Security
3.1 It is important that councils have effective measures and processes to prevent, deter and detect fraud from entering the system. Councils should verify information supplied by customers and ensure that conflicts identified through data matching are reconciled. Sufficient resources must also be employed to investigate suspected fraud thoroughly and professionally, and appropriate sanctions should be applied.
3.2 The council achieved Standard in all of the 3 performance measures, for which a Standard had been set and met 4 of the 21 enablers for Security.
Security of administration
3.3 This section reports on the arrangements for interventions and the verification of claims. The performance measures are designed to measure the impact of the council’s performance in detecting fraud and error.
Performance measures
3.4 Figure 3.1 shows Bath and North East Somerset Council’s reported performance against the Standards set for the first 9 months of 2005/06. The council was not required to report against these performance measures until the end of June 2005.
| Performance Measure |
Description | Standard for 2005/06 |
Target April to December 2005 |
Performance April to December 2005 |
|---|---|---|---|---|
| PM 10 | Number of interventions | 5,810 | 3,220 | 4,426 |
| PM 11 | % of data matches resolved within 2 months |
100% | 100% | 100% |
| PM 12 | Number of customers visited | 2,320 | 1,299 | 2,005 |
Source: Bath and North East Somerset Council
3.5 The council had exceeded its targets for interventions and visits, for the first 3 quarters of 2005/06, and was on schedule to meet its annual targets. Although the council was achieving its target, procedures for prioritising changes of circumstances resulting from interventions, which affected entitlement to benefit needed to be improved.
3.6 All data matches received from the Housing Benefit Matching Service were referred to the Fraud Investigations and Visiting team. All data matches in the first 3 quarters of 2005/06 had been resolved within 2 months.
Compliance with the Verification Framework or to equivalent standard
3.7 Bath and North East Somerset Council met neither of the enablers.
3.8 The council adopted the Verification Framework in October 2004. All Benefits and Customer Service staff had received Verification Framework training when the scheme was introduced. New staff received Verification Framework training as part of their induction, including how to use ultraviolet scanners to identify false documents and follow up on discrepancies.
3.9 However, the results of our sampling showed that there was some inconsistency in the level of verification obtained with the failure to adequately verify the:
- customer’s income in 2 (14%) out of 14 cases
- customer’s capital in 2 (14%) out of 14 cases.
3.10 Our sample of 15 changes of circumstances confirmed that all evidence had been obtained.
3.11 We also found from our sample of new claims:
- 4 cases where the HB and CTB claim form had not been date stamped by the council with the date it was received
- XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX XXXX
- 2 cases where further evidence provided by a customer had been scanned onto another customer’s claim
- 2 cases where some pages of the claim form were not on the document management system.
3.12 From our sample of new claims, we found 7 cases where Benefits processors had set pending dates on the Benefits IT system for foreseeable changes of circumstances.
3.13 The council’s claim form included a reminder to customers to provide original documents in support of a claim with a checklist detailing examples of what was acceptable. We confirmed that a Verification Framework checklist was used by staff, to record the evidence provided by customers to support their HB and CTB claims.
3.14 From our sample of new claims and changes of circumstances, we found that where original documents had been received the name of the officer who had seen the original document was recorded on the document management system. However, it would be good practice to also record the date of receipt on the document management system.
3.15 The council needs to ensure that
staff comply with the Verification Framework to secure the gateway and reduce
the risk of fraud and error entering the benefits system.
(See Recommendation 2.)
Compliance with data integrity
3.16 Bath and North-East Somerset Council met the enabler.
3.17 We confirmed with the Department that the council had been submitting data in accordance with the schedule and it had loaded successfully. In 2004/05, the council did not have any grade 1 or 2 data incidents to resolve. National Insurance number accuracy scans showed a high percentage match of 99.7% against the Departmental Central Index.
Counter-fraud activities
3.18 This section reports on the council’s efforts to detect and deal with fraud.
Performance measures
3.19 Figure 3.2 shows the council’s reported performance for 2004/05.
| Performance measures |
Description | Performance 2004/05 |
|---|---|---|
| PM 13 | Number of fraud referrals per 1,000 caseload | 29.28 |
| PM 14 | Number of fraud investigators employed per 1,000 caseload | 0.19 |
| PM 15 | Number of fraud investigations per 1,000 caseload | 24.75 |
Source: Bath and North East Somerset Council
Performance enablers
Fraud referrals
3.20 Bath and North East Somerset Council met neither of the enablers.
3.21 We identified significant weaknesses with the quality of fraud referrals received and accepted for investigation by the Investigations Team.
3.22 Referrals from Benefits staff were made directly onto the Fraud Management System using a blank input sheet lacking any structure, prompts or guidance. Staff were unaware of the essential information they were required to provide to enable a successful investigation to take place. Analysis of the 30 closed fraud files we sampled, confirmed that the quality of referrals received from Benefits staff was poor. We found that the majority of referrals were mostly doubts and queries identified by staff processing benefit claims and did not represent a firm suspicion or allegation of potential fraud.
3.23 The council had arranged fraud awareness training for all staff involved in benefits administration during 2005. Performance Standards funding had been used to provide external training in conjunction with 2 other councils in the area. However, we were told that although Benefits staff had more awareness of how fraud might be identified, the quality of referrals received by the investigators had not improved. Although Benefits staff were provided with feedback on the outcome of each referral, this did not include guidance, which would be important to improve the quality of future referrals.
3.24 Members of the public could report allegations of fraud on the council’s automated telephone information line which was advertised on claim forms, leaflets and the council’s website. However, it was not possible to speak to an investigator during working hours and the process for reporting an allegation was not straightforward. Whilst we were on-site in January 2006, we made 3 calls to this service but only managed to reach the relevant recorded message to enable an allegation to be reported at the third attempt. Investigators told us they were unaware of any recent referrals received from its information line.
3.25
The council did not monitor the outcome
of referrals from its information line, or any other source on a regular basis.
We concluded that the council did not maximise referrals from key sources
and had failed to fully engage both staff and members of the public in its
attempts to counter fraud.
(See Recommendation 4.)
Risk profiling referrals
3.26 Bath and North East Somerset Council met neither of the enablers.
3.27 Our
sampling and interviews with staff revealed that the failure to sift
out poor quality and low risk referrals was having an adverse impact on the
standard of cases investigated. Despite the recent introduction of a revised
scoring system based upon the council’s analysis of closed investigations,
more than 80% of referrals received were still scoring over the threshold.
We were told the vast majority of cases were accepted for investigation, regardless
of the score.
3.28 Our sample of 30 closed cases included 23 referrals, which should have been sifted and scored before any investigative action took place. Only 7 of these cases showed any evidence of basic risk profiling and sifting. Our analysis also showed that in 3 of these cases, the resulting score had been ignored or sifting had eventually taken place after the investigation had already commenced.
3.29 We found very limited use was made of routine intelligence and information sources to help inform the risk profiling process. This was compounded by a lack of clerical support, which meant that the 2 trained investigators had to prepare paper files and perform basic background checks on referrals.
3.30 Only 2 cases in our sample revealed evidence of preliminary checks having been made with the National Anti-Fraud Network, and in none of the cases we examined had checks been made with the Department’s Operational Intelligence Unit. (See Recommendation 8.)
3.31 We considered that only 12 (40%) of the 30 closed cases we examined should have been accepted for investigation. This represented a poor use of investigative resources and was having an adverse impact on the number of successful cases where fraud was eventually proven. Our sample showed fraud was eventually proven in only 2 (8%) cases. It is important that the council takes urgent action to refine its risk profiling system to ensure that its trained investigators are given only the best quality referrals to investigate.
Action on referrals
3.32 Bath and North East Somerset Council met neither of the 2 enablers.
3.33 The Investigations and Visiting Team Leader initially sifted referrals generated by the Housing Benefit Matching Service before passing them to the Benefits section or an investigator for further action. The 2 investigators were responsible for accepting, sifting and prioritising referrals from all other sources.
3.34 We identified long delays in this process and our analysis showed that it took an average of 33 working days to score the 7 cases, which had been sifted in our sample. No targets had been set to help with the monitoring or control of the referral process.
3.35 Our analysis also showed that it took an average of 42 working days from receipt of the referral to the first investigative action. We were told that delays had occurred because of a period of long-term sickness in the Investigations Team which had meant only one investigator had been available to take on new cases. However, there had been no attempt to prioritise cases or lift the scoring threshold to take account of this situation. As an interim measure, an additional temporary investigator had been recruited from an external provider in October 2005.
3.36 It is important that investigations commence promptly once a case has been accepted for investigation to ensure that any subsequent action is based on up-to-date information and to help safeguard the customer’s human rights. (See Recommendation 8.)
3.37
Reviews were not undertaken
at key stages of the process to monitor the progress of investigations and
it was left to the investigators to decide whether to continue with an investigation
or to end it. The Fraud Management System was not used to control follow up
action on current cases.
(See Recommendation 7.)
3.38 We were told that there was no system in place for Benefits staff to notify changes, which might affect the progress of an investigation. Therefore, the investigators had to check all of their current cases against the Benefits IT system on a fortnightly basis to confirm that the investigation was still appropriate. Again, this represented a poor use of investigative resources.
Fraud investigators’ code of conduct
3.39 Bath and North East Somerset Council met one enabler (E29) of the 4 enablers.
3.40 The council had developed a Code of Conduct for Fraud Investigators and Visiting officers. This detailed the investigator’s responsibilities regarding:
- compliance with legislation
- disclosure of interests
- visits to customers
- record-keeping.
3.41 Interviews under caution to obtain evidence had been undertaken in 4 cases in our sample of 30 closed investigations. We concluded that when interviews took place, the conduct of the investigators was compliant with the Police and Criminal Evidence Act 1984 Code of Practice.
3.42 However, our sample showed that an interview under caution was appropriate in 3 other cases but had not been undertaken. We were told that the location of interview rooms and the problems in transporting the tape machine often dictated whether or not an interview took place. Funds had been made available for the purchase of portable equipment but in February 2006, this had still to be arranged. (See Recommendation 5.)
3.43
No discussion took place
with the Investigations and Visiting Team Leader, when a taped interview was
being considered. We were concerned that 2 interviews under caution had been
arranged before potentially important evidence from employers or pension companies
had been obtained. In another case, the interview was conducted in a customer’s
home without prior notice. This meant that the customer
did not have time to consider if they required legal representation before
the interview took place. It is important that customers being interviewed
fully understand their rights regarding legal advice and their power to terminate
the interview if they choose to do so.
(See Recommendation 5.)
3.44 In all of the interviews in our sampled cases, there had been some discussion with the customer regarding the likelihood of prosecution at the end of the interview. This is poor practice and should be discontinued. (See Recommendation 5.)
3.45 The investigators were responsible for transcribing their own taped interviews because of the lack of administrative support. This practice could create doubts about the accuracy and impartiality of the finished transcript and represented a poor use of investigators’ time. We were told that the Investigations and Visiting Team Leader listened to all taped interviews when a sanction was being considered. (See Recommendation 5.)
3.46 There was no comprehensive audit trail on any of the sampled cases. Hard copy fraud files were maintained for the duration of the live investigation. However, when an investigation was closed the council failed to ensure that all evidence and original notes were scanned onto the document management system before they were destroyed. Entries in the Benefits IT system notepad facility were insufficient and did not always correspond with the closure sheet or the investigator’s entries in the QB50 notebook. (See Recommendation 5.)
3.47 We examined a QB50 notebook and discovered that entries were not sufficiently detailed, were not cross-referenced with the fraud file and had not been subject to a management check. We were also concerned that there was no record kept of informal interviews. Several cases in our sample had been accepted for investigation but then no further contact was made with the customer or where contact was made, no statement was obtained. (See Recommendation 5).
3.48 We examined one case in our sample where surveillance had been undertaken as part of the investigation. This case raised serious doubts about the control and authorisation of surveillance including:
- no explanation why surveillance was necessary or proportionate
- poor completion of the RIP1 form, which failed to describe the subject, method and location of surveillance
- inadequate consideration of the risks of collateral intrusion
- a significant delay of 3 weeks before surveillance commenced following authorisation
- failure to review or cancel the authorisation. (See Recommendation 5.)
3.49 Following our feedback the council agreed to suspend any further requests for surveillance until a full review of the authorisation procedure had been undertaken and appropriate training provided to the authorising officer.
3.50 Access to the Fraud Management System was restricted to appropriate staff and hard copy fraud files, QB50 notebooks and interview tapes were securely maintained in a locked cupboard.
3.51 However, the Investigations Team was located in the main Benefits office and therefore lacked a discrete environment to work on files or discuss cases in private. Confidential information from agencies such as the National Anti-Fraud Network or the Department was also received on the general office fax machine. It is important that the fraud team is located in a secure environment to ensure the integrity of intelligence used to support ongoing investigations and to protect the identities of those subject to investigation. (See Recommendation 5.)
The local authority fraud policy
3.52 Bath and North East Somerset Council met 2 enablers (E33 and E34) of the 5 enablers.
3.53
The council had developed an Anti-fraud
and Corruption Policy and a Counter-fraud Policy, both endorsed
by Members. These documents described the council’s commitment to prevent,
detect and investigate benefit fraud whilst encouraging those who were genuinely
entitled to claim. These documents were supported by an annual business plan,
but this failed to describe how the progress, outcome and quality of investigations
were to be monitored.
(See Recommendation 3.)
3.54 As a result Members and senior managers could not be provided with assurance that:
- the policy and strategy were working as intended
- relevant legislation was being complied with
- quality investigations and sanctions were being progressed
- best use was being made of investigative resources.
3.55 The activities and performance of the Investigations Team were not subject to a regular programme of management checking or interventions. Although our sample showed evidence of management intervention in 25 (83%) cases, this was only after the decision to terminate the investigation had been taken by the Investigator. (See Recommendation 7.)
3.56 Both the Investigations and Visiting Team Leader and the council’s permanent investigator had been appointed as Authorised Officers. However, the use of these powers was not monitored or adequately controlled. Sampled cases showed that letters to employers did not specify the legislation under which information was being requested or clearly identify the authorised officer making the request. (See Recommendation 5.)
3.57 We were also concerned that an agreement had been reached with the National Anti-Fraud Network, which allowed investigators to make and authorise their own enquiries, without any management intervention. This provided uncontrolled access to potentially intrusive avenues of investigation. (See Recommendation 5.)
3.58 However, we noted that a system had recently been introduced to ensure that only lawful requests for information from Her Majesty’s Revenues and Customs were being sent to the Department’s Operational Intelligence Unit.
3.59 XXXX
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(See Recommendation 4.)
3.60 Both the council and the Department’s Counter Fraud Investigation Service reported a close and effective working relationship. Our sample showed that the relevant notification forms had been sent in appropriate cases. Staff working for the Counter Fraud Investigation Service told us that there had been joint involvement in more than 40 cases in 2005. Other agencies such as the Police and Trading Standards had been involved and some good results obtained.
3.61 The Fraud Partnership Agreement had been signed and was underpinned by informal, but effective arrangements for liaison regarding new referrals and ongoing investigations.
3.62 This level of joint working was commendable and our only concern was that Bath and North East Somerset Council was potentially placing too much reliance on the Department’s investigators as a source of referrals and sanctions. Particularly as the relationship could be adversely affected by the relocation of Counter Fraud Investigation Service to Bristol in April 2006.
Sanctions
3.63 This section reports on the arrangements for applying sanctions against benefit fraudsters.
Performance measures
3.64 Figure 3.3 shows the council’s reported performance for 2005.
|
Performance measure |
Description |
Performance 2004/05 |
|---|---|---|
| PM 16 | Number of successful sanctions per 1,000 caseload | 0.71 |
Source: Bath and North East Somerset Council
Performance enablers
A balanced sanctions policy
3.65 Bath and North East Somerset Council met none of the 3 enablers.
3.66 A prosecution policy based upon financial limits suggested by the Department had been developed. However, the policy failed to document:
- key roles and responsibilities
- its intended audience
- legislation under which prosecutions would be pursued
- how public interest or other mitigating factors would be taken into account
- the circumstances in which a formal caution or an administrative penalty might be appropriate
- the need to check for previous convictions before issuing sanctions.
3.67
Although the policy had been reviewed in
January 2006, we were concerned that the revised policy did not address any
of the weaknesses identified above. It also failed to describe
how the council would respond if the customer refused a formal caution or
administrative penalty.
(See Recommendation 3.)
3.68 Two of
the 4 sanction cases in our sample showed a lack of adherence to the financial
guidelines set out in the existing prosecution policy. In both cases, the
overpayment exceeded £2,000, the evidential test was satisfied and a prosecution
would have been the appropriate sanction. In addition the cases were referred
to the council’s solicitor who advised a course of action which was not followed.
The following case studies provide more detail.
(See Recommendation 3.)
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3.69 We were told that the council had considered the personal circumstances of the customers, and taken mitigating circumstances into account, to arrive at the decision to administer formal cautions. However, this had been a lengthy and protracted process, which had delayed the issue of the sanctions by several months and illustrated deficiencies with both the prosecution policy and the lack of clear guidance to staff.
3.70 We noted from our sample that checks for previous sanctions were made with the Department’s Professional Standards Unit before administrative penalties and formal cautions were issued. However, no checks were made at any stage to identify whether previous criminal convictions had been recorded. This could have an important bearing on whether a sanction is applicable or which sanction should be imposed. (See Recommendation 3.)