Summary
Introduction
1.1 In 1998/99 the Department of Social Security (DSS) spent almost £96 billion 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) amounted to over £13.7 billion of government expenditure on benefits paid to around 4.5 million people. Benefits expenditure is forecast to increase to over £108 billion by 2001/02, over £17 billion of which will be HB and CTB.
1.2 Latest estimates published in the National Housing Benefit Accuracy Review 1997/98 suggest that around £840 million is lost each year as a result of fraud and error in the HB system. The Review suggests that around 16% of claimants are receiving an incorrect award of HB.
1.3 In March 1999 the government published its strategy for tackling fraud and improving security within DSS and LAs – A new contract for welfare: SAFEGUARDING SOCIAL SECURITY. The document also explains how DSS will shift the emphasis from detection to prevention of fraud and error in the social security system. The strategy calls 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
· making sure things work – by monitoring progress, evaluating the strength of defences and adjusting them in the light of experience.
1.4 The Benefit Fraud Inspectorate (BFI) is an integral part of this strategy. Through our reports on LAs and DSS agencies we:
· identify areas where improvements can be made to benefit administration to raise standards
· make recommendations to address weaknesses
· identify and spread good practices.
1.5 This report follows the BFI on-site inspection of Congleton Borough Council (Congleton) between October and November 1999.
Scope of our work
1.6 During the on-site phase we undertook detailed analysis of the benefit administration and counter fraud operations. The work included undertaking samples, interviews and observations in a wide variety of activities:
· post receipt, sorting and distribution
· the visiting programme
· new and renewal claims
· cheque dispatch
· internal reviews and review boards
· overpayments
· IT security
· fraud investigation.
1.7 Within these areas we covered the management of the day-to-day work and considered the longer-term focus of management planning.
Background
1.8 Congleton is a non-metropolitan small LA in south-east Cheshire. Its catchment area covers the centres of Alsager, Congleton, Middlewich, Holmes Chapel and Sandbach together with a large rural hinterland.
1.9 A significant issue for the inspection was that the whole of Congleton’s housing stock had, in March 1998, been transferred to a private Housing Association, Dane Housing (Congleton) Ltd (referred to after this as Dane).
Performance against statutory targets
1.10 Congleton’s performance with respect to the determination of new HB and CTB claims within 14 days of receipt of all information is shown in Figure 1.1.
| Fig. 1.1: Congleton’s 14-day performance in HB claims |
|||
|
|
1997/98 |
1998/99 |
BFI sample |
| Congleton |
95% |
88% |
47% |
| GB average |
79% |
Data not available until May 2000 |
N/A |
Source: DSS (from LA return) and BFI sampling
1.11 Figure 1.1 shows that Congleton's performance fell between 1997/98 and 1998/99. The 14-day turnaround time has declined further, following the implementation of the Verification Framework (VF) on 1 February 1999. Our sampling of claims received since that date indicates that current performance is around 47%. Congleton attributes this drop in performance completely to implementing VF, but we identified a number of ways in which the effectiveness of its benefit administration could be improved. These are discussed under Getting it right.
Weekly Benefit Savings (WBS)
1.12 The fraud team comprises 3 full-time equivalent staff, which includes a clerical assistant who is responsible for carrying out most of the visits undertaken by the team.
1.13 The LA claims to have achieved its WBS targets for the last 3 years. However, the claimed achievement fell from 281% in 1997/98 to 198% in 1998/99.
| Fig. 1.2: WBS achievement against threshold – 1996/97 to 1998/99 |
|||
|
|
1996/97 |
1997/98 |
1998/99 |
| Threshold (£) |
£72,988 |
£66,229 |
£71,279 |
| Achievement (£) |
£100,564 |
£186,039 |
£140,851 |
| % of threshold |
138% |
281% |
198% |
Source: Congleton
1.14 Congleton's total WBS claim for 1996/97 to 1998/99 is split as illustrated in Figure 1.3. As expected, the transfer of the majority of the LA rent rebate caseload to Dane is reflected in the significant fall of WBS achieved for rent rebate benefit.
| Fig. 1.3: WBS by category – 1996/97 to 1998/99 |
|||
| Benefit type |
1996/97 |
1997/98 |
1998/99 |
| Rent allowance |
£54,481 (54%) |
£87,346 (47%) |
£104,983 (75%) |
| Rent rebate |
£29,758 (30%) |
£60,580 (33%) |
£1,470 (1%) |
| Council Tax Benefit |
£14,642 (15%) |
£26,489 (14%) |
£24,822 (18%) |
| Income Support |
£1,683 (2%) |
£11,624 (6%) |
£8,338 (6%) |
| Other benefits |
Nil (0%) |
Nil |
£1,238 (1%) |
| Totals |
£100,564 (100%) |
£186,039 (100%) |
£140,851 |
Please note that totals may be affected by rounding.
Source: Congleton
1.15 There are no reliable estimates for the current level of error or fraud for Congleton. The National Housing Benefit Accuracy Review 1997/98 indicated that 5.9% of cases nationally were either confirmed as fraudulent or had a strong suspicion of fraud. If these percentages were applied to Congleton's 1998/99 HB spend of around £6.5 million, it would equate to £384,000. However, Congleton's management advised that they were involved in the most recent National Housing Benefit Accuracy Review, which identified local fraud at £89,000 for Congleton.
Main conclusions and recommendations
1.16 We conclude that Congleton does not give enough priority to administering HB and CTB and deterring benefit fraud. A lack of management control in benefit administration arena and an absence of detailed checking in overpayments and fraud result in low levels of management assurance. Congleton, to its credit, was one of the first LAs to commit to VF. Congleton’s work in this area is effective, but inefficiencies in benefit operations lead to work not being prioritised effectively.
1.17 We have set out below our main findings and conclusions using the government’s fraud strategy.
Getting it right
1.18 Congleton is committed to preventing fraudulent claims entering the system. The implementation of VF illustrates that commitment, and our checks confirmed a satisfactory level of assurance in this area. In most cases Congleton:
· requests that claimants produce enough evidence to prove they qualify for benefit before payment is made
· checks claims and supporting information, based on a sound understanding of the requirements of VF
· brings together all the information available at the point where the claim is being checked, ensuring first that information is correctly and accurately verified before the case is considered for assessment
· makes sure that it informs claimants of the outcome of all determinations.
1.19 We found:
· deficiencies in the current claim form
· delays in the area of benefit processing
· poorly targeted management checks
· the incorrect application of VF risk groups in a small number of cases
· inefficiencies in post sorting and distribution
· problems with the dated microfilming system
· weaknesses in a number of filing practices.
1.20 Congleton makes good use of the Remote Access Terminal (RAT) to confirm entitlement to Income Support (IS) and Income-based Jobseeker’s Allowance (JSA(IB)) in both new and renewal claims.
1.21 Congleton’s efforts to secure the gateway are hampered by a failure to secure effective working relationships with local Benefits Agency (BA) offices, with minimal contact on an informal basis.
1.22 Congleton successfully transferred its council housing stock to Dane, but we have concerns about some aspects of direct payment to Dane and frequency of payment.
1.23 We conclude that the process for cheque dispatch is in the main secure.
1.24 Although we identified the use of the Rent Officer (RO) to be effective, we have some concerns around the turnaround times, and the use of management information in this area.
1.25 The end-to-end process time for new claims has deteriorated significantly recently, which Congleton attributes to the implementation of VF.
1.26 Our recommendations in this area are aimed at improving the security at the start of claims, by the collection of better quality information through improved claim forms. By removing duplication and inefficiency, and freeing up the maximum amount of resource to concentrate on securing the gateway, Congleton will ensure that the right money goes to the right person at the right time.
Keeping it right
1.27 Congleton does not make enough effort to ensure that the correct amount of benefit continues to be paid. It has not:
· designed operational procedures that deter 'in claim' fraud and error from entering into the system, and does not align benefit periods to areas of highest risk or likely changes of circumstances
· focused resources sufficiently on areas where the system is weakest, to target regular checks designed to keep payments right
· used information proactively. Congleton does very little risk assessment, and does not target work to its greatest risks
· ensured that high quality referrals are made to fraud investigators
· informed BA of changes of circumstances that are notified direct to the LA
· gathered meaningful information to assure management that the whole operation is secure and effective.
1.28 We note that Congleton verifies renewal claims to a good standard and does some positive work in the follow-up action on failed renewals. But it needs to commit more appropriate resources to identify and deal with changes of circumstances.
1.29 We identified some significant concerns on the notices of determination used by Congleton. We found evidence of a number of omissions in information provided to claimants.
1.30 There are a number of delays in the internal review and review board processes. We identified some good practice and some areas for improvement here.
1.31 We highlight unlawful action where Congleton has extended benefit periods beyond the 60-week maximum and ended benefit on IS and JSA(IB) claims before getting the relevant confirmation from BA.
1.32 Congleton has introduced the new Do Not Redirect post scheme but was not using it properly.
1.33 Within this section we identified good use of the external data matching services.
1.34 Our recommendations in this area are intended to balance Congleton’s current commitment to getting it right with ensuring that it commits adequate resources so that benefit continues to be paid correctly.
Putting it right
1.35 Congleton has made least effort in the area of putting it right. It does not ensure that:
· all fraud investigators are well trained and provided with adequate equipment
· investigators pass on information on areas of high risk to others, so that future efforts can be targeted where the greatest risks lie
· management information is used to inform risks or target work effectively
· adequate publicity highlights the efforts of fraud investigators
· the wide range of sanctions are applied to people who steal from the benefit system
· the correct classification of overpayments is applied.
1.36 Congleton makes significant efforts to recover overpayments, but with some delays in the process and weak provision of management information. All but one of the cases we sampled was subject to some recovery action. We found incidences of overpayments that had been incorrectly classified as claimant error and fraud.
1.37 We identified significant weaknesses in the management of the fraud section. We are very concerned about the validity of all the WBS claims we sampled. In all our samples we found investigation was generally poor.
1.38 Congleton fails to use the range of sanctions available to it. The current prosecution policy and application of administrative penalties are unworkable as they are not supported with the relevant infrastructure
1.39 Although there has been some contact, joint working with Benefit Fraud Investigation Service (BFIS) colleagues is rare. There is much scope for improvement here.
1.40 We have made recommendations that, when implemented, should lead to a more tightly managed fraud investigation operation, better placed to support Congleton’s commitment to fighting fraud through the use of sanctions such as prosecutions and administrative penalties.
1.41 Our recommendations will also provide assurance that the process of overpayment classification and recovery is supported by thorough management checking and Management Information Statistics (MIS).
Making sure things work
1.42 We conclude that Congleton’s lack of effort in providing management assurance at all levels of the reporting chain results in minimal commitment to making sure that the overall strategy works. Congleton does not:
· plan its work effectively, leading to a reactive approach to problems
· make management information available to inform decisions
· set clear objectives for countering fraud
· ensure that the counter fraud effort will be measured effectively
· effectively target management checks, missing important areas such as overpayments and fraud
· consistently implement audit recommendations
· promote the concept that countering fraud is everyone’s responsibility by making the public aware that cheating the benefit system is a crime.
1.43 Congleton made a number of efforts to publicise changes prior to the implementation of VF. We identified, however, that the current arrears situation is hindered by a short-term approach to planning rather than a longer-term approach.
1.44 Congleton does not work closely with BA, but says it intends to do so in the near future.
1.45 Congleton has a poor record of planning, which is hindered by the lack of management information available to inform choices.
1.46 Although we identified many management checks in the area of new and repeat claims, we noted that these were poorly targeted and avoided many important areas such as overpayments and fraud.
1.47 Congleton fails to understand the impact of its counter fraud activity. It fails to set clear objectives for countering fraud and makes little effort to measure the impact of its counter fraud activity.
1.48 Despite input from Internal Audit (IA), we established that senior management could take little assurance from their work, as many recommendations remain unactioned.
1.49 Our recommendations, when implemented, should lead to a planned approach to clearing the current backlog of work, with more structured management checking of benefit and fraud issues. Our recommendations will provide greater assurance at senior management level that audit recommendations are actioned and that Congleton makes enough effort to work closely with BA.