Findings (continued)

Getting it right

2.11  Getting it right means benefit payments should be correct from day one. The expectation is that:

• there must be a secure gateway to the benefit system
• claimants should not be subject to excessive red tape
• LAs must provide a modern, high quality service.

2.12  Securing the benefit gateway means organisations must:

• insist that claimants produce enough evidence of their personal details to prove they qualify for benefit before payment is made
• ensure claims information can be checked systematically, based on a sound assessment of where that information is at risk of being wrong
• bring together all the information available at the point where the claim is being checked
• make sure there is continuing contact with claimants.

Conclusions

2.13  Barnet has undertaken a number of initiatives to counter fraud and error. These include:

• revising the claim form to ensure that sufficient evidence is gathered to verify a benefit claim
• setting up a PVT
• undertaking a good level of management checks in benefit administration.

2.14  Barnet’s efforts to secure the gateway are fully supported by the effective working relationships and working practices within the local BA and ES offices.

2.15  However, Barnet has failed to develop and implement an effective range of preventative and deterrent measures.

2.16  Barnet and the BA signed the revised national model SLA in June 1999. Performance against it is not currently monitored, but BA admits that it will not achieve the agreed standards for 1999/2000, and will sign the compliance certificate to that effect.

Findings

Post opening

2.17  Secure post opening procedures are vital to provide an adequate, economic, safe and efficient postal receipt service. We observed Barnet’s post opening procedures on 27 July 1999 which featured the following good practices:

• post opening procedures manual
• post maintained in a secure manner
• post opened in a designated area
• use of a valuables log book
• document control forms
• post distribution log sheet.

We recommend that:

• valuables should not be stapled to paperwork. Plastic wallets would avoid the danger of defacing such valuables
• the post opening supervisor should sign the attendance book
• the post opening supervisor should remain present during post opening
• the security of cheques transported between buildings could be improved by allocating 2 people to the task and by the use of a secure, lockable trolley.

Obtaining evidence to prevent and deter fraud

2.18  Barnet has introduced a number of positive initiatives to make its service as accessible as possible to claimants. These are:

• advice sessions at 4 council offices, one BA office and one ES office. They are held every week, and the day on which they are held is varied over a 4-week cycle
• 4 Action Points. These consist of touch point computers and are backed up by advisory staff, leaflets and claim forms. The Action Points are sited at council offices and in a separate mobile unit.

2.19  These initiatives provide an excellent customer service. However, some leaflets and claim forms at 2 of the Action Points were out of date. In view of this finding, Barnet has agreed to implement a formal review system for all HB and CTB information and documentation held at other council offices.

2.20  Barnet recently revised its HB/CTB claim form, the new version being a significant improvement on its predecessor. Appendix A suggests further improvements that would support Barnet’s counter fraud efforts.

2.21  Barnet no longer uses a shortened renewal form for HB and CTB claimants who are in receipt of IS or JSA(IB). XXXXX XXXXX XXXXX XXXXX XXXXX XXXXX XX XXXXX XXXXX XXXXX XXXXX XXXXX XXXXX XXXXX XXXXX XXXXX XXXXX XXXXX X XXXXX XXXXX XXXXX XXXXX XXXXX XXXXX XXXXX XXXXX XXXXX XXXX

2.22  Supporting evidence for a claim is photocopied, the original document is returned to the claimant and the copy retained in the claim file. Photocopies are dated and endorsed as a true copy, but this procedure has only applied since July 1999. The endorsing officer’s signature was illegible in some cases, weakening the control of photocopies. Barnet maintains a list of staff signatures which is stored in a safe, and which allows an unidentifiable signature to be checked.

2.23  Barnet checks HB claims against HB and other records in the verification process, including a comparison of signatures and details from earlier claims, council tax and housing records. XXXXX XXXXX XXXXX XXXXX XXXXX XXXXX X XXXXX XXXXX XXXXX XXXXX XXXXX XXXXX XXXXX XXXXX XXXXX X

2.24  We examined a random sample of 65 new claims received since January 1999 to test the extent to which supporting evidence was obtained. The results are shown in the following table:

XXXXX XXXXX XXXXX XXXXX XXXXX XXXXX XXXXX XXXXX XXXXX XXXXX XXX

XXXXX XXXXX XXXXX

2.25  XXXXX XXXXX XXXXX XXXXX XXXXX XXXXX XXXXX XXXXX XXXXX XXXXX XX XXXXX XXXXX XXXXX XXXXX XXXXX XXXXX XXXXX XXXXX XXXXX XXXXX XXXXX X XXXXX XXXXX XXXXX XXXXX XXXXX XXXXX XXX

2.26  XXXXX XXXXX XXXXX XXXXX XXXXX XXXXX XXXXX XXXXX XXXXX XXXXX X XXXXX XXXXX XXXXX XXXXX XXXXX XXXXX XXXXX XXXXX XXXXX XXXXX XX

XXXXX XXXXX XXXXX XXXXX X

2.27  XXXXX XXXXX XXXXX XXXXX XXXXX XXXXX XXXXX XXXXX XXXXX XXXXX XXX XXXXX XXXXX XXXXX XXXXX XXXXX XXXXX XXXXX XXXXX XXXXX XXXXX XXXXX XX XXXXX XXXXX XXXXX XXXXX XXXXX XXXXX XXXXX XXXXX XXXXX XXXXX XXXXX XX XXXXX XXXXX XXXXX XXXXX XXXXX XXXXX XXXXX XXXXX XXXXX XXXXX XXXXX XX XXXXX XXXXX XXXXX XXXXX XXXXX XXXXX XXXXX XXXXX XXXXX XXXX

2.28  While Barnet applies national risk assessment it is weak in local risk analysis. It is good practice in dealing with renewal claims to:

• apply local risk assessment to the caseload, including the fraud caseload
• identify the high risk groups, and verify identity and residency of all claimants within those groups as a matter of course
• use renewal claims to trigger proactive BAFIS exercises, for example visiting claimants who do not contact the Benefits section except to make a renewal claim.

Checking of payslips

2.29  It is good practice to identify and check conflicts between the claim form and payslips by doing more than simply verifying amounts. Not doing so means that:

• fraudulent claims are not identified before payment is made
• overpayments are caused because the true income is not established
• the Benefits section is less able to offer advice and guidance which supports the corporate anti-poverty strategy, for example by identifying people being paid less than the legal minimum wage.

2.30  Barnet has trained its processing staff in payslip verification and provided. training notes and desk aids. Barnet is also working to establish the 'payment method' of earned income, using VF as a guide. We commend this work but would argue that it is no more than the minimum that should be done in this area and are concerned that, despite this training, a number of weaknesses were identified.

2.31  This view is supported by our examination of a random sample of 20 income cases. We used these cases to test the ability of benefit processors to spot inconsistencies between information declared in the claim form and information included in payslips, and to establish their level of fraud awareness.

2.32  The results clearly show that processing staff have a limited understanding of the importance of this type of checking and are not sufficiently fraud aware. More detail on the results of the sampling is given at Appendix B.

PVT

2.33  Barnet’s social exclusion directorate plans to implement the VF in April 2000. The original planned implementation date was September 1999 and there has therefore been significant slippage.

2.34  The PVT, set up in October 1998, makes pre-award visits to verify new claims using some VF principles. It consists of a benefits specialist, an advisor and a review team officer with expertise in the close scrutiny of claims. All team members are experienced officers. Figure 2.6 shows that pre-award visits increased significantly after the team was set up

Fig. 2.6: Number of pre-award visits

Source: BFI questionnaire completed by Barnet

2.35  XXXXX XXXXX XXXXX XXXXX XXXXX XXXXX XXXX XXXXX XXXXX XXXXX XXXXX XXXXX XXXXX XXXXX XXX XXXXX XXXXX XXXXX XXXXX XXXXX XXXXX XXXXX XXX XXXXX XXXXX

2.36  Of the new claims received before the PVT was formed, 30% were not put into payment in 1996/97 and 29% in 1997/98. Figure 2.7 gives details of cases that were cancelled between November 1998 to March 1999, that is, after the PVT was set up.

2.37  In our view, pre-award visits are vital to the security at the start of the HB and CTB administration process. It is therefore essential that staff know what to do when a visit fails to establish contact with the claimant. XXXXX XXXXX XXXXX XXXXX XXXXX XXXXX XX XXXXX XXXXX XXXXX XXXXX XXXXX XXXXX XXXXX XXXX XXXXX XXXXX XXXXX XXXXX XXXXX XXXXX XXXXX XXXX XXXXX XXX

Source: BFI analysis

2.38  Barnet does not analyse the results from PVT visits and is therefore missing an opportunity to help BAFIS and BA target resources effectively, for example by establishing:

• the reason and basis for cancellations
• the effectiveness of the claim form and guidance notes
• whether there was sufficient and relevant questioning of the original claim by the benefit processor
• whether requests for further information were sufficient and relevant
• whether the claimant’s circumstances had changed between the date of claim and the date of visit.

14-day performance

2.39  Barnet’s performance measures show that it exceeds the reported GB average14-day performance for processing and paying HB and CTB claims. This is shown in Figures 2.8 and 2.9.

Source: Barnet

Barnet’s excellent performance as shown in the above figure can be highlighted by comparison to the GB average as shown in Figure 2.9.

Source: DSS (from LA returns)

Barnet also performs very well in paying claims within the14-day target, as shown in Figure 2.10.

Source: DSS (from LA returns)

2.40  We tested the reliability of reported performance by examining 65 new claims to measure the speed of processing and payment. Figure 2.11 shows our findings that Barnet exceeded the reported performance.

Source: BFI sample analysis

Use of the Remote Access Terminal (RAT)

2.41  Barnet has had a RAT since 1998, and uses it to confirm entitlement to IS and JSA(IB) for both new and renewal HB and CTB claims. Barnet told us that the RAT has helped in processing claims more efficiently. Our sampling on live load cases indicates that Barnet makes good use of the RAT.

2.42  Barnet has a high turnover of cases (about 30,000 per year). However, the rules by which DSS allocates RATs and the associated training leave Barnet with only one RAT and 3 staff trained to use it. This limits Barnet’s ability to cover staff absences and compels staff to adopt a "conveyor belt" system, potentially increasing the risk of error.

Effective controls

2.43  Barnet has implemented some effective controls to prevent false HB and CTB claims from entering the system:

• all new claims are logged and date stamped on receipt
• there is a clear separation of duties between logging of claims and benefit processing
• introduction of the PVT
• work is allocated on a daily basis, not on a geographical or caseload split.

We recommend that Barnet:

• introduces our suggested improvements to the claim form
• improves verification, particularly in relation to identity and residency for all claims
• develops procedures for the PVT in the event of a failure to make contact with the claimant
• analyses the data from PVT visits, assesses it for risk, and shares the results with BAFIS, BA and CBFIS
• tests the quality of payslip training through regular random case-checks.

Impact of deterrence

2.44  Deterrence refers to activities designed to discourage fraudulent HB and CTB claims. Barnet has no such measures in operation. It has drafted a policy and a number of strategies on deterrence, but has no implementation plans as yet. Drafts include:

• a corporate strategy on fraud and corruption. This had yet to receive Members’ approval at the time of our inspection
• a prosecution policy written in May 1999. This was with Barnet’s legal section for comment at the time of our on-site inspection
• a "whistleblowing" policy. This again had yet to receive Members’ approval at the time of our inspection.

Strategy on fraud and corruption

2.45  We found the draft strategy to have a number of significant shortcomings:

• it is only relevant to internal fraud
• employees are not given guidance on the definition of a serious offence
• employees are not given guidance about to whom they should report allegations of fraud and corruption in bodies outside the council
• employees are encouraged to report deliberate or criminal acts, but to whom they should be reported is not made clear
• there is a lack of clarity about the recruitment responsibilities of employees and managers
• the strategy is not cross-referenced to the draft "whistleblowing" strategy. In our view, the documents should have been drafted in parallel
• there is no clear responsibility for investigating suspicions of staff fraud and corruption
• the strategy is not cross-referenced to the draft prosecution policy
• the strategy states that the Chief Executive and Borough Solicitor will be consulted before a case is referred to the police. This is not reflected in the draft prosecution policy
• there is no mention of fraud awareness training for all council staff.

Prosecution policy

2.46  A prosecution policy actively demonstrates an authority’s commitment to fighting fraud. A clear and concise policy will show that the decision to offer administrative penalties or to prosecute is not arbitrary, and therefore not subject to challenges of discrimination and unfairness. Publicising the authority’s commitment to prosecutions will reinforce the message that fraud will not be tolerated.

2.47  Barnet drafted a prosecution policy in May 1999. Like the fraud and corruption strategy, it has shortcomings. It does not clearly state:

• who is responsible for the decision to prosecute
• the criteria, in sufficient detail, to allow an informed decision to prosecute
• who is responsible for preparing the case for prosecution
• who is responsible for carrying out the prosecution (in the past, Barnet prosecutions have been undertaken by the Crown Prosecution Service (CPS))
• to what offence(s) it relates
• detailed processes for the operation of administrative penalties
• levels of management checks or controls
• that formal management authorisation should be documented before passing a case for prosecution.

2.48  Despite the lack of an agreed prosecution policy, BAFIS prepared 6 cases for prosecution in 1998/99 and made presentations on them to CPS. Of these, 4 were successful. On examining the quality of investigation in these cases and the preparation of the paperwork passed to CPS, we found that:

• none fully met the standards we would expect of a properly constructed prosecution file
• the quality of investigation varied widely across the 4 cases
• there was no evidence of any management checks
• none of the cases were formally authorised for prosecution by management
• the progress of a case was not monitored after it was passed to CPS.

Further details are given in Appendix C.

Whistleblowing policy

2.49  A draft whistleblowing policy and code of practice had been submitted for Members’ approval at the time of the on-site inspection in July 1999 but approval had not been received. We examined the draft policy and were concerned that it:

• allows details of an enquiry or investigation to be reported back to the individual who initiated the action. This could cause significant tensions between staff, and potentially jeopardise any subsequent action taken against individuals.
• does not include or define ‘abuse of power or position’
• gives no examples of serious cases that would qualify for whistleblowing
• does not suggest alternative ways to report concerns, for example by internal hotline or by contacting a person of choice
• does not provide for an independent monitoring of referrals to check that the right action had been taken in all cases.

We recommend that Barnet reviews and revises the draft strategies to ensure that they are clear, concise and support each other. Barnet must develop processes to test compliance and standard documentation.

Fraudulent overpayments

2.50  Barnet does not always classify fraudulent overpayments correctly, due to:

• ineffective processes, both in the Benefits section and in BAFIS
• communication failures
• weaknesses in the WBS form which allow incorrect classification
• an absence of checks and controls on classification within the Benefits section
• no checks within BAFIS on the accuracy of fraud classifications
• minimal reconciliation of Benefits section records with those held by BAFIS.

2.51  These problems raise a serious doubt about the WBS and overpayment subsidy claimed for 1998/99, as demonstrated by Figure 2.12.

Source: Barnet records 1998/99

2.52  The value of fraud overpayments recorded by the Benefits section cannot be reconciled with BAFIS records. There are significant differences to WBS records.

2.53  Designated overpayment officers in the Benefits section are authorised to classify overpayments as fraudulent. They should refer a case to BAFIS if they believe that the evidence does not support cancellation or amendment of benefit, or that it is inappropriate to classify a case as fraudulent. This does not happen.

2.54  The Benefits section sends monthly reports of overpayments classified as fraudulent to the Head of Audit. Nothing is done with the reports and the Head of Audit confirmed that they are not cross-referenced to WBS records due to lack of BAFIS resources. This is surprising, given that there were 78 cases in 1998/99.

2.55  We examined 34 random WBS cases from 1998/99 to test the quality of investigation, the correctness of WBS claimed and the classification of the overpayment. WBS records showed only 15 (44%) cases as having fraudulent overpayments recorded. We cross-checked these cases against HBIS and found that only 3 (20%) were classified correctly as fraudulent on HBIS.

2.56  These results caused us concern, so we applied the same tests to a further 96 cases. Only 22 (23%) had overpayments classified as fraudulent on HBIS.

2.57  Of the 130 overpayment cases examined, 91 (70%) resulted from claimant error, and 14 (11%) were paper overpayments. This means that the majority of WBS claims in 1998/99 are invalid. We also noted from BAFIS records that the monthly WBS claims do not add up to the reported total WBS.

2.58  Figure 2.13 demonstrates the standard WBS claimed (WBS claim requiring any fraudulent overpayment) and the valid standard WBS:

* debit entry due to previous claims being reversed

Source: Barnet 98/99 WBS records and BFI analysis

2.59  Of the £878,391 standard WBS claimed in 1998/99, our findings indicate that only £281,039 fulfils the WBS criteria. If Barnet’s WBS claim for 'gone aways' in 1998/99 (£220,920) is added to the latter figure, the total WBS for 1998/99 comes to £501,959. On the basis of these figures, Barnet will face a subsidy reduction of £504,756.

2.60  Barnet pointed out that a new manager and new procedures had been introduced in the current financial year, so we checked 11 of the 36 cases where WBS had been claimed in 1999/2000. Five of the cases had a fraudulent overpayment recorded, but when we checked HBIS, only 2 of these had overpayments classified as fraudulent.

2.61  In 1997/98, HBIS had no facility to classify overpayments as fraudulent. Such cases were classified as claimant error through the following process:

• on completion of a investigation, BAFIS would prepare a report covering the details of the investigation and a recommendation as to further action
• the Principal Investigations Manager (PIM) then took the papers to HB/CTB
• both BAFIS and HB/CTB then discussed whether fraud had been proven and whether cancellation or amendment of benefit was appropriate
• HB recorded the decision on its copy of the investigation closure report (called the audit report) and PIM would take note of the decision
• cases would be cancelled or amended as appropriate and an overpayment raised and automatically classified as claimant error on HBIS
• the PIM would then establish the overpayment either by phone or when he visited HB/CTB
• notified overpayments were recorded on the WBS records. At the end of the year these records would be copied to HB/CTB for the recorded overpayments to be classified as fraudulent.

2.62  Weaknesses in this process raise serious concerns about the integrity and security of the system, because it lacks:

• a formal, documented system for re-determining HB and CTB entitlement after investigation
• management checks to ensure that overpayments were correctly classified
• internal controls to minimise the risk of internal fraud and abuse
• internal independent reconciliation of records held by the Benefits section and BAFIS.

We would expect recovery of fraudulent overpayments to be rigorously pursued, using all available avenues. Barnet’s failure to correctly record all fraudulent overpayments would have had a detrimental effect on recovery.

2.63  WBS performance and overpayment records for 1997/98 are shown in Figure 2.14.

Source: Barnet records 1997/98

2.64  EA reduced the claimed WBS and increased the overpayment subsidy claim for 1997/98. These changes were reported to the DSS via amended returns, but we found that Barnet has not amended its own records. As a result, inappropriate and inaccurate investigation reports remain on HB and CTB files.

2.65  We consider that this problem results from the lack of a co-ordinated approach by the management of both the Benefits section and BAFIS.

We recommend that Barnet introduces:

• a formal, documented system for re-determining HB and CTB entitlement following investigation by BAFIS
• management checks to ensure that fraudulent overpayments are correctly classified. It is important that these checks are integrated within a comprehensive set of management checks for the Benefits section and BAFIS
• internal controls to minimise the risk of internal fraud and abuse
• regular (ideally monthly) internal independent reconciliation of records held by the Benefits section and BAFIS.

Fraud hotline

2.66  Many LAs maintain a benefit fraud hotline and use the associated publicity to raise the profile of fraud and demonstrate their commitment to fighting it, as well as to remind the public of their responsibility to report suspected fraudsters.

2.67  Barnet has no hotline, reflecting its lack of commitment to countering fraud and denying the public an opportunity to report fraud anonymously.

We recommend that Barnet introduces a fraud hotline, including an out of hours service (answerphone). Staff should be given training, and appropriate procedures and documentation developed to support implementation.

Suitable publicity should be used to raise public awareness of the objectives of the hotline, and to give the number to call to report suspicions.

Impact of prevention

2.68  In this context, prevention refers to measures that minimise the opportunity for internal or external fraud and error. Barnet has introduced the following prevention measures but is not using them to their full effectiveness:

• the Do Not Redirect initiative
• effective vetting checks for new entrants to BAFIS (but not for the Benefits section)
• a minimal amount of fraud awareness training
• a fraud referrals form
• a large number of pre-award visits by the PVT
• a minimal amount of IA input to HB and CTB work on the Benefits section. But note that there is no such input to BAFIS.

Do Not Redirect initiative

2.69  Section 182A of the Social Security Administration Act 1992, introduced by the Fraud Act 1997, allows LAs to mark HB and CTB envelopes Do Not Redirect. This is to prevent the Royal Mail from redirecting the envelope to a forwarding address, returning it instead to the appropriate LA.

2.70  Barnet started to use Do Not Redirect envelopes for all benefit post, not just cheques sent by post, in March 1999. XXXXX XXXXX XXXXX XXXXX XXXXX XXXXX XXXXX XXXXX XXXXX XXXXX XXXXX XXXXX XXXXX XXXXX XXXXX XXXXX XXXXX XX XXXXX XXXXX XXXXX XXXXX XXXXX XXXXX XXXXX XXXXX XXXXX XXXXX XXXX

We recommend that Barnet starts collecting data and monitors it to:

• establish the effectiveness of the initiative
• test the effectiveness of verification checks made by benefit processing staff
• enhance the assessment of those cases most likely to be fraudulent
• ensure that all such cases are referred to BAFIS for investigation.

Vetting of BAFIS staff

2.71  Barnet introduced a procedure in May 1999 by which all BAFIS investigators are vetted effectively. We commend Barnet for introducing this best practice, but are disappointed that it does not also apply to the Benefits section.

Fraud awareness

2.72  Fraud referrals from LA employees are a valuable source of information for investigation teams. To maximise this resource, employees should receive regular fraud awareness training with the aim of:

• increasing the number and quality of referrals
• enhancing the information database
• improving working relationships and communications throughout the authority
• minimising the risk of fraud entering the system
• increasing the likelihood of detecting fraud at the earliest opportunity.

2.73  Barnet benefits staff were given fraud awareness training in April 1999 by way of a joint presentation with CBFIS and the Immigration Services. This was the first such training in 6 years. It covered deterrence, prevention, detection and investigation, and the post-training evaluation forms clearly indicate that staff felt it to be effective and useful.

2.74  Barnet plans further training for benefits staff and informs us that it is committed to regular fraud awareness training in the future. Barnet should extend this training to other council staff, thereby increasing sources of potential referrals.

2.75  We examined 71 investigation cases carried out in 1998/99 and the related files on pre-investigation activity by the Benefits section. There were 14 cases (20% of the sample) where, in our opinion, a referral should have been made to BAFIS at an earlier date. For example:

• Claimant X (a single mother) had been in receipt of HB and CTB since 1992. In her first claim, she declared a child with a surname different to her own. Following this first claim, she had 2 further children (one in1995 and one in1996) both with the same surname as the first child. No enquiries were made as to the whereabouts of the children’s father, or whether he was paying maintenance, and no referral was made to BAFIS. In February 1999, an investigation was started but we could not establish from the records why or if a referral had been made.
• Claimant Y declared very low earnings and an employer with the same surname. The Benefits section made no enquiries as to whether this was a proper employer, nor was a referral made to BAFIS at the time of the claim. There was no evidence that anyone had looked into the possibility either that claimant and employer were one and the same person, or that the employer was a relative and that earnings had been understated to fraudulently increase benefit payments. The claimant had been in receipt of HB and CTB since 1997, but referral to BAFIS was not made until January 1999.
• A renewal claim form was received on 26 June 1997 from claimant Z. The signature on this form was totally different to that on the first claim form. No referral was made to BAFIS for them to establish if the original claimant was still resident and still entitled to HB and CTB. An investigation was eventually started, but only because the case was included in National Fraud Initiative (NFI) data matching exercise in May 1998.

2.76  These examples show that benefit processors fail to refer cases to BAFIS. We conclude that this is because of the minimal fraud awareness training provided over the last 6 years. We consider that HB and CTB could have been overpaid for 4 years in the first example, and for 2 years in the other cases.

We recommend that Barnet provides regular fraud awareness training for all staff.

BAFIS should review all cases in payment for more than a year prior to April 1999. This will identify cases that should previously have been referred but were not due to a low level of fraud awareness.

2.77  BFI’s Good Practice Guide gives further details on fraud awareness training.

Fraud referrals

2.78  Employees should be encouraged to refer any suspicions to BAFIS direct to ensure that referrals are not inappropriately intercepted. A standard referral form, with clear instructions for completion, will ensure that the information given by employees is relevant and complete and can also be used as a checklist.

2.79  BAFIS does not record the source of referrals, so cannot monitor:

• the level of referrals from specific teams or individuals
• whether referrals have increased following fraud awareness training.

2.80  The Benefits section uses a form called an audit enquiry to refer cases to BAFIS, accompanied by the claimant’s HB/CTB file. The referral form should clearly identify whether the information it contains relates to a claimant or a tenant. The form is not fit for purpose because it does not include:

• prompts for basic details such as National Insurance number (NINO), date of birth, HBIS reference number, household details and payments details
• prompts about the detail of the suspicion, for example, the reason for suspicion, or for supporting information, such as suspected employer details
• a section for BAFIS to record reasons for rejecting a referral, should they do so
• carbon (to eliminate the need for photocopying)
• a statement that the form is a referral to BAFIS, not an audit enquiry.

2.81  We also found that audit enquiry forms were not date-stamped on receipt by BAFIS.

2.82  It is important that BAFIS gives feedback to the source of a referral so as to:

• encourage further referrals
• improve fraud awareness amongst employees
• maintain effective liaison with benefit assessors
• allow an opportunity to highlight fraud trends
• help identify operational weakness that could allow fraud and error to enter the system.

2.83  Benefit processors make a referral to BAFIS through a Senior Benefit Officer (SBO) who will decide whether it should be put to BAFIS. We were told that SBOs review the papers to confirm that the evidence is of a good quality and that the case warrants referral. This is bad practice because:

• SBOs have not had sufficient fraud awareness training to allow them to make the same judgement as a trained and experienced fraud investigator
• it closes a direct and open link to BAFIS for employees who suspect fraudulent activity. This could leave the Benefits section open to criticism that suspicions of fraud are being suppressed.

2.84  BAFIS told us that they use an audit report form to give feedback on the results of investigations. We consider that the procedure by which forms are first hand-written, then typed, is unnecessarily time consuming. We also found that the forms do not help the person making the referral to become more fraud aware.

2.85  We were told that there is informal oral feedback between investigators and HB/CTB assessors. This is no bad thing if it supplements a written response, and is done by an experienced, trained investigator, but this is not always the case in Barnet.

2.86  BAFIS management does not collect data on:

• the overall numbers of referrals, or quality and outcome of referrals received
• cases where the investigation identified weakness in procedural or working practice that enabled the fraud, or compounded the ability to commit the fraud, nor on suggested remedial action
• cases which suggest that proactive fraud activity needs to be refocused.

We recommend that Barnet:

• introduces a comprehensive fraud referral form which is fit for purpose and which conforms with best practice advocated by BFI
• develops a formal system to ensure that feedback is given in all cases
• takes steps to ensure that BAFIS management collects the necessary data to monitor standards and performance within BAFIS.

Managing referrals

2.87  Referrals should be:

• formally accepted or rejected. If rejected, written feedback on why the referral is rejected should be given to HB/CTB within a reasonable time
• prioritised and allocated to the most appropriate officer
• analysed for management information, such as volume, types and sources.

2.88  There was little evidence that BAFIS formally accepted or rejected referrals in 1998/99. However, it introduced a prioritisation system in May 1999, based on the level of evidence, severity of the offence, amount of benefit in payment and circumstances of the claimant.

2.89  Procedural guidance states the order of priority:

• Priority 1 – visit within 4 working days
• Priority 2 – visit or appointment within 7 working days
• Priority 3 – visit or appointment within 10 working days.

2.90  In our sample of 71 investigations, 3 referrals had been prioritised, but subsequent action failed to uphold the prioritisation. Figure 2.15 gives details.

Fig. 2.15: Action on prioritised cases
Case	Outcome	Adherence to priority
X	Given priority 2 - 16 days before first action.	9 days after target
Y	Given priority 2 – 12 days before first action	5 days after target
Z	Given priority 2 – 28 days before first action.	21 days after target

Source: BFI analysis

2.91  There were 4 proactive cases and 67 reactive cases in the sample. We could determine neither the date of referral, nor the date of first action in 22 (33%) of the reactive cases. Of the remaining 45 cases:

• 12 (27%) took 0 –5 days before first action
• 11 (24%) took longer than 5 days before first action
• 22 (49%) took more than 10 days before first action.

We recommend that Barnet implements the monitoring of referrals, including management checks, to ensure that:

• referrals are dealt with promptly
• the prioritisation procedure is adhered to
• prioritisation is consistent
• investigations are undertaken promptly, with remedial action if not
• performance in dealing with referrals, and the speed of investigation activities, is recorded and reported regularly to senior management.

IA

2.92  IA has a key role to play in evaluating HB and CTB systems and procedures and reporting on adherence to legislative requirements and to an LA’s strategies, policies and procedures. IA offers a level of assurance on benefit service delivery and on an LA’s procedures to deter, prevent, detect and investigate fraud.

2.93  LAs should consider the following factors, and balance their audit priorities, to ensure that adequate audit resources are allocated to HB and CTB systems:

• HB and CTB spend as a proportion of the LA’s total spend
• HB and CTB caseload and turnover
• the known incidence of internal and external fraud and reasons for this fraud
• internal and external audit reports
• the need to apply risk assessment techniques and tools.

2.94  Barnet spent £89.96 million on HB and CTB in 1997/98, 20% of the gross expenditure of £456.5 million. The figures demonstrate that HB/CTB administration is big business, and it is widely recognised that it offers many opportunities for fraud and corruption. It follows that IA should allocate sufficient audit resources to give assurance that this key area is being monitored and controlled.

2.95  Figure 2.16 shows the IA resources allocated to the Benefits section and BAFIS over the last 3 years.

Fig. 2.16: IA days spent on HB/CTB and BAFIS 1996/97 to 1999/2000
Year	Total IA days used	IA days used on HB/CTB	IA days used on BAFIS	Total days used on HB/CTB and BAFIS	% of total IA days spent on HB/CTB and BAFIS
1996/97	N/K	30	14	44	N/K
1997/98	2218	0	12*	12	0.5
1998/99	2729	5	5*	10	0.4
1999/2000	3265	25*	0	25	0.8

Source: Barnet IA records

* estimated

2.96  This is the lowest allocation of IA resource to benefits administration and counter fraud that we have seen. We are very concerned at the inadequate level of IA activity.

2.97  IA last audited BAFIS activities in 1996. There was no report on the conclusion of the audit, but the audit manager sent a private and confidential memorandum dated November 1996 to the head of audit. After 3 requests over a 6 week period, the head of audit produced a copy of the memorandum for us. It reported the following areas of concern and recommendations for resolving them:

• inadequacy of fraud investigations to support cancellation or amendment of HB and CTB
• insufficient work undertaken before commencing an investigation
• the reliance placed by investigators on requesting claimants to attend interviews rather than making unannounced visits
• all visits by investigators being undertaken during normal working hours
• lack of clarity of policy and roles
• poor co-operation and communication between HB/CTB and BAFIS.

2.98  Barnet informed us that visits were undertaken outside working hours. Indeed, staff receive an automatic overtime allocation for this duty. It is therefore confusing why this was an issue in the report.

2.99  We are seriously concerned that none of the other issues raised in the memorandum has been resolved, despite Barnet informing us that attempts were made to do so. The failure to resolve the issues indicates that no action plan was developed or implemented following the memorandum. In fact, all the issues were raised again in an EA report in 1998 and are raised yet again in this report.

2.100  This failure to implement internal and external audit recommendations is of serious concern and raises doubts as to whether Barnet is committed to providing a quality investigation service or is likely to change without external pressure.

2.101  We do not think it appropriate that the fraud investigation function falls within IA. This compromises IA in its assurance function. Furthermore, there should be, at some point, a common chain of command covering both the administration of benefits and the investigation of fraud relating to it. This does not exist in Barnet.

2.102  We were given copies of 3 witness statements made by BAFIS investigators to the head of audit. XXXXX XXXXX XXXXX XXXXX XXXXX XXXXX XXXXX XXXXX XXX XXXXX XXXXX XXX No investigation was undertaken and the head of audit did not even take the basic step of reviewing all investigations made by that officer.

2.103  We found other examples of poor management:

• XXXXX XXXXX XXXXX XXXXX XXXXX XXXXX XXXXX XXXXX XXXXX XXXXX XXXXX XXXXX XXXXX XXXXX XXXXX XXXXX XXXXX XXXXX XXXXX XXXXX XXXXX XXXXX XXXXX XXXXX XXXXX XXXXX XXXXX XXXXX XXXXX XXXXX XXXXX XXXXX XXXXX XXXXX XXXXX XXXXX XXXXX XXXXX XXXXX XXXXX XXXXX XXXXX XXXXX XXXXX XXXXX XXXXX XXXXX XXXXX XXXXX XXXXX 
• no evidence that mileage claims for the team had been properly checked. We were given the claims in batches, and it was clear that they had not been filed in any order. We made basic checks on the available mileage sheets and diaries and found occasions when they did not tally
• no evidence that the practice of visiting the same area on consecutive days was being questioned or controlled
• a lack of monitoring and control of visits made by investigators
• XXXXX XXXXX XXXXX XXXXX XXXXX XXXXX XXXXX XXXXX XXXXX XXXXX XXXXX XXXXX XXXXX XXXXX XXXXX XXXXX XXXXX XXXXX XXXXX XXXXX XXXXX XXXXX XXXXX XXXXX XXXXX XXXXX XXXXX XXXXX XXXXX XXXXX XXXXX XXXXX XXXXX XXXXX XXXXX XXXXX XXXXX XXXXX XXXXX XXXXX XXXXX XXXXX XXX

2.104  We voiced our concerns to the head of audit, who acknowledged the lack of expertise and experience of HB and CTB in IA and the impact this has on the integrity and security of the benefits system.

We recommend that Barnet reviews the current positioning of BAFIS in order to ensure that it is managed in an effective and efficient manner with the appropriate skills and knowledge, and that effective management checks are implemented.

We further recommend that Barnet:

• undertakes a formal risk assessment to ensure that an appropriate level of assurance can be given to the Secretary of State, Members and senior officers as to the integrity and security of the benefits system in Barnet
• ensures that sufficient IA resources are allocated to auditing the activities of the Benefits section and BAFIS
• secures Members’ approval of the draft fraud and corruption strategy after our recommendations have been taken into account
• drafts an implementation plan which includes the development of supporting policies and procedures
• drafts procedures for dealing with cases of suspected internal fraud which prevent officers from suppressing or failing to investigate them
• introduces a formal reporting structure so that appropriate cases are reported to Members and senior officers.

Working with the RO

2.105  Barnet told us that it has a good working relationship with the RO. Barnet has an SLA with the RO, but neither party monitors performance against it. Barnet has used the automated RO referral system, RoConn, since May 1996. RoConn has the capacity to monitor individual cases. However, this does not remove the onus on managers to measure performance against the SLA.

2.106  The RO told us that the turnaround target is met in over 90% of referrals, allowing for the need to visit properties in 25-30% of the cases referred. Figure 2.17 illustrates the referrals to RO by Barnet.

Fig. 2.17: Referrals to RO
	1996/97	1997/98	1998/99
Number of pre-determinations requested	194	39	342
Number of determinations requested	6143	6666	6063
Number of Housing Association determinations requested	44	44	58

Source: Barnet

2.107  The figure shows that Barnet is referring Housing Association cases to the RO. We were told that referrals are made if:

• there is evidence of over-accommodation or
• the rent is considered to be excessive.

2.108  Our test of claims confirmed that Barnet makes RO referrals appropriately and efficiently.

We recommend that Barnet introduces formal mechanisms to monitor its performance and that of the RO against the agreed SLA.

Working with ES

2.109  ES is working closely with the BA to ensure that new claims for JSA are assessed promptly and accurately through the implementation of the Barnet model. See Appendix C for further details.

2.110  At the time of the on-site inspection Barnet did not have an SLA with the local ES. ES staff do not attend liaison meetings with Barnet, despite invitation, and were unaware that Barnet undertakes a weekly advisory session for claimants at an ES office. This indicates that the working relationship and liaison is limited.

2.111  ES staff have not had fraud or benefits awareness training on HB and CTB and have no active involvement in deterring or preventing fraud in these benefits. The local BA District encourages ES to refer all benefit-related enquiries to BA.

We recommend that Barnet proposes an SLA to ES which includes training on HB and CTB awareness and fraud awareness.

We will recommend to ES that it sends representatives to customer service liaison meetings to raise its awareness of issues affecting the administration and payment of HB and CTB (for urgent implementation).

Working with BA

2.112  Barnet and BA contact each other regularly about benefit administration and counter fraud activity, but we found scope for closer working. Our findings are detailed at Appendix C.

2.113  BA staff do not receive HB and CTB awareness training. BA relies on team meetings to cascade HB and CTB issues from DSS circulars and on its liaison meetings with Barnet. We were however informed by Barnet that there has been training in the past and training is planned at Leaside District in December 1999.

2.114  We found that links between Barnet and BA generally work well. NHB1s are linked to entitlement notices before dispatch to Barnet.

2.115  We checked that HB and CTB indicators had been correctly set for those HB claims sampled at Barnet where the claimant was also in receipt of either IS or JSA. We found that the indicators had been correctly set in 85% of the cases.

We recommend that Barnet notifies BA of cases where the RAT shows that indicators have been set incorrectly. This will reduce the risk that HB and CTB will continue to be paid beyond the date of entitlement.

Getting it right – recommendations

We recommend that:

valuables should not be stapled to paperwork. Plastic wallets would avoid the danger of defacing such valuables the post opening supervisor should sign the attendance book the post opening supervisor should remain present during post opening the security of cheques transported between buildings could be improved by allocating 2 people to the task and by the use of a secure, lockable trolley. (Paragraph 2.17.) Barnet: introduces our suggested improvements to the claim form improves verification, particularly in relation to identity and residency for all claims develops procedures for the PVT in the event of a failure to make contact with the claimant analyses the data from PVT visits, assesses it for risk, and shares the results with BAFIS, BA and CBFIS tests the quality of payslip training through regular random case-checks. (Paragraph 2.43.) Barnet reviews and revises the draft strategies to ensure that they are clear, concise and support each other. Barnet must develop processes to test compliance and standard documentation. (Paragraph 2.49.) Barnet introduces: a formal, documented system for re-determining HB and CTB entitlement following investigation by BAFIS management checks to ensure that fraudulent overpayments are correctly classified. It is important that these checks integrated within a comprehensive set of management checks for the Benefits section and BAFIS internal controls to minimise the risk of internal fraud and abuse regular( ideally monthly) internal independent reconciliation of records held by the Benefits section and BAFIS. (Paragraph 2.65.) Barnet introduces a fraud hotline, including an out of hours service (answerphone). Staff should be given training, and appropriate procedures and documentation developed to support implementation. (Paragraph 2.67.) Suitable publicity should be used to raise public awareness of the objectives of the hotline, and to give the number to call to report suspicions. (Paragraph 2.67.) Barnet starts collecting data and monitors it to: establish the effectiveness of the initiative test the effectiveness of verification checks made by benefit processing staff enhance the assessment of those cases most likely to be fraudulent ensure that all such cases are referred to BAFIS for investigation. (Paragraph 2.70.) Barnet provides regular fraud awareness training for all staff. BAFIS should review all cases in payment for more than a year prior to April 1999. This will identify cases that should previously have been referred but were not due to a low level of fraud awareness.(Paragraph 2.76.) Barnet: introduces a comprehensive fraud referral form which is fit for purpose and which conforms with best practice advocated by BFI develops a formal system to ensure that feedback is given in all cases takes steps to ensure that BAFIS management collects the necessary data to monitor standards and performance within BAFIS. (Paragraph 2.86.) Barnet implements the monitoring of referrals, including management checks, to ensure that: referrals are dealt with promptly the prioritisation procedure is adhered to prioritisation is consistent investigations are undertaken promptly, with remedial action if not performance in dealing with referrals, and the speed of investigation activities, is recorded and reported regularly to senior management. (Paragraph 2.91.) Barnet reviews the current positioning of BAFIS in order to ensure that it is managed in an effective and efficient manner with the appropriate skills and knowledge, and that effective management checks are implemented. (Paragraph 2.104.) Barnet: undertakes a formal risk assessment to ensure that an appropriate level of assurance can be given to the Secretary of State, Members and senior officers as to the integrity and security of the benefits system in Barnet ensures that sufficient IA resources are allocated to auditing the activities of the Benefits section and BAFIS secures Members’ approval of the draft fraud and corruption strategy after our recommendations have been taken into account drafts an implementation plan which includes the development of supporting policies and procedures drafts procedures for dealing with cases of suspected internal fraud which prevent officers from suppressing or failing to investigate them introduces a formal reporting structure so that appropriate cases are reported to Members and senior officers. (Paragraph 2.104.) Barnet introduces formal mechanisms to monitor its performance and that of the RO against the agreed SLA. (Paragraph 2.108.) Barnet proposes an SLA to ES which includes training on HB and CTB awareness and fraud awareness. (Paragraph 2.111.) We will recommend to ES that it sends representatives to customer service liaison meetings to raise its awareness of issues affecting the administration and payment of HB and CTB (for urgent implementation). (Paragraph 2.111.) Barnet notifies BA of cases where the RAT shows that indicators have been set incorrectly. This will reduce the risk that HB and CTB will continue to be paid beyond the date of entitlement. (Paragraph 2.115.)

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