Executive summary
Background
1.1 The role of the Benefit Fraud Inspectorate (BFI) is to inspect Benefits administration and counter-fraud activity within the Department for Work and Pension’s (the Department) agencies and local authorities. The findings from our inspections are reported to the Secretary of State.
1.2 Housing Benefit (HB) and Council Tax Benefit (CTB) are important contributions to many household budgets. Just under 4 million people receive it, including many families with children, and many pensioners. It helps one in 6 households meet the cost of their housing at an annual cost of £11.5 billion.
1.3 In its response to the Housing Green Paper of November 2000 the Department for Work and Pensions (the Department) agreed to develop a performance framework for HB. BFI played the major role and the HB and CTB Performance Standards were launched and published in April 2002. Each local authority was sent a copy of the Standards at that time, and encouraged to complete a self-assessment against them.
1.4 The Performance Standards allow local authorities to make a comprehensive self-assessment of whether they deliver benefit effectively and securely. The Department has chosen to consider the full picture of what constitutes an effective and secure Benefits service, that meets wider strategic objectives, rather than focussing solely on speed and accuracy of processing claims and security. They are standards the Department aspires to; they are not the standards the Department thinks local authorities can achieve tomorrow.
1.5 How quickly local authorities meet these standards will depend on the circumstances they face. These include current levels of performance and the level of local and national resources, as well as the effectiveness of change management within the authority itself. The Department has therefore not set a timescale for how rapidly the standards will need to be met by local authorities.
1.6 This report assesses Knowsley Council's administration of HB and CTB against the Performance Standards. The findings in this report should be read in conjunction with the Performance Standards pack, which can be downloaded from the Department’s website, www.dwp.gov.uk/housing benefit/publication/2003
1.7 Knowsley Council had faced many challenges since early 2000. Senior management had identified a number of essential building blocks that needed to be in place to deliver improvements to the Benefits service and achieve the status it aspired to. These included:
· implementation of the Verification Framework (VF) in March 2000
· implementation of an electronic document management and workflow system in August 2000
· establishment of one stop shops and a customer Contact Centre to provide a single point of contact for customers in September 2000
· strengthening the management of the Revenues and Benefits division by introducing a new Assistant Director (Revenues and Benefits) in August 2001 and an ongoing divisional reorganisation
· being one of only 9 authorities to be selected to participate in the Registered Social Landlord Verification Framework pilot in October 2001
· implementation of a new Benefits IT system in June 2002
· undertaking a Large Scale Voluntary Transfer of its remaining housing stock in July 2002
· implementation of a homeworking pilot for Benefits staff in May 2003 to move towards better "Work–Life Balance" with a greater emphasis on eGovernment
· undertaking its first Performance Standards self-assessment in July 2003
· introducing a new corporate Performance Review and Development scheme.
1.8 This was an ambitious programme of activity that we discuss in a greater level of detail at various sections within this report. Many of the earlier changes were responsible for a considerable backlog of new and renewal claims that Knowsley Council was recovering from at the time of our on-site activity. The Benefits service had a committed workforce and we acknowledge the considerable efforts made by Members, senior officers and staff over a sustained period of time.
1.9 Knowsley Council had used the outcome of its second Performance Standards self-assessment in August 2003 to determine where action could be taken in the short term to address weaknesses. A series of action plans were subsequently developed and the Benefits service implemented a number of changes before we arrived on site in October 2003.
1.10 Our inspection considered Knowsley Council’s performance against each of the Standards and tested Knowsley Council's own self-assessment. Knowsley Council reacted positively to feedback we provided on-site and we commend it for implementing a number changes to its Benefit processes. This supported Knowsley Council's programme of continuous improvement.
1.11 We are grateful to Knowsley Council for its help and co-operation throughout this inspection.
Overall performance
1.12 Figure
1.1 is a radar graph that provides an illustration of Knowsley Council’s performance
against the Performance Standards 7 functional areas. The outside line shows
the Standard level of performance, the inside line is BFI’s assessment of
Knowsley Council’s performance at the time of our
on-site inspection in October and November 2003.
|
Fig. 1.1: Performance against standard |
|
|
Source: BFI analysis
For an explanation about how to read this radar chart see Strategic Management
1.13 Although we found that Knowsley Council had not reached Standard in any of the 7 functional areas of Standards, we were impressed by the Vision within Strategic Management where performance had met Standard.
1.14 Knowsley Council had an ambitious vision of where it wanted its Benefit service to be but we had concerns about its capacity to get there. There were a number of serious problems that contributed to our view and many of these were management issues. Knowsley Council had recognised before our inspection that it had a number of weaknesses and embarked on a significant programme of change. During our inspection it was part way through a structural reorganisation. Our primary concern was that the Benefits service had failed to address some fundamental management issues, which provided us with doubt about its capability to fulfil its ambition.
1.15 Knowsley Council had not documented its approach to Benefits administration, essential strategic policies were not in place and there was insufficient procedural guidance. Staff lacked day-to-day operational support through procedural guidance on routine processes, which meant inconsistent decisions were being made on claims. We had serious concerns about the lack of management assurance and public accountability provided by the Benefits service. Inadequate management checking and elected Members not receiving full details of audit findings were important failings. We were also concerned by its failure to comply with the legal requirements of Social Security legislation, the Disability Discrimination Act and the Race Relations Amendment Act.
Performance against Standards
Strategic Management
1.16 Knowsley Council is not at Standard.
1.17 We confirmed a high level of support from Members for the Benefits service. This was typified by the Cabinet Member with portfolio who attended weekly meetings with senior officers from the Finance Department and was kept informed of issues at a fairly detailed level. However, very weak levels of assurance in the process of reporting Audit findings and recommendations compromised this level of interest. The role of Internal Audit is to give assurance to senior officials and elected Members on the health of the Benefits service. Although the work of Internal Audit was very comprehensive Members only received a summary report which did not adequately cover the range of findings and in particular the scale of recommendations. We were concerned that Audit recommendations had not been rigorously implemented and failures in the reporting process to Members reduced public accountability.
1.18 Business planning at a strategic level included strategic objectives for the Benefits service and ensured the service had a high profile within the authority. However, ineffective business planning at an operational level had undermined the successful implementation of major changes. We were told that significant difficulties were experienced following implementation of the Verification Framework (VF) in 2000/01. This was closely followed by another major change for the implementation of a document image processing system. We were told that this failed to deliver what the IT software company had promised. The impact of these changes was a backlog in claims processing which at its height reached 9,000 outstanding cases.
1.19 During 2001/02 Knowsley Council began reviewing the organisational structure within the Revenues and Benefits service. A key part of this was a comprehensive review of the service undertaken with support from the Institute of Revenues Rating and Valuation, which produced a high-level action plan. Implementation of the wide range of changes identified, required a project manager to oversee and co-ordinate activity as well as ensuring accountability for delivery. Although an objective to devise an implementation plan for the organisational review formed part of the Assistant Director of Finance’s overall duties we were unable to confirm through our interviews that the specific role of project manager had been fulfilled.
1.20 During the course of our inspection we found that many of the difficulties encountered by Knowsley Council could be attributed to a lack of effective planning and organisation, limited risk management, absence of clear timescales and responsibilities not set for the completion of activities. We concluded that deficiencies in these key management areas had been unhelpful to Knowsley Council in its efforts from 2001 to the date of our inspection to deal with a backlog of claims, whilst also undertaking a fundamental re-organisation of its service.
1.21 Knowsley Council's first self-assessment against Performance Standards was undertaken in July 2003 with assistance from Internal Audit. Areas of non-compliance were identified and prioritised and action plans produced. A further self-assessment was undertaken one month later. We found the reported 23% improvement in performance had been over optimistic by a wide margin.
1.22 Identification of appropriate policies and the production of procedures were two of the areas not given a high enough priority for action following the first self-assessment. The Benefits service did not have policies to bridge the gap between where the service was and where it wanted the service to be. Lack of procedures meant that there was nothing to translate policies into practical steps for delivery, which resulted in Knowsley Council making inconsistent decisions and managing by exception. Insufficient management checking meant Knowsley Council did not have adequate assurance about the quality or security of the service it was providing.
1.23 Administrative errors were not being identified, except from individual complaints or appeals, when the case in question was dealt with. The lack of feedback on quality issues was apparent when we sampled claims and found weaknesses in form completion, evidence gathering and verification. These failings had a direct consequence on the level of official error overpayments being unnecessarily incurred.
1.24 Knowsley Council had set local targets for all the national Best Value Performance Indicators (BVPIs) and other key areas of its business. Although it collected management information to support these performance indicators, the information did not cover all areas of the Benefits service and information was not consistently used to inform decision making or provide assurance to Members.
Customer Services
1.25 Knowsley Council is not at Standard.
1.26 It had not assessed its Benefits service against the requirements of the Disability Discrimination Act and was also not complying with the Race Relations Amendment Act. Physical access issues for customers with disabilities had been considered but their access to services including information needs had not been assessed. We also found that the needs of customers whose first language was not English had not been assessed. As pre-arranged appointments were not available at any of the customer outlets we were concerned that certain customer groups including the aged, infirm, disabled, ethnic minorities and in work customers could be prevented or discouraged from calling into the council's offices.
Processing of Claims
1.27 Knowsley Council is not at Standard.
1.28 Although it had implemented the VF it was not consistently applying the rigorous standards required for gathering and confirming evidence. An impressive effort had been made to reduce a backlog of new claims. At the time of our on-site inspection Knowsley Council had a realistic expectation that it would achieve its BVPI target of processing new claims in 36 days or less.
1.29 We were told that new and renewal claims processing had been given priority over other outstanding work. Our sampling of cases confirmed increases of outstanding reported changes of circumstances. We were concerned that delays in processing these cases were contributing to high levels of avoidable overpayments. In addition we made senior management aware of our concerns about a backlog of over 20,000 individual items of post. No action had been taken to sift the items or identify priorities. The oldest recorded item was received in May 2001. Knowsley Council did not have a recovery plan.
Working with Landlords
1.30 Knowsley Council is not at Standard.
1.31 It completed the Large Scale Voluntary Transfer of housing stock to Knowsley Housing Trust in 2002. It had also implemented the Registered Social Landlord Verification Framework Scheme and 7 of its registered social landlords were participating. Former council tenants who claim HB have been able to retain a similar level of access to the Benefits service as they had prior to the Large Scale Voluntary Transfer. This was mainly due to Knowsley Council's sound working arrangements secured by a service contract with Knowsley Housing Trust. Also Knowsley Housing Trust is co-located in 3 of Knowsley Council's 4 customer outlets. However, there were no agreed service levels with the remaining registered social landlords. Knowsley Council was not managing the relationship with registered social landlords sufficiently to ensure adequate security and effectiveness in the verification process. We saw evidence of this in weak verification and delays in claims being processed.
Internal Security
1.32 Knowsley Council is not at Standard.
1.33 XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX X XXXX XXXX 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 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 XX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXX XXXX XX
Counter-fraud
1.34 Knowsley Council is not at Standard.
1.35 Although good use was being made of the opportunities afforded by data matching this intelligence was not being consistently applied to identify weaknesses in Benefits administration. The introduction of management grades within the counter-fraud team was delivering significant improvements as the referral process was now being managed with appropriate cases being recommended for sanction. Positive efforts were also being made to raise the profile of counter-fraud activity in the council. Improved publicity of its prosecution policy was needed internally and externally, to demonstrate that Knowsley Council takes fraud seriously.
1.36 Although Members had endorsed a Prosecution Policy, the benefit irregularity panel whose primary purpose was to ensure consistency XXXX X XXXX XXXX XXXX XXXX Our sampling showed that the referral process it used and the scoring system that determined appropriate action and the level of sanction to be taken undermined the Prosecution Policy. 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 XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XX
1.37 We were also extremely concerned that the prosecution process used by Knowsley Council allowed customers to remain under caution for excessive periods of time. Our sampling showed that in the worst case the customer had remained under caution for 11 months during which time they did not know what action, if any, might be taken against them. This is unacceptable.
Overpayments
1.38 Knowsley Council is not at Standard.
1.39 Training was provided for staff that were directly and indirectly involved in the identification and recovery of Benefit overpayments. However there was no debt recovery strategy and staff were not provided with comprehensive guidance to provide direction and ensure that consistent decisions were made. Despite the lack of direction good progress had been made in the management of debt through the commitment of staff and efficient processes in place. Fraud overpayments were pursued rigorously and promptly recovered which provided a good deterrent to potential fraudsters. XXXX XX XXXX 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 XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX X
1.40 Knowsley Council had recognised failings in its procedures for the classification of overpayments before our inspection and had taken action to address these through refresher training. Whilst we were satisfied that this action had gone a considerable way to dealing with the problem we had serious concerns about the classification of earlier overpayments before changes had been introduced.
1.41 We sampled 30 overpayment cases raised between April 2002 and March 2003, and found that Knowsley Council had failed to correctly classify 8 of those 30 cases and in 4 cases the overpayment was caused or increased by its failure to take prompt action. Reported levels of official error overpayments for the period from April to November 2003 represented 34% of total overpaid benefit. Examples of misclassifications in our sampling indicate that the correct level is likely to be higher.
1.42 Our sampling showed that 70% of identified overpayments were from changes in circumstances reported by customers themselves, some in advance of the change occurring. There was a direct link between failure to prioritise reported changes in circumstances and increased levels of official error overpayments. We concluded that inefficient management of Benefit processes was resulting in an unsatisfactory level of loss to public funds, which requires immediate attention.
Knowsley Metropolitan Borough Council
1.43 Knowsley Metropolitan Borough Council is one of Merseyside's five metropolitan districts located between Liverpool and Manchester. It covers an area of 33 square miles, two-thirds of which is Green Belt land and has a population of approximately 150,000 people. Knowsley's population is relatively young with almost 23% aged under 16 compared to the national average of 20% and with only 5.7% aged 75 or over compared with 7.6% nationally.
1.44 According to the Index of Multiple Deprivation (2000) Knowsley was the 6th most deprived district in England and of Knowsley's 22 wards, 18 were among the most deprived 10% of all wards in England. The population also had the following characteristics reinforcing the deprived view:
· almost 42% of households had no car (less than 27% nationally)
· almost 12% of lone-parent households had dependent children (6.5% nationally)
· employment was 49% (over 60% nationally)
· over 12% of the population were permanently sick or disabled (5.5% nationally)
· almost 10% had a degree or higher level qualification (almost 20% nationally).
1.45 In 2001 Knowsley achieved Beacon status for regeneration. Its diverse economy was originally as a result of a strong manufacturing base but was now seen as a major centre for service industries with a number of small to multi-national companies providing 60% of jobs.
1.46 Knowsley Council also achieved Beacon status in 2001 for its Accessible Services and went onto achieve Beacon status in 2003 for Removing Barriers to Work. £30m had been invested in the latest technology to support businesses and provide innovative services that support people from all walks of life, including:
· people with learning disabilities
· young adults
· older people
· job seekers.
1.47 On-line facilities via the Internet and Digital Television are being rolled out that allow electronic forms, on-line payments, on-line bookings and even on-line job applications to be accessed 24 hours a day and 7 days a week. Knowsley had been awarded Beacon status for Social Inclusion through Information and Communication Technology recognising the efforts of Knowsley Council and its partners.
1.48 Figure 1.2 shows that for October 2003 the average unemployment rate across Knowsley's 2 main parliamentary constituencies, Knowsley North & Sefton East and Knowsley South was 4.8%. This was above the national average of 3.1%.
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Fig. 1.2: Knowsley Council unemployment levels – October 2003 |
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|
Parliamentary constituency |
% unemployment |
|
Knowsley North & Sefton East |
4.2 |
|
Knowsley South |
5.3 |
|
Unemployment rate overall |
4.8 |
Source: House of Commons Library
1.49 We were told that attempts had been made to keep the Council Tax charge as low as possible and Figure 1.3 shows that although Knowsley Council's Council Tax was higher than the metropolitan borough average in 2001/02 it had been lower in both years since.
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Fig. 1.3: Council Tax per dwelling for area |
|||
|
2001/02 |
2002/03 |
2003/04 |
|
|
Knowsley Council (£) |
696 |
718 |
737 |
|
Percentage increase since 2001/02 |
–- |
3.2 |
5.9 |
|
Metropolitan Borough average (£) |
684 |
722 |
780 |
|
Percentage increase since 2001/02 |
–- |
5.6 |
8 |
|
England average (£) |
741 |
804 |
908 |
|
Percentage increase since 2001/02 |
–- |
8.5 |
12.5 |
Source: Office of the Deputy Prime Minister
1.50 The Council’s Best Value Performance Plan quoted that the 2003/04 revenue budget resulted in the lowest Council Tax on Merseyside for the second year running (and the second lowest increase in the country in 2003/04). Figure 1.4 shows that this trend did not mirror either the metropolitan borough or England average.
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Fig. 1.4: Council Tax charge per dwelling for area |
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|
Source: Office of the Deputy Prime Minister
Benefit expenditure and caseload
1.51 An average 68.5% of Knowsley Council's HB caseload during 2002/03 was from IS/JSA(IB) customers. Where the Benefits service had confirmed that the customer (or their partner) was in receipt of IS or JSA(IB), there was no need to seek evidence of any other income or capital the customer, or his/her family may have had. This was because HB and CTB regulations required the authority to disregard the income and capital in full. Knowsley Council also had the opportunity to accept the Secretary of State's assurance that sections 1(1a) and 1(1B) of the Social Security Administration Act 1992 in respect of the customers' identity had also been met. This was possible if it was satisfied that Jobcentre Plus had verification standards that met the requirements of the VF.
1.52 The Large Scale Voluntary Transfer of housing stock in 2002 meant that Knowsley Council had no rent rebate caseload. Implementation of the Registered Social Landlord Verification Framework Scheme meant that although responsibility for VF remained with the council, the bulk of the work should have in the main been transferred elsewhere, easing the burden on Knowsley Council and making the administration of HB and CTB a lot more straightforward. Although cultural change within its customer base was necessary to make this really successful, Knowsley Council could have achieved greater benefit than it did through effective management of its external working relationships.
1.53 Figures 1.5 and 1.6 illustrate the authority’s HB and CTB expenditure and caseload.
| Fig. 1.5: HB and CTB expenditure and caseload | |||
|
Rent
rebate |
Rent
allowance |
CTB |
|
|
2000/01 |
31.4 |
14.9 |
21.5 |
|
2001/02 |
34.1 |
17.8 |
23.4 |
|
2002/03 |
10.4 |
42.0 |
18.4 |
|
April to October 2003/04 |
0.1 |
32.3 |
18.3 |
Source: Knowsley Council
|
Fig. 1.6: HB and CTB caseload |
|||
|
Rent rebate |
Rent allowance |
CTB |
|
|
2000/01 |
11,327 |
3,926 |
5,377 |
|
2001/02 |
11,463 |
4,754 |
5,471 |
|
2002/03 |
0 |
17,079 |
5,724 |
|
April to October 2003/04 |
0 |
17,482 |
6,667 |
Source: Knowsley Council
1.54 Figures 1.7 and 1.8 show the corresponding trend in caseload and benefit expenditure.
1.55 Figure 1.9 shows that HB and CTB expenditure equates to an average of 20% of the total revenue expenditure for the same period.
| Fig. 1.7: HB and CTB Expenditure |
|
|
|
Source: Knowsley Council |
| Fig. 1.8: HB and CTB New claims caseload |
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|
|
Source: Knowsley Council |
| Fig. 1.9: Gross HB expenditure as a % of gross revenue expenditure | |||
|
Year |
Total gross revenue expenditure £ million |
HB and CTB expenditure £ million |
HB and CTB expenditure as % of total revenue expenditure |
|
2000/01 |
371 |
67.8 |
18.3 |
|
2001/02 |
373 |
75.3 |
20.2 |
|
2002/03 |
367 |
70.8 |
19.3 |
|
April to October 2003/04 |
220 |
50.7 |
23.0 |
Source: Knowsley Council