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 and Council Tax Benefit 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 Housing Benefit. The Benefit Fraud Inspectorate (BFI) played the major role and in the new 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 standards the Department aspires to; they are not the standards the DWP think local authorities can achieve tomorrow.

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 standards will need to be met by local authorities.

1.6 We had previously inspected City of York Council in 1999 and made a number of recommendations to improve its Benefit and Counter-fraud services.

1.7 City of York Council responded positively to our first BFI Inspection report acknowledging that improvements to the Benefits service were required and developing an action plan to address our recommendations.

1.8 City of York Council completed a Best Value review of its Revenues and Benefits services in March 2002. An interim report in April 2001 proposed integrating the existing Revenues and Benefits services, Local Taxation services, cashiers, Housing and Council Tax services, Benefits Advice and Business Management support functions.

1.9 This was achieved in September 2001, and was intended to deliver:

· reductions in overall management costs

· a new Business Management team responsible for all business planning, performance, quality management, subsidy returns and IT systems maintenance across the new structure

· greater efficiency through the creation of a new document management systems service

· improved efficiency and productivity by streamlining customer contact and assessment processes into one team located in one building.

1.10 A final options report produced in May 2002 recommended a revised organisational and staffing structure that was intended to deliver:

· improved levels of service

· sufficient resources to fund revised grades and posts

· further efficiency savings in salary costs by reducing the number of staff and merging jobs

· an estimated increase in income from subsidy and improved overpayment recovery rates

· a new career grade pay band for Benefits assessment staff.

1.11 The revised organisational structure involved considerable changes to the previous structure at all levels.

1.12 City of York Council did not fully implement the revised structure until January 2004. The council told us that the revised structure was reliant on implementation of a new Benefits IT system and this was not completed until September 2003.

1.13 We acknowledge that delays in implementing a new Benefits IT system had hampered City of York Council’s ability to deliver an effective service and achieve the improvements it anticipated. Difficulties with the implementation were attributed by City of York Council as being the main cause of a backlog of work building up which had adversely affected its performance against Best Value performance indicators for speed of processing claims. In particular its reported Best Value performance indicator for processing new claims in 2003/04 was 86 days compared against its own target of 40 days.

1.14 City of York Council’s self-assessment against Performance Standards was undertaken in April 2004 as part of its preparation for our inspection. Neither internal audit nor senior management reviewed the assessment. This was a weakness as we found the reported assessment had been over optimistic and unreliable.

1.15 This report assesses City of York 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. They can be downloaded from the Department’s website, www.dwp.gov.uk

1.16 We are grateful to City of York Council for its help and co-operation throughout this inspection.

Overall performance

1.17 Figure 1.1 is a radar graph that provides an illustration of City of York Council’s performance against the 7 areas of Performance Standards. The solid line shows the Standard level of performance, the dotted line is our assessment of City of York Council’s performance at the time of our on-site inspection in June 2004.

Fig. 1.1: Performance against standard

Source: BFI analysis

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 dashed line is outside the solid line, the local authority is performing above standard.

1.18 City of York Council is providing a poor Benefits service.

1.19 City of York Council had used the Best Value process to undertake a review and develop a view of the future structure and vision for its Benefits service. Despite a lengthy implementation over 2 years from May 2002 the full restructuring of the Benefits service had not been completed at the time we were on site in June 2004. The council attributed most of the delays to difficulties in implementing a new Benefits IT system. We were concerned however, that some of the difficulties encountered with the IT system were symptomatic of more fundamental management weaknesses.

1.20 Key management disciplines of planning, target setting, monitoring and control, checking and assurance testing were inadequate. Limited management information was being obtained but only some was being used effectively. This was most apparent in City of York Council’s failed attempts to overcome a work backlog. No effective controls were in place to measure productivity, despite significant extra costs being incurred.

1.21 To meet its 2004/05 Public Service Agreement target for processing new claims, reliance had been placed upon reducing backlogs of work before April 2004 by using agency staff and staff provided by external service providers. This was an expensive approach to adopt that had been poorly managed and ultimately proved unsuccessful. It represented poor value for money and breached the council’s financial regulations.

1.22 There was no documented approach to its Benefits administration, essential strategic policies were not in place and its procedural guidance was fragmented, outdated and incomplete.

1.23 Claims processing performance at June 2004 was very poor with new claims being processed in an average of 81 days and change of circumstances in 18 days. We were concerned that a recovery plan was not in place. This is an issue that requires urgent attention.

1.24 We had concerns about the lack of management assurance and public accountability provided by the Benefits service. Inadequate management checking and elected Members not being provided with full details of audit findings were further failings. We were also concerned by its failure to comply with certain key legal requirements of HB and CTB legislation.

Performance against Standards

Strategic management

1.25 City of York Council is not at Standard. There were no direct links between the council’s corporate objectives and the Benefit service vision, and the vision statement had not been endorsed by Members.

1.26 The council had few explicit policies for its Benefits service and the creation of policies had been given a low priority.

1.27 Business planning was a particularly weak area. We were provided with a draft Benefits Service Plan for 2004/05. However, it did not contain an objective to meet the full range of Performance Standards or make clear links between the Benefits service vision statement and the service objectives. Staff did not have individual or team targets that supported Benefits service objectives.

1.28 The council had adopted a Public Service Agreement target for 2004/05 of processing new claims within an average of 30 days. The Benefits service could receive an additional £280,000 government grant by achieving this target. However, its performance for the first quarter was so poor that it is very unlikely to achieve this target.

1.29 The Fraud team had overall targets, but no individual targets had been set for 2003/04 and nor were any planned for 2004/05.

1.30 Performance monitoring was another particular weakness. City of York Council was struggling to obtain reliable and accurate data. The council was producing limited management information for processing of claims but was not using this systematically to manage the productivity of staff and external providers.

1.31 This was a serious weakness that impacted on management’s ability to manage productivity. We were concerned that City of York had not taken adequate steps to rectify this deficiency. Insufficient management checking meant City of York Council did not have adequate assurance about the efficiency, quality or security of the service that it was providing.

1.32 The organisational structure did not fully reflect individual roles and responsibilities as some work was performed on an historical basis and management lines of responsibility were not always clear and logical. The organisation chart and staff’s job descriptions did not clearly identify staff’s duties.

1.33 The council had extensively used staff provided by agency and external providers to support the Benefits service, including processing claims. The amount spent was over £450,000 between April 2003 and June 2004. The arrangements were poorly managed as no formal contract existed, no performance targets had been set and performance was inadequately monitored. The work had not been subjected to an external competitive tendering exercise.

1.34 The continued reliance and use of agency staff and staff from external suppliers represented very poor value for money and raised concerns over financial probity as the process breached City of York Council’s contract procedures and financial thresholds.

1.35 Benefits assessment resources had not been reallocated, despite significant changes in workload in 2004/05. For example, the abolition of benefit periods from April 2004 meant that the council no longer had to process renewal claims. Despite this we were told that Service Managers had decided on the basis of workload and resourcing issues not to reduce the number of Benefits assessment staff deployed for processing claims.

1.36 The average cost per claim had risen by 50% between 2001/02 and 2003/04 but the latest calculation was incorrect as it failed to include the substantial costs for the use of agency staff and staff from external providers.

Customer services

1.37 City of York Council is not at Standard. It provides access to its Benefits service to customers by telephone and personal visit for 36 hours per week. However the main caller facility, at Library Square, is only available by a restricted appointment system in the afternoons. The telephone service is restricted by limiting the lines available during certain times. This restrictive telephone service may cause particular difficulties for working customer in accessing the Benefits service. This is evidenced by customer surveys that show low levels of satisfaction with the telephone service.

1.38 There were no reliable records of customer complaints. We found that the records kept were inaccurate and inconsistent. Verbal complaints received at the customer reception points were not recorded as complaints as they were dealt with immediately.

1.39 City of York Council does not have targets for dealing with and submitting appeals to the Appeals Service. We found that appeals were dealt with in batches with many cases outstanding for long periods and long gaps between action. At the time of our inspection in June 2004 there were
81 outstanding appeals and no cases had been submitted to the Appeals Service for over 18 months.

Processing of claims

1.40 City of York Council is not at Standard. It had successfully implemented the Verification Framework and our sampling of cases confirmed that evidence gathering to support claims was being undertaken to good quality standards. However, insufficient management checking meant that there was a lack of assurance for the overall verification process.

1.41 Steps taken by City of York Council between January 2004 and June 2004 to try and reduce work backlogs had been unsuccessful. Agency staff and an external provider were used to help clear the original ring-fenced backlog of 2,400 claims which were outstanding in January 2004. Whilst efforts were made to reduce the backlog a further significant volume of claims had again built up by the time of our inspection. In
June 2004 there were over 1,500 claims outstanding and more than 960 had been waiting to be processed for more than 8 weeks.

1.42 Also, at the end of June 2004 the year-to-date performance for processing new claims was an average 81 days.

1.43 In its drive to address the backlog of new claims resources had been diverted away from other key areas such as processing changes of circumstances. At the end of June 2004 there were over 1,400 changes of circumstances waiting to be processed of which, 500 were more than 8 weeks old.

1.44 City of York Council was failing to meet its regulatory requirements to make payments on account where appropriate and make referrals to the Rent Officer within the required timescales.

1.45 Overall, City of York Council’s performance for processing claims was extremely poor. Inadequate management planning, control and use of information had contributed to undermining efforts to secure improvement. Urgent action is required to develop and instigate a recovery plan to prevent the situation from getting worse.

Working with landlords

1.46 City of York Council is not at Standard. City of York Council did not communicate effectively with all its landlords. It did not issue clear guidance to its Registered Social Landlords informing them of their responsibilities or encourage them to co-operate to prevent overpayments and prevent evictions.

1.47 We were concerned that very slow processing of claims, allied to ineffective communications could dissuade landlords from letting to benefit customers.

1.48 The Benefits service did not communicate effectively with the Housing department. Although a service level agreement signed in 2002 clearly detailed the standards for communications between estate managers and nominated liaison officers this agreement was not adhered to. This affected the level of housing rent arrears and we were told that notices of intention to seek possession, which may ultimately lead to eviction, had been issued when Benefit claims were waiting to be processed.

1.49 Overpayment decision notices were not issued to landlords receiving direct payments at the same time as a decision notice was issued to the customer. By not doing so, City of York Council was failing in its legal obligations and was effectively denying these landlords their right of appeal.

Internal security

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1.52 We were concerned by the poor accountability of the Benefits service in its failure to respond to internal audit recommendations. In addition, public accountability was compromised by inadequate arrangements for reporting audit activity to Members.

Counter-fraud

1.53 City of York Council is not at Standard. However, its Fraud team had achieved some impressive results with limited and relatively inexperienced staff resources. The quality of counter-fraud investigation work being undertaken was effective as demonstrated by the full range of sanctions being applied and all cases submitted for prosecution had been successful. We identified a need for improvements in the time taken to sift referrals and commence investigations. These issues are important because failing to act promptly can allow fraud to remain in the Benefit system unchecked and increase the level of avoidable overpayments.

1.54 Joint working with the Department was a particular strength. A joint initiative with the Counter-Fraud Investigation Service into ‘living together’ cases had been very effective, identifying overpayments totalling in excess of £500,000 and resulting in several prosecutions attracting positive media coverage.

1.55 Inadequate production and use of management information was a major cause of concern. It was undermining the effective control of fraud casework, the identification of patterns and trends, and the focusing of resources on the areas of greatest risk.

Overpayments

1.56 City of York Council is not at Standard. We found serious failings in the recovery of overpayments. City of York Council was recovering overpayments even though customers had not been advised of the overpayment decision or their right to request full details or a revision of the decision.

1.57 A failure to prioritise the processing of cases that involved changes of circumstances was incurring avoidable overpayments and a net loss to public funds.

1.58 We had concerns with the classification of overpayments. Within our sample of 30 cases, we found that 11 had been incorrectly classified. In 7 of these all or part of the overpayment had not been correctly classified as local authority error. Subsidy may be lost as a result of the increasing values of local authority error overpayments, which in 2003/04 was over £190,000.

City of York Council

1.59 Covering 105 square miles of North Yorkshire, City of York Council is a Unitary authority which comprises the urban area of York and many small rural and semi-rural settlements covered by parish councils. According to the 2001 Census 181,100 people live in City of York Councils’ area. The area has a very small ethnic minority as 97.8% of census respondents stated their ethnicity as white.

1.60 Between 1991 and 2001 the population increased by 9.1% and is projected to increase by a further 4.2% by 2011 and a further 8.3 % up to 2021. Life expectancy for men is 76 and for women 81. This, together with rapid economic growth and a decrease in the number of people per household, is placing pressure on housing. Affordable housing is in particular short supply and house prices are well above the regional average.

1.61 City of York Council is the lowest spending Unitary Council per head of population in the country. Council Tax is below the national average (including the Parish and Police precepts) band D Council Tax has been set at £848.75 for 2004/05 and City of York Council expects to spend £157.4 million in providing services.

1.62 In June 2004 the average unemployment rate in the parliamentary constituency, City of York, was 2.4%. This was below the national average of 3%.

Benefit expenditure and caseload

1.63 Figures 1.2 and 1.3 illustrate the authority’s HB and CTB expenditure and the authority’s HB and CTB caseload.

Fig. 1.2: HB and CTB expenditure
	2001/02 £	2002/03 £	2003/04 £
Rent rebate	12,455,590	13,062,799	11,881,511
Rent allowance	11,774,438	14,448,779	11,642,323
Council Tax Benefit	4,962,108	5,192,131	5,859,358
Total	29,192,136	32,703,709	29,383,192

Source: City of York Council

Fig. 1.3: HB and CTB caseload
	2001	2002	2003
Housing Benefit	8,760	8,490	8,240
Council Tax Benefit	10,200	10,110	9,830

Source: The Department

1.64 Figure 1.4 compares the gross HB expenditure with the gross revenue expenditure of City of York Council from 2000/01 to 2002/03.

Fig. 1.4: Gross HB expenditure as a % of gross revenue expenditure
Year	Total gross revenue expenditure £	HB and CTB expenditure £	HB and CTB expenditure as % of total gross revenue expenditure
2001/02	227,891,000	29,192,136	13
2002/03	248,864,000	32,703,709	13
2003/04	264,052,000	29,383,192	11

Source: City of York Council and BFI

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