Executive summary

Background

1.1 The role of the Benefit Fraud Inspectorate (BFI) is to inspect benefit administration and counter-fraud activity within the Department for Work and Pensions’ (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 HB, 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. There are over 4.6 million people in receipt of CTB at a cost of over £2.8 billion.

1.3 In its response to the Housing Green Paper of November 2000 the Department agreed to develop a performance framework for HB and CTB. BFI played a major role when 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 focusing solely on speed and accuracy of processing claims and security. They are the Standards the Department expects local authorities to aspire to in time.

1.5 How quickly local authorities meet these Standards will depend on the circumstances they face, 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 Standard’s will need to be met by local authorities.

1.6 This report assesses the administration of HB and CTB and
counter-fraud work by Sandwell Metropolitan Borough Council (Sandwell Metropolitan Borough Council) against Performance Standards. The findings in this report should be read in conjunction with the Performance Standards pack. This can be downloaded from the Department’s website, www.dwp.gov.uk/housingbenefit/publications.

1.7 We are grateful to Sandwell Metropolitan Borough Council for its help and co-operation throughout this inspection.

Overall performance

1.8 Prior to the on-site phase of our inspection in November 2003, Sandwell Metropolitan Borough Council had undertaken a self-assessment of its HB and CTB administration and counter-fraud work. We were therefore able to validate Sandwell Metropolitan Borough Council’s own assessment against our findings.

Fig. 1.1: Performance against Standard

Source: BFI inspection assessment

This and all subsequent radar graphs show the levels of performance for each of the elements of individual Performance Standards. The Standard score is the number of levels of performance that need to be achieved for the local authority to be at Standard. The BFI assessment is the number of levels of performance that have been achieved. Where the inner line moves outside the outer line, the local authority is performing above Standard.

1.9 Figure 1.1 is a radar graph that provides an illustration of Sandwell Metropolitan Borough Council’s performance against the 7 functional areas of Performance Standards. The outside line shows the Standard level of performance, the inside broken line is BFI’s assessment of Sandwell Metropolitan Borough Council’s performance at the time of our on-site inspection in November 2003.

1.10 This is our third report on the HB and CTB administration and
counter-fraud work of Sandwell Metropolitan Borough Council. We first reported on Sandwell Metropolitan Borough Council in August 1999. Our second report (referred to throughout this report as our last report) was published in March 2001 and detailed the findings of our follow-up inspection. In our last report we said that the council had improved its performance as a result of implementing most of the recommendations made in our first report. However, since then Sandwell Metropolitan Borough Council's Best Value Performance Indicators and its returns to the Department showed that its performance had deteriorated.

1.11 The objectives of our third inspection were to:

· report on the council's progress since our last report

· report on the council's performance against Performance Standards

· identify areas for improvement and make suitable recommendations.

1.12 A summary of Sandwell Metropolitan Borough Council’s progress against the recommendations of our last report is at Appendix A. We report on the council's performance against Performance Standards throughout this report and a summary of our findings appears in this Executive summary section of the report. A summary of our recommendations resulting from this inspection appears at Appendix B.

1.13 Sandwell Metropolitan Borough Council had implemented a number of significant changes since our last report, including:

· entering a contractual partnership agreement with a private contractor (the council’s partner) in June 2002 to supply the council with:

- a replacement benefits IT system

- an electronic data management system

- fault management and correcting services from its software supplier and the production of decision notices, based in Sheffield

- a replacement telephone call centre system

- a visiting service to satisfy the requirements of the Verification Framework

- new desktop computers

- off-site claims processing by a dedicated team of processors specifically dealing with Sandwell Metropolitan Borough Council's benefit claims

- provision of temporary staff on-site to cover vacancies

- a post opening and document scanning service based in Sale, Greater Manchester

- access to the partner's Intranet site and Single Process

- training courses for new entrants and IT training for all Revenues and Benefits service staff

· the introduction of the Verification Framework in September 2002

· the implementation of an electronic data management system in October 2002

· relocating the council's claims processing operation to Intersection House, West Bromwich in October 2002

· the implementation of a new benefits IT system in April 2003.

1.14 The council's Revenues and Benefits service was housed at 3 separate locations. Most of the Revenues and Benefits service staff worked at Intersection House, where the centralised benefit administration and Revenues and Benefits service call centre were located. Customer Advisers worked at the 2 public enquiry counters located at Oldbury Council House, and Lodge Road, West Bromwich.

1.15 The Revenues and Benefits service was supported by 16 local neighbourhood offices, operated by Housing Direct, a section of the council responsible for managing its housing stock. These offices predominantly dealt with housing queries from council tenants. However, they also provided a limited service for customers who wanted to submit claims for HB and CTB.

1.16 In our last report we commented that Sandwell Metropolitan Borough Council's high level of staff vacancies had caused a backlog of work. The backlog at the time of our last inspection was equal to 2 weeks incoming work. Due to the continued high level of staff vacancies, the amount of work outstanding increased until it had almost doubled. To address this, the council recruited around 50 staff between November 2002 and September 2003. The council had made a successful bid for funding from the Department’s Performance Standards Help Fund to help with this recruitment. It also agreed that its partner would process benefit claims from council tenants at its Barrow-in-Furness office, for 3 of the borough's 6 towns. However, we found that Sandwell Metropolitan Borough Council had continued to have a backlog of work. In the 11 months before the on-site phase of our inspection, the backlog had ranged between 3 and 7 weeks work and was around 4 weeks at the time of our on-site visit.

1.17 Staff shortages had also affected the performance of the Benefit Investigation team. We noted lengthy delays between various stages of investigations and that some cases had been open for as long as 3 years.

1.18 In our last report we made a number of recommendations to support Sandwell Metropolitan Borough Council's decision to implement a separate Overpayment Recovery team to improve its performance in this area. We were disappointed to find that this team had been disbanded shortly after our last inspection. During this inspection, we found the council's performance in this area to be poor.

1.19 The council had clearly embarked on an ambitious programme of change and had developed a comprehensive planning framework. The verification of information before benefit was paid had improved since our last inspection, following the council's implementation of the Verification Framework, making us confident that the gateway to the benefits system had been made more secure.

1.20 However, the council had not achieved Standard in any of the 7 functional areas of Performance Standards, and performance against Best Value Performance Indicators had not improved since our last inspection.

1.21 Of the 37 recommendations we made in our last report, 12 (32.5%) had been fully implemented, 9 (24%) had been partially implemented, 11 (30%) had not been implemented and 5 (13.5%) had become obsolete due to legislative changes. We were concerned to find Sandwell Metropolitan Borough Council had failed to implement, or implement fully more than half (54%) of our previous recommendations. This failure had clearly impacted on performance in key areas including Customer Services, Processing of Claims and Overpayments.

Performance against Standards

Strategic Management

1.22 Sandwell Metropolitan Borough Council did not achieve Standard in this area but demonstrated some strengths in terms of Operational planning, Organisational structure and Cost of benefit administration.

1.23 Our main concern was the cessation of regular management assurance checking as recommended by the Audit Commission in Countering Housing Benefit Fraud: A Management Handbook (1997). If this is not undertaken regularly Sandwell Metropolitan Borough Council risks impairing Members’ and senior officers’ ability to monitor and drive improvements in performance.

1.24 We were also concerned about the lack of service level agreements and monitoring of performance of Sandwell Metropolitan Borough Council's internal and external partners. There were also security and training issues around the implementation of the council's new benefits IT system although we were told at the time of the on-site phase of our inspection that most of these issues were being resolved.

1.25 Sandwell Metropolitan Borough Council will achieve Standard in this area if it:

· develops and introduces management assurance checking procedures for claims processing and uses the findings of those management checks to inform training and development plans

· develops a documented business continuity plan and a documented IT fallback and recovery plan

· enables Members to ensure audit recommendations are implemented within prescribed timescales

· set and monitors targets for dealing with personal and telephone callers

· develops management information reports to enable managers to monitor performance against targets in their own functional areas

· fully implements and monitors performance against service level agreements with all appropriate internal and external partners

· ensures that on-line procedural guidance is available to all Revenues and Benefits service staff.

Customer Services

1.26 Sandwell Metropolitan Borough Council was not at Standard in this area, although it did have some strengths in the areas of:

· dealing with requests for reconsideration and appeal referrals effectively

· addressing complaints about its services effectively.

1.27 However, we found that customers experienced real difficulty in accessing the council’s Revenues and Benefits service, either because of difficulties in getting through to the Revenues and Benefits service call centre, or having to wait a long time at the council’s 2 enquiry counters. We also found that there was little performance monitoring undertaken of these services. This made it more difficult to identify performance issues and target resources appropriately.

1.28 We were also concerned that Customer Advisers had not received appropriate training to enable them to deal effectively with customers making overpayment enquiries, an issue compounded by confusing decision notices that were issued by the council.

1.29 In its self-assessment, Sandwell Metropolitan Borough Council acknowledged that it had much to do to reach Standard in the areas of:

· Accessible, quality services for customers with specific needs

· Accessible quality service for those in work

· Encouraging benefit take-up, reducing poverty.

1.30 Sandwell Metropolitan Borough Council will achieve Standard in this area if it develops:

· plans to improve customer access to its services, and introduces targets and performance monitoring to measure its progress in improving these services

· an effective training and development programme for Customer Advisers

· strategies and service plans to improve the accessibility of its services for customers with specific needs and those in work

· a strategy to encourage benefit take-up and reduce poverty.

Processing of Claims

1.31 Sandwell Metropolitan Borough Council did not achieve Standard in this area although it operated verification procedures in line with the Verification Framework that it adopted in September 2002.

1.32 We had concerns about the level of claims processing performance achieved and the lack of quality checking.

1.33 Figure 1.2 shows that the level of performance achieved against Standard had declined since our last inspection.

Fig. 1.2: Comparison of claims processing performance between last inspection and this inspection
	Reported performance 31 March 2001	Performance identified during 2003 inspection	Performance Standard
% of claims processed within 14 days of receiving necessary information	59	42	90
Average number of days to process claims from receipt of claim	61	86	36
% of renewal claims paid without a break	70	13	83
Average number of days to process changes of circumstances	19	59	9

Source: The Department, BFI analysis

1.34 Figure 1.2 shows that Sandwell Metropolitan Borough Council’s performance was well below Standard. Much work remained to be done to address this situation.

1.35 Sandwell Metropolitan Borough Council had not conducted a programme of regular quality checks on benefit assessments for over a year prior to this inspection. We were pleased to note that Sandwell Metropolitan Borough Council had approved outline procedures to re-introduce quality checks from January 2004.

1.36 During the period January 2003 to September 2003, Sandwell Metropolitan Borough Council made awards of HB and CTB in a significant number of cases when it did not have a claim for the period in question. The awards in those cases were in breach of the Regulations. Sandwell Metropolitan Borough Council had also failed to comply with the Regulations for a period in early 2003 when it decided to implement reported changes of circumstances from a current date instead of from the effective date of the change.

1.37 Sandwell Metropolitan Borough Council will achieve Standard in this area if it:

· substantially improves claim processing times

· operates a system of exception reports for claims not meeting Standard

· re-introduces a programme of regular quality checks on 10% of all benefit assessments

· monitors rent allowance claims and makes prompt payments on account in appropriate cases

· introduces procedures to make applications to the Rent Service within the statutory time limits.

Working with Landlords

1.38 Sandwell Metropolitan Borough Council was not at Standard in this area, but it did demonstrate some strengths. There was a service level agreement with registered social landlords and regular meetings took place with registered social landlords and Housing Direct. Performance was also communicated and discussed with landlords at quarterly landlord forums. The council also publicised procedures for evictions and urgent cases and had an Arrears Management Policy, which was communicated to Housing Direct.

1.39 Sandwell Metropolitan Borough Council will achieve Standard in this area if it:

· provides landlords with help sheets and information leaflets

· includes appropriate consent wording on the HB claim form allowing the sharing of information with landlords

· writes to landlords annually with information about benefits and landlord responsibilities

· ensures, as a minimum, that decision notices meet regulatory requirements and that they are sent to landlords in all direct payment cases

· sends direct payment landlords a copy of the letter it sends to customers inviting them to renew their claim

· ensures that it only makes direct payments to those landlords that are fit and proper to receive it

· amends its procedures for staff on the circumstances when recovery of overpayments should be sought from the customer rather than the landlord.

Internal Security

1.40 Sandwell Metropolitan Borough Council was not at Standard in this area, but it had increased the number of days Sandwell Audit Services spent auditing the Revenues and Benefits service since our last inspection. All Revenues and Benefits service staff were required to sign declarations of interest annually.

1.41 We found security arrangements in relation to post opening varied in standard between the council's 3 main locations for post opening. The council's document management arrangements had built unnecessary delays into the administrative process.

1.42 Sandwell Metropolitan Borough Council will achieve Standard in this area if it:

· increases the security of its post opening operations

· improves its vetting procedures for new Revenues and Benefits service staff, so that they at least match those recommended by the Audit Commission

· ensures that its document management arrangements have no adverse impact on the efficiency or effectiveness of its benefit administration.

Counter-fraud

1.43 Sandwell Metropolitan Borough Council was not at Standard in this area, but we found many examples of good practice, including:

· having the Counter-fraud Policy on its website

· an up-to-date and relevant procedures manual covering counter-fraud work

· being at Standard for the Authorised individuals element

· full and complete audit trails on all cases we looked at

· making good use of its fraud case management IT system

· a history of high levels of sanction activity against fraudsters.

1.44 However, the council did not clearly define its criteria for taking sanction action. We found that the council's work on Housing Benefit Matching Service referrals had deteriorated and it was not properly operating the ‘Do Not Redirect’ scheme.

1.45 Sandwell Metropolitan Borough Council will achieve Standard in this area if it:

· defines its criteria for taking sanction action against fraudsters

· introduces procedures to sift all referrals within 5 working days

· ensures that all data matching referrals are investigated within 14 days of receipt

· properly implements the 'Do Not Redirect' scheme

· introduces key review stages on investigation cases.

Overpayments

1.46 Sandwell Metropolitan Borough Council was not at Standard in this area and we found it had made little progress in improving its performance since our last inspection.

1.47 Although Members approved an Overpayment Recovery Policy in September 2002, the lack of effective monitoring meant that it had little impact in the operational area.

1.48 The Overpayment Recovery Policy was supported by some procedural guidance for staff involved in overpayments work. However, we found that insufficient training on overpayments and the lack of effective monitoring, meant that this procedural guidance was not followed. This resulted in frequent errors being made as demonstrated in our sample of overpayment cases.

1.49 We also found that insufficient guidance had been provided to Revenues and Benefits service staff about the council’s write-off procedures as set out in the General Debt Recovery Policy. As a result debt was sometimes written off without any enquiries being made to see if it was recoverable.

1.50 Sandwell Metropolitan Borough Council acknowledged that it was not at Standard in the areas of identifying and calculating overpayments, because of continuing backlogs of work.

1.51 We found that the council’s General Sundry Debtor team utilised more recovery methods for debt than the Revenues and Benefits service. For example, it took full legal action against HB debtors, or registered debts at the County Court under subsection 75(7) of the Social Security Administration Act 1992, or used debt collection agencies when appropriate. However, the Revenues and Benefits service had not submitted any cases to the County Court at the time of the on-site phase of our inspection.

1.52 We also found that:

· decision notices issued by the council did not comply fully with the requirements of Schedule 6 of the Housing Benefit (General) Regulations 1987, and parallel CTB Regulations

· overpayments were not always classified correctly

· recovery of all debt, including old debts, was not actively pursued

· fraudulent overpayments were not prioritised for recovery

· a strategy was not in place for the continuous improvement in the age and level of debt

· the range of management information collected on the level of overpayments outstanding and the amount of debt that it had recovered was poor.

1.53 Sandwell Metropolitan Borough Council will achieve Standard in this area if it:

· identifies changes of circumstances and calculates overpayments promptly

· correctly classifies overpayments

· produces accurate management information about overpayment recovery

· ensures that overpayment decision notices are always issued to persons affected by the decision

· uses all available recovery methods.

Sandwell Metropolitan Borough Council

1.54 Sandwell is one of the 7 metropolitan districts in the West Midlands and one of 4 boroughs which make up the Black country. The population is around 283,000 people and results of the 2001 census indicated that 20% of the borough’s residents were from ethnic minority communities. It is the most densely populated area in the West Midlands. The borough covers a relatively small area, 86 square kilometres (33 square miles) and incorporates the original 6 towns that make up the borough, with West Bromwich providing the main focus for the area.

1.55 The heavy industry upon which much of the employment in Sandwell was founded was hit hard by recession in the 1980s, leaving 16% of the workforce without a job. However, employment in the service industries is increasing and unemployment has fallen in the last few years but, at 5.1%, still remains higher than the UK average.

1.56 Figure 1.3 shows the unemployment rate across Sandwell’s 4 parliamentary constituencies, as at October 2003. The unemployment rate in all of the parliamentary constituencies is higher than the UK average of 3.1%.

Fig. 1.3: Unemployment levels – October 2003
Parliamentary constituency	% unemployment
Halesowen and Rowley Regis	3.7
Warley	5.9
West Bromwich East	5.1
West Bromwich West	5.8
UK average	3.1

Source: House of Commons Library

1.57 In 2000, Sandwell was ranked the 11^th most deprived borough in England, and the index of Multiple Deprivation 2000 (by ward) showed that 11 of Sandwell’s 24 wards were amongst the worst 10% in England. Between 1996 and 2000, the population fell by 1.3% (particularly in the 25 - 34 age range).

1.58 Sandwell has 72 elected Members: 55 Labour, 9 Conservative, 6 Liberal Democrat, and 2 British National Party. The political structure consists of:

· a Cabinet, comprising a Leader, and 8 Cabinet Members

· 9 scrutiny committees

· 6 town committees

· 3 quasi-judicial committees and select committees.

1.59 Sandwell Metropolitan Borough Council is the largest employer in the borough, employing approximately 15,000 people. It had gross revenue expenditure of nearly £850 million for 2002/03.

Benefit expenditure and caseload

1.60 Figures 1.4 and 1.5 show the authority’s HB and CTB expenditure and caseload respectively.

Fig. 1.4: HB and CTB expenditure
	2000/01 (£)	2001/02 (£)	2002/03 (£)
Rent rebate	56,561,841	57,140,670	59,022,490
Rent allowance	20,924,500	22,022,106	24,058,565
CTB	21,714,035	23,200,450	23,260,486
Total	99,200,376	102,363,226	106,341,541

Source: Sandwell Metropolitan Borough Council

Fig. 1.5: HB and CTB caseload
	2000/01	2001/02	2002/03
Rent rebate	23,821	23,422	22,192
Rent allowance	6,136	6,207	6,153
CTB	38,241	38,195	36,793
Total	68,198	67,824	65,138