Appendix I:
Cheque dispatch process

At initial meetings with EP&NBC, the LA told us that it was aware of a lack of security in some of the procedures associated with the dispatch of HB cheques. We agreed that we would observe the process during our visit and make recommendations for improvement if appropriate. If these are adopted in conjunction with the LA’s intention to promote the use of BACS, the situation will be considerably improved.

The current cheque dispatch process involves activity in 4 sections of EP&NBC’s offices within the Civic Centre. These sections are:

• IT
• IA
• HB and CTB
• post dispatch.

To assess the security of the cheque dispatch process, we observed it on Friday, 4 June.

General organisation

The main responsibility for the dispatch of the cheques rests with one member of staff and a supervisor from the main Benefits section. There is also involvement from at least 2 members of the IT section and a member of the IA section. The following paragraphs provide some detail behind the process.

Cheque distribution

Blank cheques are provided by IA. A technician from the IT section signs for a batch of cheques. 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 XXXX. The computer manager also advised that IA carries out spot checks on the stock of cheques.

We consider that these processes are insecure. XXXXX XXXXX XXXXX XXXXXX 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.

Production of cheques

Cheques are produced on a daily basis. The IT section is notified by IA of the number of cheques to be produced. The machine is then programmed to print the benefit cheques. There are 2 blank cheques left at the start of the print run to ensure alignment. After printing, a second officer then takes the cheques to IA.

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 XXXX.

IA role

On receipt of the printed benefit cheques from the IT section, IA carries out a series of processes and checks. These are:

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• checking the chronological sequence of the cheque run
• checking dates, and names and addresses for any duplicates mismatches etc
• selecting a few cases for full check against claim file. An audit checklist is used which considers areas such as claimant’s signature, proof of income etc.

After the completion of the prescribed checks, IA then passes the cheques to either the IT section or directly to the Benefits section. A major run is done each Thursday when the bulk of the cheques are issued.

Because of the high volume the cheques are passed back to IT section to separate by machine. This process is known as ‘bursting’. Every other day the cheques are passed direct by IA to the Benefits section.

We consider that this level of checking is good practice, but believe that it is inappropriate for IA to carry out this role. This level of involvement again compromises its position in being able to independently audit the process. This level of checking would be best placed within the benefit arena. XXXXX XXXXX XXXXX XXXXX XXXXX XXXXX XXXXX XXXXX XXXXX XXXXX XXXXX XXXXX XXXXX XXXXX XXXXX XXXXX XXXXX XXXXX XXXXX.

Action when cheques are returned from IA

As described in the previous section, IT only receives the cheques back from IA when the major cheque run is carried out each Thursday. When the cheques are returned from IA to the IT section a notebook record is maintained. Details are kept of the:

• sequence number of the first and last cheque
• time received in the section
• signature of the person who takes the action
• signature of the person who takes receipt of the cheques in the Benefits section.

The reason this record is maintained is to monitor the time taken to deal with this part of the process. However, it is a good example of maintaining the security of the process when cheques have to be passed between officers.

Action on Benefits section when cheques are returned from IA

The Benefits section receives all cheques due for dispatch either from IA or IT section as detailed above. It then amalgamates the relevant entitlement notices with the cheques for dispatch, and passes them to the post room. 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 XXXXXX.

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Conclusions

EP&NBC has poor supervisory and management controls over the cheque dispatch process. There is a serious risk of internal fraud throughout the whole process. Encouragingly the LA has already recognised this weakness and is anxious to make the process more secure. We consider that it could be improved by:

• creating a new post within the IT section to amalgamate the entitlement notices with the cheques for dispatch. This nominated officer should not be involved in the initial printing of the cheque run or involved in benefit assessment duties
• ensuring that those staff involved in the process sign for cheques allocated to them at each stage of process
• improving management controls by instigating a series of supervisory and management checks within the benefits domain
• ensuring that the independence of IA is maintained by removing it from the process. An independent system review of the process should be part of the ongoing audit systems programme.

* Highlighted parts of this report are omitted from the published version as they may assist fraudsters or may contain confidential commercial information.