case conferences
· recovery through County Court action
· Call Centre staff in Sheffield to pursue overpayments during the evenings and at weekends.
8.45 These options were outlined in London Borough of Bromley’s Overpayments Strategy but at time of the on-site phase of our inspection no target dates had been set for their implementation. London Borough of Bromley later told us that it had sought legal advice on pursuing County Court action and had fortnightly meetings with Broomleigh Housing Association regarding payment of debts.
8.46 London Borough of Bromley had not used the powers available under section 75 of the Social Security Administration Act 1992 to recover overpayments by registering the debt with the court. This method of recovery could provide the opportunity to use recovery methods such as attachment of earnings.
8.47 There were a large number of cases that were pending. Pending cases were those where either no recovery action was being taken or recovery action had stopped. This category had increased steadily over the last 6 years, and represented a large proportion of the outstanding debt.
8.48 London Borough of Bromley had a total of 5,335 outstanding invoices covering the period April 1998 - August 2003, of which 2,092 (39%) were in the pending category. In monetary terms, this equated to £1.18 million in unrecovered overpayments on which no action was being taken. Although cases in pending were regularly reviewed there was no strategy for reducing the number of such overpayments.
8.49 However, in January 2004 London Borough of Bromley agreed to reduce the turnaround time for issuing invoices from 42 days to 28 days.
8.50 London Borough of Bromley had little success in securing agreements to repay overpayments from debtors. Agreements had been reached on a total of 946 invoices, which equated to 18% of the total outstanding invoices.
8.51 When CTB excess payments were calculated by the Benefit IT system they were transferred to the Council Tax system and automatically recovered through adjustments to the Council Tax account. An overpayment decision letter was then generated from the Benefit IT system.
8.52 XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX X
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Recommendations |
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We recommend that London Borough of Bromley: |
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· sets a target to achieve top quartile performance against the overpayment recovery Best Value Performance Indicator · makes use of all recovery methods · actively pursues recovery, including old debts · prioritises fraud overpayments. |
Classification of overpayments
8.53 The correct classification of overpayments is important as it:
· affects the level of subsidy attracted on HB and CTB payments
· can affect the level at which the recovery rate is set
· provides an indication of levels of fraud and error
· affects claims under the Security Against Fraud and Error scheme.
8.54 London Borough of Bromley was not at Standard in this element as it did not correctly classify overpayments in line with legislation.
8.55 We examined the overpayment classifications in a sample of 20 cases. An incorrect classification had been recorded in 9 cases (45%). London Borough of Bromley agreed with our findings and immediately corrected the claims.
8.56 Figure 8.4 provides details of the classification of HB overpayments from April 2001 - 30 September 2003.
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Fig. 8.4: Classification
of HB overpayments from |
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Category |
2001/02 £ |
2002/03 £ |
2003/04
- £ |
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Customer error/other |
855,443 |
874,946 |
646,901 |
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Local authority error |
409,161 |
611,394 |
261,228 |
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Fraud |
204,257 |
Included in customer/other |
Included in customer/other |
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Departmental error |
0 |
0 |
0 |
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Total |
1,468,861 |
1,486,340 |
908,129 |
Source: London Borough of Bromley
8.57 In April 2002 the contract for dealing with benefits, which included overpayments, was awarded to the current Service Provider. The Service Provider inherited backlogs and struggled to control workloads. Resources were often diverted from overpayment work to assist in the payment of claims.
8.58 In our first report we recommended that London Borough of Bromley ensured that its Service Provider performed a minimum of 10% management checks on overpayment classifications. This was to ensure that overpayments were classified correctly and to gain some assurance regarding the integrity of subsidy claims.
8.59 London Borough of Bromley acknowledged this recommendation and told us that it had performed this 10% check. However, our findings indicated that the correct classification of overpayments was still an issue and raised concerns over the need for additional training.
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Recommendations |
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We recommend that London Borough of Bromley ensures that all overpayments are classified correctly. |
Management of debt
8.60 Local authorities should attempt to recover all overpayments as quickly as possible to manage debt effectively. Managers should:
· ensure that recovery action is taken wherever possible
· monitor the amount of outstanding debt
· seek to keep the amount of outstanding debt as low as possible
· review working practices for continued efficiency.
8.61 London Borough of Bromley was not at Standard in this element as it did not:
· consider writing off debts only when all avenues of recovery had been exhausted, or where it would be uneconomical in line with its corporate write-off policies
· set targets for reducing the numbers and amounts of inactive debt.
8.62 London Borough of Bromley had a strategy for the continuous improvement in the level and age of debt. It also monitored and reported to Members on the level and age of debt.
8.63 London Borough of Bromley produced a comprehensive range of management information on the level of overpayments raised and overpayments recovered. It was also able to provide figures on overpayments for landlords, which would have enabled targeted recovery action. These figures were reported monthly to managers and Members.
8.64 Management information regarding the outstanding debt was divided into 4 main categories:
· outstanding invoices
· arrangements
· potential write-offs
· recovery suspended.
8.65 The Debt Recovery team monitored individual debts either on a weekly or monthly basis depending on the type of arrangement the debtor had made. Comprehensive records were maintained regarding the stage of each overpayment.
8.66 Figure 8.5 provides details of London Borough of Bromley’s sundry debt position for the period 1 April 2001 - 31 October 2003. This shows a 48% increase over 2 years.
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Fig. 8.5: Overpayment sundry debt position from April 2001 - 31 October 2003 |
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2001/2002 £ |
2002/2003 £ |
April
- £ |
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Balance brought forward |
1,721,130 |
1,989,733 |
2,495,130 |
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New debt raised in period |
3,301,366 |
4,516,793 |
3,053,699 |
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Debts recovered this period |
2,947,958 |
3,968,169 |
2,578,122 |
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Written off in period |
84,359 |
35,859 |
24,068 |
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Issues* |
446 |
7,368 |
3,590 |
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Balance carried forward |
1,989,733 |
2,495,130 |
2,943,049 |
Source: London Borough of Bromley
* Issues denotes discrepancies under investigation by London Borough of Bromley
8.67 Any overpayment that the authority decided not to recover or considered non-recoverable was submitted for write-off. However, there were procedures in place to reopen debts if appropriate, for example if a customer made a new claim.
8.68 London Borough of Bromley had a write-off policy as part of its Overpayments Strategy. It contained clear instructions on lines of responsibility between the Service Provider and London Borough of Bromley’s staff for deciding whether a debt was suitable to be written off.
8.69 The Debt Recovery team identified cases and sent the relevant information to the client-side for authorisation of the write-off. Referrals were made individually as each case required a report outlining the facts.
8.70 From our write-off sample of 7 cases we found that 6 (86%) could have had further action taken before being written off. For example, in 2 cases more use could have been made of the Remote Access Terminal to establish if recovery from other benefits was a possibility.
8.71 XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX X XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXX
8.72 XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX
· XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXX
· XXXX XXXX XXXX XXX
· XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX X XXXX XXXX XXX
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· XXXX XXXX XXXX XXXX XXXX XXX
· XXXX XXXX XXXX XX
8.73 Figure 8.6 shows the outstanding debt on the Benefit IT system and the sundry debtors system for debts raised from April 1998 - 31 October 2003.
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Year |
Number of outstanding debts raised |
Amount outstanding £ |
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1998/99 |
111 |
40,249 |
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1999/2000 |
478 |
360,438 |
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2000/01 |
394 |
369,357 |
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2001/02 |
644 |
484,232 |
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2002/03 |
1,445 |
729,714 |
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2003/04 - 31 October 2003 |
2,445 |
1,074,293 |
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Total |
5,517 |
3,058,283 |
Source: London Borough of Bromley
8.74 We found that London Borough of Bromley needed to do more work to recover its aged debt, incorporating the initiatives set out in the Overpayments Strategy.
8.75 Meetings between the Debt Recovery team Manager and the client-side were held every 2 weeks. However, improved communication between the Debt Recovery team and the Benefit Assessors to discuss operational issues is essential to maximise overpayment recovery.
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We recommend that London Borough of Bromley: |
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· considers writing off debts only when all methods of recovery have been exhausted, or where it would be uneconomic in line with the local authority’s write-off policy · sets targets for reducing the numbers and amounts of inactive debt and monitors its performance against these. |