Introduction

1.1  The Department of Social Security (DSS) currently spends just under £96 billion a year on benefits for some 30 million people, equivalent to £80 a week for every household in the country. Payment of Housing Benefit (HB) and Council Tax Benefit (CTB) by local authorities (LAs) amounts to around £13.7 billion of government expenditure (Social Security Departmental Report 1999/2000), with benefit being paid to around 4.5 million people.

1.2  Latest estimates, published in the National Housing Benefit Accuracy Review 1997/98, suggest that around £600 million is being lost each year as a result of fraud in the HB system.

1.3  In March 1999, the government published its strategy for tackling fraud and improving security in DSS and LAs - A new contract for welfare: SAFEGUARDING SOCIAL SECURITY. This strategy calls for a sustained and detailed effort across 4 fronts:

• Getting it right - benefit payments should be correct from day one
• Keeping it right - ensuring payments are adjusted as circumstances change
• Putting it right - detecting when payments go wrong and taking prompt action to correct them, with appropriate penalties to prevent a recurrence
• Making sure things work - monitoring progress, evaluating defences and adjusting them in the light of experience.

1.4  The Benefit Fraud Inspectorate's (BFI's) work is an integral part of the strategy. Our reports on LAs and DSS agencies inform future policy and raise standards of benefit administration by:

• recommending areas for improvement
• ensuring that our conclusions and recommendations reinforce the objectives of the strategy
• disseminating good practices.

1.5  This report records the result of our inspection of Berwick BC. The on-site phase of the inspection took place during November and December 1999.

The scope of our work

1.6  After examining data from a variety of sources regarding Berwick BC's administration of HB and CTB, we decided to focus our efforts on 14 key areas:

• organisational structure
• management information
• training
• claim forms
• verification and checking
• rent officer referrals
• overpayments – identification, classification and recovery
• reviews
• liaison with Benefit Fraud Investigation Service (BFIS) and Rent Service (RS)
• internal audit
• prosecution and administration penalties
• counter fraud activities
• counter fraud IT system
• internal security.

Berwick BC background

1.7  Berwick BC's offices are in the town of Berwick-upon-Tweed. Berwick BC is one of 6 LAs in Northumberland and is England’s northernmost borough. It covers an area of 370 square miles and has a population of almost 27,000, a large proportion of which (24.6%) is over retirement age.

1.8  Recently published population projections by the Office of National Statistics suggested that without policy intervention the population of the Borough would decline by nearly 10% by the year 2021. It is also noted that:

The demographic structure of the population of the Borough showed a marked ageing of the population, to the extent that the Borough has one of the highest proportions of persons beyond retirement age in the UK. The resident population was also characterised by lower than average numbers of young people.

1.9  In 1998/99, Berwick BC paid out just over £4 million in HB and CTB, about 27% of its gross revenue expenditure. The Figure below shows the amount of benefit paid split between rent allowance (RA) and rent rebate (RR), and CTB. The current total caseload for HB and CTB is 2,699.

Fig. 1.1: Benefit expenditure
Benefit	1997/98 (£000)	1998/99 (£000)
RA	1,327	1,270
RR	2,055	2,080
CTB	959	1,039
Total	4,341	4,389

Source: Berwick BC

1.10  There are no reliable estimates of the level of error or fraud in Berwick BC’s area but data from the National Housing Benefit Accuracy Review 1997/98 suggests HB and CTB losses in the region of £65,000 to £194,000 each year. These figures are calculated using the minimum and average estimates of fraudulent claims or claims with a strong suspicion of fraud in the North East.

1.11  Berwick BC’s efforts to reduce the amount of fraud and error are limited to:

• the appointment of a full-time fraud officer (FO)
• recent fraud awareness talks and the issue of a fraud awareness pack to benefits staff
• a benefits leader check introduced in September 1999
• a locally produced letter issued with determination notices which advises claimants of the need to notify changes, and the consequences of failure to notify those changes
• checks on earnings within benefit periods.

Summary

1.12  Staff involved in benefits administration and counter fraud work are well motivated and keen to offer an effective and efficient service. The inspection was welcomed by staff who regarded it as an opportunity to improve the management and delivery of their work.

1.13  However, the resources Berwick BC has allocated to benefits administration and counter fraud work are inadequate. Consequently, its overall performance in administering benefits and tackling fraud is poor. HB and CTB claims are not managed or controlled effectively and Berwick BC is unable to provide assurance that the benefits system is secure. Berwick BC has also failed to implement good practices in a number of areas. We have made fundamental recommendations about the whole counter fraud structure and effort. Berwick BC must address the need for more resources as a matter of great urgency.

1.14  We found that Berwick BC lacked commitment to tackling fraud. This was evident from the absence of:

• an effective fraud strategy
• adequate training
• sufficient management controls
• any sanctions being applied against fraudsters.

1.15  In addition to the need for more resources, there are a number of other significant issues Berwick BC must address, including:

• the absence of a fraud strategy to provide a focus and steer for counter fraud activity
• the focus on clearing claims quickly, resulting in weak verification of claim information, leaving the benefit system vulnerable to internal and external fraud
• the use of a shortened claim form for renewal claims
• insufficient management checks and controls on benefit administration and IT system access and activity
• poorly focused internal audit (IA) activity in HB and CTB resulting in an inability to provide assurance to Members and the Chief Executive
• risks associated with cheque production and control
• inadequate fraud investigation work and a poorly managed fraud resource
• inadequate training for fraud staff
• insufficient measures to enable Berwick BC to properly plan and control HB and CTB administration and counter fraud activity.

1.16  These are major concerns. However, we are confident that our recommendations would, together with a commitment from management to increase resources and improve the areas identified, improve Berwick BC’s benefit administration and counter fraud performance.

 

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