Conclusions
1.1 Local authorities (LAs) pay over £13.7 billion to 4.5 million people on Housing Benefit (HB) and Council Tax Benefit (CTB). Latest estimates, published in the National Housing Benefit Accuracy Review 1997/98, suggest that £840 million is lost each year through fraud and error.
1.2 The government is committed to ensuring the right money goes to the right person. A new contract for welfare: SAFEGUARDING SOCIAL SECURITY set out the government’s strategy for achieving this. It called for 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, and
· making sure the strategy works – by monitoring progress, evaluating the strength of defences and adjusting them in the light of experience.
1.3 The Benefit Fraud Inspectorate (BFI) is an integral part of this strategy. Through our reports on LAs and Department for Work and Pensions (DWP) (formerly Department of Social Security) agencies we aim to:
· identify areas where improvements can be made to benefit administration to raise overall standards
· make recommendations to address weaknesses, and
· identify and spread good practices among administrators.
1.4 This report records the results of our inspection of the London Borough of Bromley (Bromley), which took place between October and November 2000.
1.5 In our inspection, we looked at the administration of HB and CTB and the processes and procedures Bromley had in place to prevent, detect and investigate fraud in the benefit system. The scope of the inspection did not specifically examine accounting/management subsidy controls.
Main conclusions and recommendations
1.6 Bromley expressed commitment to improving the security and integrity of the benefits system and modernising all its services using e-government. Bromley welcomed this inspection as an opportunity to review and improve its benefit operations. Since our on-site inspection Bromley told us it had made progress in implementing many of our recommendations, such as increasing staffing in the client unit.
1.7 In 1993 Bromley outsourced its benefit service, together with most of its other financial services, to Capita. It was one of the first LAs to outsource its benefit service and the contract has weaknesses which it acknowledged, addresses through its working practices and aims to remedy when the contract is next re-tendered.
1.8 We found that although it has a strong culture of probity there were weaknesses in its:
· contract and monitoring arrangements
· verification processes
· counter fraud operation, and
· management checking.
These have hampered the effectiveness of its steps to improve the security and administration of the system.
1.9 Bromley was aware of some of these weaknesses and has started to address these. Capita changed its local management shortly before our inspection and was in the process of reviewing its benefit operations. The client-side was also reviewing its staffing to build in greater assurances as well as preparing to re-tender the contract and conduct a Best Value (BV) review. Our recommendations can be used to complement these reviews and should enable Bromley to build a more secure and efficient benefits system.
1.10 Bromley has increased its publicity and customer focus over the last year to promote the legitimate take-up of HB and CTB. Bromley’s stated aim in its service plan 2000-2003 is:
…to monitor the strategy for combating fraud while promoting benefits to maximise take-up.
1.11 In order to raise awareness Bromley has used a wide range of advertising methods and introduced consultation with claimant focus groups and other welfare bodies associated with benefit take-up.
1.12 Bromley’s current claim form does not collect all the relevant information required. Bromley was revising the form whilst we were on-site. We were concerned that 27% of the forms examined in our sampling were previous versions of the claim form. These included a version with a significant error regarding contribution-based Jobseeker’s Allowance (JSA(cont)) and another version that was 2 years out of date. Bromley needs to revise its current claim form and improve its control and distribution to ensure it is collecting correct information.
1.13 Bromley’s post opening is contracted out to Capita. Although some of the post opening procedures comply with BFI’s Good Practice Guide there are some weaknesses and avoidable delays that compromise the security and speed of benefit processing.
1.14 We found Bromley has variable standards of verifying claims and needs to improve this to ensure the right amount of benefit goes to the right person. It has a good record on verifying National Insurance numbers (NINOs), Income Support (IS), income-based Jobseeker’s Allowance (JSA(IB)) and rent liability. However, standards of verifying claimant’s identity, residency, income and capital were inconsistent and Bromley has limited assurance of the integrity of this information because of:
· failure to ensure all evidence gathered is scrutinised and based on original documentation, despite written guidance from Capita that originals should be photocopied and copies stamped originals seen. We found evidence in our sampling and interviews that this guidance was not followed or monitored
· use of Housing Associations (HAs) to verify identity and residency
· the high error rate of the new pre-assessment team, who comprise Capita’s least experienced staff
· lack of management checks.
1.15 Although Bromley has a dedicated visiting officer it does not have a programme of residency visits that focuses on and supports new claims. In addition, benefit sections are not told of the outcome from those residency visits carried out as part of fraud team activity.
1.16 Capita and Bromley should institute more rigorous management and controls to improve the quality and consistency of checking and ensure guidance is followed. Additionally, Bromley should work more closely with its Homeless Person’s Unit (HPU) to share information and improve verification.
1.17 Capita was attempting to address problems in the pre-assessment team at the time of our inspection. However, we were concerned that management checks of the pre-assessment team had ceased since June 2000, despite the high error rates found.
1.18 Bromley has not introduced the Verification Framework (VF). It has declared its support for the principles of ensuring secure and accurate benefit administration and was considering implementing a modular approach at the time of our on-site inspection.
1.19 Bromley held the view that the need to ensure evidence is based on original documents was only a requirement of the VF, and therefore optional. We consider that the necessary assurance of the integrity of evidence can only been obtained by seeing original documents. We have found from past inspections that the majority of LAs, whether or not VF-compliant, require original documentation.
1.20 Bromley has a manual process to ensure that it complies with the regulations so that all determinations are made by Bromley staff. Bromley cross-checks a listing of Capita’s provisional assessments for new claims against the determinations it makes. We found this worked well, although:
· it needs strengthening to ensure it captures cases rejected by the client-side
· the listing only started including transactions other than new claims whilst we were on-site.
1.21 Bromley stated that it plans to implement a software solution in 2001 that should ensure all Capita’s assessments are electronically referred to the determination team.
1.22 The speed of processing claims is poor. Less than 50% are paid within 14 days. We found delays at post handling and logging stages. This puts additional pressure on the telephone call centre as they do not have access to up-to-date information. There are delays at all stages of processing, which generate large numbers of telephone calls, reception enquiries and complaints.
1.23 Bromley is inconsistent in making Payments On Account (POAs). It does not make POAs in all cases required. There are also undue delays and a failure to monitor and review POAs to ensure they comply with the law. Not making payments on time raises the possibility of a claimant’s tenancy and accommodation being put in jeopardy and creates an unacceptable burden of worry for people, many of whom are old and vulnerable.
1.24 Although fraud
awareness training has been provided in the past, it had not been
provided to all HB staff at the time of our inspection. Counter staff,
who provide a key safeguard to the process, confirmed they had not
received any fraud awareness training,
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1.25 We found, in some areas of work, referral of cases to the fraud team to be mechanical, without due consideration of the individual situation. For instance, all cases where there is a resident landlord are passed to the fraud team without any further enquiries made by HB staff. This approach was mainly due to misleading guidance provided by fraud to assessment staff.
1.26 Bromley does not meet with the Benefits Agency (BA), Employment Service (ES) or Rent Service (RS). Bromley delays making referrals to the Rent Officer (RO) and fails to review and action responses. It has Service Level Agreements (SLAs) with the BA and RS but fails to monitor these and is missing opportunities to work together to secure the gateway. It has no SLA or formal liaison with ES.
1.27 Implementing our recommendations will improve security, accuracy and delivery of benefits by improving:
· the standard of verification
· speed of processing
· working relationships and co-ordination between Bromley, BA, ES and RS.
1.28 Bromley uses a variety of determination notices. Several of these do not comply fully with the requirements of Schedule 6, which means that defective determination notices are being sent to claimants.
1.29 Bromley attempts to keep things right during the lifetime of a claim by tailoring benefit periods to take account of individual circumstances at the start of some claims. However, it needs to ensure that appropriate benefit periods are set for claimants re-housed in temporary accommodation where stays are likely to be of short duration.
1.30 Bromley undertakes limited checks during the lifetime of a claim to confirm that claimants’ circumstances remain unchanged and that payments are kept right. In particular:
· there is a lack of publicity advising landlords and claimants of the need to report changes of circumstances
· there is no focused programme of residency visits
· computer-generated reports which provide details about known changes have been used inconsistently
· renewal claim forms which are not returned are not followed up.
1.31 We found that Bromley’s liaison arrangements with HAs was generally good and include a dedicated HA telephone helpline, liaison officer and regular meetings. This is particularly important as 88% of claims are paid direct to HAs. However, we found that staff were unaware of the fit and proper person test that can be applied to landlords receiving direct payments. They failed to consider this, or use their powers to recover overpayments from landlords in appropriate circumstances.
1.32 Bromley’s council housing was transferred to Broomleigh HA in 1992. This is its biggest single landlord and they have a particularly close and largely productive working relationship. We considered that the fast track scheme operated for new Broomleigh HA tenants was successful in improving the speed and efficiency of processing claims, but the scheme compromises the integrity of the claim process.
1.33 We found some examples of inappropriate access levels granted to IT users. Capita’s failure to review and update IT access levels poses risks to the security and integrity of Bromley’s benefit system.
1.34 Our recommendations would improve the safeguards for keeping payments right during the lifetime of a claim by:
· ensuring all notices and rights to review comply with legal provisions
· reminding claimants and their landlords of their duty to notify changes quickly and accurately to Bromley
· improving IT security and controls.
1.35 Bromley’s current performance in tackling fraud is ineffective due to weaknesses in its organisation and investigation quality.
1.36 These weaknesses result in Bromley not investigating allegations of fraud to a standard needed to establish whether a fraud has occurred. This means that it is unable to provide a strong deterrent against fraud by imposing available sanctions.
1.37 Bromley has developed several procedural guides on various aspects of its fraud work and developed an action plan to improve its counter fraud performance. Additionally it attempts to investigate a wide range of fraudulent activity. Nevertheless, Bromley has still to make significant progress before it can ensure that fraud work properly follows appropriate codes of practice and can place an assurance on the quality of investigation work in areas such as:
· planning
· direction and focus
· interviewing and collection of evidence
· delivering a deterrent.
1.38 We also have concerns about the methods adopted by Bromley to determine its proactive fraud activity and fraud investigators becoming involved in non-investigation issues surrounding claim verification work.
1.39 Bromley’s fraud section comprises 2 units, based respectively in Capita and the authority. We express reservations about aspects of Bromley’s structure and performance in the areas of:
· organisation and division of fraud responsibilities
· consistency and availability of training
· standard and vetting of referrals
· lack of performance measures
· limited use of management statistics
· limited risk analysis.
1.40 We commend Bromley for its attempt to improved fraud performance through various methods such as:
· Professionalism in Security (PINS) training for 2 staff
· undertaking risk analysis and proactive fraud work
· introducing a prosecution policy
· providing written guidance
· distributing a fraud newsletter to non-fraud staff.
1.41 However, overall we consider that deficiencies in many areas of work undermine Bromley’s efforts to provide an effective fraud investigation service. Bromley must raise the standard of its fraud work if it is to:
· properly establish fraud
· be able to impose sanctions
· provide assurance that any WBS claim can withstand scrutiny and challenge.
1.42 Bromley has no assurance that all overpayments are correctly identified and recorded. There is no effective check undertaken by either Bromley client-side or Capita management to test the accuracy of the overpayment calculation and classification. Capita staff frequently fail to comply with legal provisions as they make decisions on overpayments raised, issue notices of determinations and undertake recovery action without referral to Bromley client-side.
1.43 We found a number of cases where Bromley client-side had eventually determined the overpayment classification and subsequent recovery erroneously.
1.44 Bromley’s overpayment recovery performance will be strengthened by using the full range of recovery methods set out in section 75 of the Social Security Administration Act 1992 (SSAA 1992), as amended by the Social Security Administration (Fraud) Act 1997 (the Fraud Act 1997). In particular, Bromley should recover RA overpayments direct from ongoing payments to landlords, register debts at the county court, make increased use of recovery through DWP benefits and consider making further use of a debt collection agency service.
1.45 In relation to new debt, we found Bromley was meeting 71% of its target; the major concern was old debt. We believe that the effectiveness of Bromley’s recovery effort is being hampered by the large amount of "old" debt not being pursued for repayment and just being carried forward each year. We would recommend that old debts are written off where all avenues of recovery have been explored and there is no reasonable prospect of recovery.
1.46 We have noted that Bromley has already identified some areas for improvement in its overpayment process. It has plans to review some of the issues raised in this report, including the revision of its client-side determination check sheet and the production of a daily report to check that all cases have been referred to the client-side for determination.
1.47 Our recommendations will:
· ensure more effective use of available fraud resources
· encourage better targeting, planning and control of fraud investigations
· provide greater assurance to the quality of fraud investigative work being undertaken
· ensure compliance with regulations in determining and notifying overpayments
· provide greater powers and flexibility in the recovery of HB debt
· encourage greater use of powers introduced by the Fraud Act 1997. We provide more details of this in Appendix C.
Making sure the strategy works
1.48 Bromley has a strong culture of probity at officer and Member level. It recognises the need to draw together its existing policies on probity into a single corporate fraud and corruption policy.
1.49 Bromley gains some assurance on the accuracy and integrity of the benefits system through Internal Audit (IA) work. It also has a process to ensure that Capita’s assessments are legally determined by Bromley staff in accordance with the regulations. However, its assurances are weakened by:
· lack of management checks by Capita and Bromley
· limited monitoring and validation by the client-side
· failure to maximise use of the management information available
· counter fraud organisation split between Capita and Bromley.
1.50 Bromley’s contract with Capita was one of the earliest benefit contracts awarded and all parties acknowledged it has some deficiencies, which Bromley aims to remedy when the contract is re-tendered from 2002. Bromley recognises its client-side staffing is under resourced and therefore unable to carry out sufficient independent monitoring of the contractor. Bromley adopts a partnership approach to working with Capita. The client-side manages the contract assertively and has secured some service improvements beyond the scope of the contract. Bromley told us that, following our inspection, it has increased the client side staffing by 50% and all staff investigating fraud have been brought into one team which reports to the client-side.
1.51 Bromley has effective working relationships with its HAs. It has SLAs with BA, Benefit Fraud Investigation Service (BFIS) and RS but these are not formally managed or monitored. Bromley and its partners need to use SLAs to ensure that all parties are fully co-operating and providing an effective barrier to prevent fraud entering the benefit system.
· Implementing our recommendations will build on current foundations to move the service forward to meet the challenges of Best Value
· ensure it has sufficient resources to monitor the benefits contract effectively
· provide greater management confidence in quality and delivery of benefit
· ensure a consistent approach to all aspects of fraud work.
1.52 On behalf of my inspection team I thank the Chief Executive, senior officers, staff of Bromley and the contractor for their support and co-operation during this inspection.
Susan Lingwood
Programme Manager