Appendix E: Fraud referrals and investigations
Introduction
This appendix:
- examines the type and source of fraud referrals passed to Berwick BC’s FO for consideration of investigation
- covers the methods used by the FO to establish if fraud or irregularity exists.
Findings
Process
Berwick BC employs only one full-time FO with no support staff. This was initially a temporary post for a 2-year period but this position has now been made permanent. The Senior Auditor manages the FO but does not have a specific allocation of time for fraud work. The Senior Auditor was unable to estimate the amount of time actually spent on counter fraud work.
The FO has an extensive background in the administration of HB and CTB. However, she has no background in fraud investigation.
The FO maintains her records on an Excel spreadsheet. An Access database has recently been introduced to record additional information. The use of 2 independent recording systems is inefficient. The FO makes all inputs, she has no clerical support and states that 4 out of every 5 days are spent on administrative work.
We found no evidence that this information is used for management information, analysis of referrals or management checks.
Casework
All fraud cases are kept in files separate from the main case papers. We commend Berwick BC for this good practice. However, the standard of casework presentation, content and narrative is very poor. There is no logical trail of activity recorded by the FO. There are no proper records of telephone calls or interviews.
Since the on-site inspection Berwick BC has introduced new measures to rectify this situation, including an activity log on each file and comprehensive notes of claimant interviews.
Referrals and WBS
Fraud referrals are actively encouraged and received from the Berwick BC benefits staff. However, of 8 investigated cases they referred in the current year, only 2 resulted in claimed WBS.
Feedback is provided to the benefits leader on all investigated cases. We found, however, that this is not passed on to the officer who made the referral. No feedback is provided on cases which are not pursued.
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Fig. E.1: Total number of referrals with source |
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Source |
1998/99 |
April 1999 to October 1999 |
Berwick BC Benefits Office |
60 |
34 |
Berwick BC IA |
28 |
8 |
Housing Benefit Matching Service |
36 |
0 |
Hotline |
0 |
7 |
DSS |
0 |
3 |
Post |
21 |
13 |
Other internal |
23 |
14 |
Other |
29 |
9 |
Not known |
20 |
29 |
Total |
217 |
117 |
Source: Berwick BC FO’s statistics
Berwick BC’s fraud referral form does not include a box for the source of the referral. The FO states that she usually knows the source of the referral but, the Figure above shows the high number of cases where the source has not been recorded on the FO’s statistics.
Where the source was recorded, we found discrepancies between the apparent source on the file and those recorded by the FO. We found 2 cases in the 1999/2000 sample which were referred from the Housing Benefit Matching Service, but were recorded as DSS on the statistics provided.
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Fig. E.2: Referrals and results received by source, 1 April 1999 – October 1999 |
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Source |
Investigated cases |
WBS cases claimed |
£ value of WBS |
IA |
4 |
4 |
5,288 |
Benefits section |
8 |
2 |
1,936 |
Other internal |
7 |
3 |
4,218 |
DSS |
1 |
1 |
133 |
Data matching |
1 |
1 |
1,505 |
Fraud hotline |
1 |
1 |
1,473 |
Other external |
1 |
1 |
1,527 |
Not known |
8 |
2 |
1,452 |
Post |
4 |
1 |
1,920 |
Total |
35 |
16 |
19,452 |
Source: Berwick BC MIS and BFI analysis
The above Figure shows the source of the most productive referrals in the current year. Referrals from IA resulted in 100% claimed WBS compared with 25% for referrals from the benefits office.
Interrogation of referral source is one example of the way in which Berwick BC could target its fraud resources more efficiently.
In 22.8% of cases the source of the referral was not recorded and could not be determined from the fraud file.
We examined 30 completed fraud files and were able to determine the source in only 10 cases. Where the source is shown as "other internal" or "other external" there is no record of the actual source.
All the Housing Benefit Matching Service referrals examined related to Family Credit. The FO advises that a number of Working Families’ Tax Credit referrals have been received since its introduction. None were complete and available for sample.
Within the Benefits Office, there is no systematic liaison with local BA or the Tax Credit Office dedicated Helpline to confirm award details.
There were 50 referrals received between June 1999 and August 1999 which remained open when we conducted the on-site inspection in November. The trail has gone cold on most of these cases and the FO told us that most cases will be closed down with no investigation.
Fraud sample
We took a sample of 57 completed fraud cases to examine the quality of Berwick BC’s fraud investigations. The Figure below shows the nature of the cases examined by result and type of investigation.
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Fig. E.3: Analysis of fraud sample |
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Type |
Fraud claimed |
Fraud not claimed |
Discarded referrals |
Total |
Undeclared income |
15 |
5 |
4 |
24 |
Undeclared partner |
6 |
3 |
10 |
19 |
Gone away |
4 |
1 |
0 |
5 |
Non dependant |
2 |
1 |
1 |
4 |
Undeclared Family Credit |
3 |
0 |
1 |
4 |
Accommodation type |
0 |
0 |
1 |
1 |
Total |
30 |
10 |
17 |
57 |
Source: Berwick BC fraud sample
Berwick BC claimed WBS on 27 of the 30 cases sampled. The fraud files showed that the FO had not established intent to defraud on 21 cases. There was no interview under caution or statement taken in 13 of those cases.
In 3 of the remaining 6 cases, the FO had established non–residency. Berwick BC claimed WBS at 100% on these cases. We examined the files with the FO and she agreed that WBS should have been claimed at 75%.
SLA1s were issued to BFIS in 5 cases. Of these, 3 resulted in WBS which we considered to be valid, the other 2 we regarded as invalid.
We scrutinised each file again in the presence of the FO at the request of the Borough Treasurer. The FO agreed with our findings on all cases with regard to the failure to establish intent to defraud.
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Fig. E.4: Weekly Benefit Savings |
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WBS claimed |
Full WBS appropriate |
75% WBS appropriate |
|
| 1998/99 | 11 |
1 |
1 |
April 1999 – October 1999 |
16 |
2 |
2 |
Source: Berwick BC fraud sample
Investigations
The main technique employed by the FO is to challenge claimants with an allegation over the telephone. We were told that the FO also conducts a number of office interviews, but we could not discern any criteria for the method of interview.
The FO states that only one day a week is dedicated to fraud investigation, the remainder is taken up with administration tasks related to fraud work. The lack of time available to the FO means that the investigation techniques she uses are very limited and there is little time for visits to claimants or employers.
We saw 3 examples of cases where the FO has used information from electricity and water suppliers to help prove non-residency. This has been combined with observations of the property.
Where the claimant was interviewed at home, we noted that the cases sampled did not contain references to observations in the household, to help prove if there was an undeclared partner.
For general case notes and records of telephone calls the FO uses a variety of notes and statement forms. It is difficult to follow the sequence of events. It is evident from our interviews with the FO that she has established more facts than are recorded but has not documented all of her activity.
There is no turnaround target set for fraud cases and no management checks for accuracy, turnaround or quality of investigation.
Information and intelligence gathering
Berwick BC relies heavily on local knowledge to gather information and intelligence. This is a close knit community and such information is a valuable source of referral. We are concerned, however, that Berwick BC does not lose sight of the need to select cases systematically on the basis of risk.
Berwick BC has some informal arrangements with BFIS, which are not documented. However, we did find examples of information sharing with BFIS within our sample of completed fraud cases. Out of 5 cases referred, 3 resulted in valid WBS.
Berwick BC does not contact the Driver and Vehicle Licensing Agency as part of the investigation of fraud. The FO states that enquiries take too long to return. This service is used by IA, however, for other Berwick BC business.
Berwick BC is considering discussions with officers from environmental health to generate potential referrals from hot food outlets visited during the course of their duties.
Berwick BC is not proactive in its approach to fraud detection. Berwick BC states that this is because of a lack of resources. We could find no evidence of initiatives having been costed or suggested to obtain additional funding.
A proactive approach to fraud detection would greatly increase the number of good quality referrals leading to a greater number of proven fraud and recoverable overpayments.
Overpayment recovery is a particular strength in Berwick BC, therefore greater success in the identification of recoverable overpayments would in turn result in increased revenue for Berwick BC.
Quality of fraud investigation work
The figure below shows a comparison between accepted evidence requirements and those found in Berwick BC.
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