Appendix N:
The fraud investigation process and WBS claims

Background

This Appendix:

• covers the methods used by EP&NBC to establish if fraud or irregularity exists in claims referred to its Designated Fraud Officers (DFOs)
• examines WBS claims made from investigations carried out
• highlights scope for improvement on current practices.

Findings

Process

At the time of our inspection, the LA was employing 6.5 full-time equivalent members of staff in the E&O section. In addition to counter fraud work, the section is responsible for processing all overpayment recoveries. With the exception of one investigator, all staff are involved to varying degrees in this process.

A senior officer manages the work of the section as well as being involved in fraud investigation work, overpayments and appeals/reviews. The senior officer has a strong fraud background within EP&NBC, having set up the fraud operation in 1993.

All staff within the section, EP&NBC with the exception of the administration officer, are DFOs.

There was evidence of strong commitment and support from members and management for counter fraud work.

Good use is being made of the fraud computer system, which is networked within the fraud operation and uses the FMS to provide MIS information.

Information provided by the system will enable management and staff to target effectively those areas of potential fraud previously identified. This area of risk analysis is currently being pursued.

None of the fraud staff have been appointed as Inspectors.

Casework

In our sample of fraud files we found the standard of casework to be high. We identified a number of good practices, including:

• the standard of fraud referrals is high
• fraud paperwork is held securely in unique files
• investigations are well documented, including summary sheets
• cases are dealt with quickly
• the Potentially Violent register is maintained.

Clerical support

There was evidence of good clerical support available to the investigators, and of the general smooth running of the fraud operation. The officer responsible for this work has clearly defined duties within the fraud operation, which also includes an element of in-house investigation work.

Referrals

Fraud referrals are actively encouraged and received from all parts of the LA. These referrals are examined on receipt by the administration officer, with any inappropriate cases being returned to source with reasons.

The Figure below indicates the source of referrals received in 1998/99.

Source: BFI analysis

The Figure above highlights the very important part played by the Benefits section in the fraud referral process with 45.6% of all referrals received coming from this source. This confirms the high level of fraud awareness we found there. The volume of referrals received from the general public is low, with only 23 being received (2.9%).

Observations

These can be time-consuming, but should be regarded as a necessary part of quality investigation work. Observations in some appropriate cases are carried out, but are not a general feature of fraud investigations. There is some interaction with the BFIS team with regard to the sharing of this activity where practicable.

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Interviews

Although no IUCs take place as required, investigators do interview potential fraudsters. These take place either in the claimant’s home or on the LA’s premises. However, there was strong evidence within WBS files sampled that many cases, mainly residency inspired investigations, stopped short of a claimant, landlord or neighbour interview. This situation can weaken the quality of the investigation and could place some doubt on WBS claims.

Investigation staff have not been appointed Inspectors under section 110A of the Social Security Administration Act 1992. These powers would assist in carrying out fraud investigations, which include interviewing of landlords and employers.

Information and intelligence gathering

The team has access to a variety of intelligence sources, including information on taxi operators, further education awards and miscellaneous licence holders, Registry Office records, BA links, Driver and Vehicle Licensing Agency (DVLA) contact and access to Land Registry information. Additionally, there is much information and intelligence to be obtained from front line benefit assessors within the LA, which has been translated into a high volume of fraud referrals received from this area.

EP&NBC subscribes to both HBMS and NFI and is an active member of Local Authority Investigation Officers’ Group (LAIOG). This in our view further demonstrates a clear commitment by the LA towards countering benefit fraud.

Title of the fraud operation

The team is called the E&O section. The absence of the word ‘fraud’ in LA forms and external communication material could have the effect of diluting the deterrence value of the fraud operation.

Having commented on this issue, we commend the LA for the style and format of the internally prepared poster highlighting the benefit fraud hotline. There is no doubting the fraud message it gives.

Cessation or suspension of benefit

Before a fraud case is closed and WBS claimed, the file is passed to a nominated officer in the Benefits section who decides, in the light of the information obtained by the investigator, whether or not entitlement to benefit can continue. If benefit will be affected, the file is returned with written confirmation. If not, written advice is provided on file.

We consider that this process is a good safeguard and a good practice.

Documentation and WBS

All documentation relating to fraud investigation is held in its own file. Subsequent new fraud referrals for the same claimant are also included in this file under a different file number. Sampling revealed that all files held a referral form, investigation case notes form and a summary of investigation form. There was no evidence of any individual WBS1s in the files of WBS claims, which are a necessary audit trail requirement.

The SLA with BFIS allows for the exchange of information from the LA to BFIS via a series of SLA forms.

The SLA1 is used to advise BFIS that the EP&NBC fraud officer is conducting an investigation on a particular claimant. Although our case sample findings revealed that this process was not always being adhered to, the same sample revealed that there was no evidence of any investigation overlaps between the 2 operations.

Source: BFI sample

We accept that in the case of residency checks the SLA1 process will have little if any impact because of the immediate nature of the visit.

The SLA3 is used to support an IS WBS claim, and is sent to BA along with any supporting information to enable BA to adjudicate on the effect that the LA’s fraud investigation has on other Social Security benefits. Once decided, the adjudication officer should return the form to the LA, so that WBS can be claimed in relevant cases.

We sampled 29 cases where IS WBS had been claimed. Our findings are in the Figure below.

Source: BFI analysis

Although there were only 3 SLA3s in files to support the IS WBS claims, the other 26 cases had various forms of BA notifications ranging from compliment slips to BA memos. Although all had been stamped by the BA, 9 did not show the termination date of IS. This means that there was no audit trail to confirm that it was LA action that resulted in the cessation of the IS claim.

Whilst we were on-site, retrospective notification of IS termination dates were obtained for the 9 cases.

It is important for audit trail purposes that the SLA3 is used in every case to support an IS WBS claim.

Sampling and analysis of 37 WBS cases confirmed the following good practices:

• validity of WBS claimed was 73% correct
• the fraud case management system supported all WBS cases
• there was evidence of quality investigation work to WBS claim level in non-residency cases
• there was excellent timely action and turnover in all cases investigated
• file case notes were generally good
• content of fraud files were well laid out
• referral forms were well completed in every case
• good use was made of case closed summary sheets.

However, we also identified the following areas where improvements are required:

• there was no written evidence of managerial checks on fraud files
• there was little evidence of visits to employers, by investigators, to obtain wage details
• residency checks lacked a full quality investigation
• prosecution action was not considered in appropriate cases
• no IUCs were taking place.

Conclusions

We consider that the fraud operation in EP&NBC is structured in such a way to provide a reasonable service. However, recent long-term sickness absences have affected its capability. The many good practices in place can be enhanced even further by improving the quality of the investigations, and by taking on board all aspects of our recommendations.

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