Overpayments
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Source: BFI inspection assessment
For an explanation about how to read this radar chart see Strategic Management.
8.1 This section covers London Borough of Harrow’s efforts to reduce the loss to public funds from fraud and error in the benefits system.
8.2 When we first inspected London Borough of Harrow we were concerned at the inadequate resources for overpayment recovery. The council responded to a recommendation in our first report by setting up an overpayment team of 6 officers. We have reported on this in more detail in Strategic Management.
Overpayment policies and procedures
8.3 Local authorities should link their overpayment policies to the strategic vision for housing benefits administration, and underpin this by performance targets that give:
- a clear view of the desired outcome
- accountability for providing effective and efficient debt recovery.
8.4 London Borough of Harrow was not at Standard in this element as it did not:
- identify fraudulent overpayments as a priority for recovery
- include the use of blameless tenant legislation in its overpayments policy and strategy.
8.5 The authority had a comprehensive overpayments policy and strategy that:
- had been endorsed by Members
- summarised the legislation
- reflected the Department’s guidance on overpayments
- set out the service standards the authority expected in the administration of overpayments
- emphasised the need to maximise recovery while seeking to minimise hardship and respecting customers’ rights.
8.6 The overpayments policy and strategy was complemented by a set of procedures that explained how staff should identify, classify, notify and recover overpayments. Each member of staff had their own copy of these and staff involved in identifying and recovering overpayments had received effective training in all aspects of the overpayments process. Customer Advisors had also received comprehensive training on how to make arrangements for overpayment recovery and give advice on overpayment issues. However, the policy did not emphasise the need to prioritise the recovery of fraudulent overpayments.
8.7 In our first report we recommended that the council prioritises all fraud overpayments and seeks maximum recovery of fraud overpayments as quickly as possible. We were therefore disappointed that London Borough of Harrow did not prioritise the recovery of fraud overpayments as this can act as a deterrent against fraud.
8.8 The policy did not set out the use of blameless tenant legislation under the Social Security Administration Act 1992. This enables authorities to recover overpaid Rent Allowance from a landlord by making a deduction from HB paid to them in respect of another tenant. London Borough of Harrow told us that it had not used this method of recovery because its own research suggested that it was unworkable. Although we asked the council to provide us with evidence of its research, none was provided.
8.9 London Borough of Harrow would achieve Standard in this element if it:
- prioritised the recovery of fraudulent overpayments
- included the blameless tenant provisions in the overpayments policy and strategy and implemented its use.
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We recommend that London Borough of Harrow: |
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Identification of overpayments
8.10 The accurate and timely identification of overpayments is important as it:
- ensures the incorrect payment of benefit does not continue
- enhances the prospect of a successful recovery of the overpayment
- reduces the number of complaints and appeals.
8.11 London Borough of Harrow told us that it was not at Standard in this element because it did not process changes of circumstances and stop overpayments continuing, on average within 7 calendar days of receiving sufficient information to act on the error or changes of circumstances.
8.12 To achieve Standard, London Borough of Harrow must identify changes of circumstances quickly and stop any resulting overpayment. It must also identify any changes of circumstances that have been received and are still outstanding after 7 calendar days so that these can be dealt with. This is also covered earlier in the report under Processing of Claims.
8.13 From our sample of 10 claims that involved a change of circumstances we found that 43% took longer than 7 days to process.
8.14 If London Borough of Harrow regularly analysed all those cases that failed the target, it would be able to identify where there were delays in its processes, or where procedures were not being followed.
8.15 To achieve Standard in this element, London Borough of Harrow should:
- take action to stop overpayments continuing, on average, within 7 calendar days of it receiving sufficient information to act on changes of circumstances
- analyse changes of circumstances that take longer than 7 calendar days to process.
We recommend that London Borough of Harrow: |
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Calculation of overpayments
8.16 The accurate and timely calculation of overpayments is important to:
- provide a quality service to customers and landlords
- meet regulatory requirements
- give accurate management information on the value of the overpayment debt
- ensure that only the correct overpaid amount is recovered from the debtor
- enable the correct calculation of subsidy claims and avoid subsidy loss.
8.17 London Borough of Harrow was not at Standard in this element as it did not process the calculation of an overpayment, on average, within 14 calendar days of receipt of written notification of a change of circumstances. But there was evidence of good performance:
- Benefit Assessors used the correct effective date of change in every case in our sample when calculating the overpayment
- customers were always invited to supply evidence to establish if there was underlying entitlement to benefit
- uncashed cheques were always taken into account in all appropriate cases in our sample when calculating the overpayment.
8.18 Before an overpayment of benefit is calculated the authority must have first established if there was any underlying entitlement to benefit during the period of the overpayment. If there is any underlying entitlement, it will affect the final amount of the overpayment.
8.19 All benefit staff had been made aware of the requirement to assess underlying entitlement when calculating an overpayment of benefit. London Borough of Harrow invited customers to provide information about their circumstances during the overpayment period. We saw several letters to customers asking them to supply evidence in support of a further claim for benefit.
8.20 An overpayment must be reduced by the value of any uncashed cheques. London Borough of Harrow had procedures in place for identifying uncashed cheques and reduced overpayments by the value of these. It also had procedures for referring cases to the Investigations team where cheques were not being cashed regularly. This is good practice. An uncashed cheque suggests that the customer may no longer be living at the address or may have undeclared income or capital. Both conditions should trigger a referral to the Investigations team.
8.21 To achieve Standard, London Borough of Harrow should process the calculation of an overpayment, on average, within 14 calendar days of receipt of written notification of a change of circumstances. From our sample of 30 cases we established that the average time taken to process the calculation of an overpayment was 78 days.
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We recommend that London Borough of Harrow: |
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Decisions on recoverability
8.22 Regulations 98 and 99 of the Housing Benefit (General) Regulations 1987 and regulations 83 and 84 of the Council Tax Benefit (General) Regulations 1992, are crucial because they:
- govern the classification and recovery of overpayments
- affect customers and the finances of the authority
- affect subsidy claims under the Security Against Fraud and Error scheme.
8.23 London Borough of Harrow was above Standard in this element. The authority always considered whether an overpayment was caused or contributed to by an official error and assessed the recoverability of official error overpayments in accordance with the Regulations. Our sampling found that decisions on the recoverability of the overpayment and whether the overpayment should be recovered were recorded on file.
8.24 When a Benefit Assessor decided that an overpayment was non-recoverable it was submitted for write-off. Performance Standards requires local authorities to refer to the Department’s guidance when making decisions on recoverability and from whom it should seek recovery. Staff told us that they did this by using internal documents and procedures. The Benefit Assessors recorded their considerations and decisions within the notes section of the benefits IT system and when the overpayment decision letters were generated they were passed to the Overpayments team who checked the following:
- compliance with Schedule 6 of the Housing Benefit (General) Regulations 1987 and Council Tax Benefit (General) Regulations 1992
- factual correctness of the assessment
- that the debt was recoverable
- that no appeal was outstanding
- the mental or physical health of the customer to ensure that the customer would be able to understand and deal with the overpayment letter
- the customer’s financial circumstances
- that it was going to be cost-effective to pursue recovery of the overpayment
- if the customer had died, that the customer’s estate had sufficient funds available to repay the overpayment.
8.25 If the Overpayments Team Leader decided that the decision to recover the overpayment required further reconsideration, the overpayment was referred back to the Assessment team through one of the Assistant Benefit Managers (Assessment).
8.26 Any overpayment that the authority decided not to recover or considered non-recoverable was submitted for write-off.
8.27 London Borough of Harrow had a procedure to reopen debts that had previously been written off. An example of this is where an overpayment had been classified as local authority error and written off as unrecoverable. If subsequently the overpayment were found to be the result of fraud, the authority would reopen the debt and record it on the sundry debtors system to pursue recovery.
Decision notices
8.28 Regulation 77(1) of the Housing Benefit (General) Regulations 1987 prescribes that local authorities shall notify in writing any person affected by a decision made by it under these Regulations. Decision notices must contain a statement of the matters as set out in regulation 77(1) and Schedule 6 to the Housing Benefit (General) Regulations 1987. Regulation 67 and Schedule 6 to the Council Tax Benefit (General) Regulations 1992 has like provisions in respect of CTB decision notices.
8.29 London Borough of Harrow was not at Standard in this element, because it did not always issue overpayment decision notices to persons affected by its decision.
8.30 The overpayment decision letters generated by the benefits IT system did not always record the reason for the overpayment correctly. To rectify this, overpayment decision letters were suspended and recreated on the document image processing system so that they included the correct reason for the overpayment. In 5 of the 30 cases we sampled no overpayment decision letter was sent to either the customer or the landlord. The letter from the benefits IT system had been suspended but the replacement letter had not been issued.>
8.31 London Borough of Harrow would achieve Standard in this element if it ensured that overpayment decision letters were sent to persons affected by the decision.
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We recommend that London Borough of Harrow: |
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Recovery of overpayment debt
8.32 The efficient and effective recovery of overpayments is important as it:
- deters fraud and error
- reduces losses to public funds
- is a visible demonstration of the local authority’s commitment to accuracy and propriety
- is a source of revenue for the local authority.
8.33 London Borough of Harrow was not at Standard in this element because it did not:
- set a budget to achieve upper quartile performance against other English authorities
- use all available recovery methods
- actively pursue recovery of debts.
8.34 Staff told us that the Overpayments team always negotiated recovery rates based on the individual circumstances of the customer and took account of potential hardship.
8.35 Rent Rebate overpayments were only transferred to the rent account if there was a credit on the account.
8.36 The Department’s
guidance for calculating performance for the Best Value Performance
Indicator 79b, is found in HB/CTB adjudication circular
A3/2002, the guidance says that:
This indicator measures the value of cash recovered during the period being reported on as a percentage of the value of recoverable overpayments identified by the local authority on or after 1st April 2000.
8.37 In 2000/01 London Borough of Harrow did not report on performance for Best Value Performance Indicator 79b because it believed that the information its benefit IT system produced was unreliable. For 2001/02 the authority agreed with its external auditor that it could calculate performance against this indicator in a different way to that specified in the Department’s guidance. For 2001/02 London Borough of Harrow recorded that it had recovered 29% of the overpayments that had been created since April 2000.
8.38 We were provided with a copy of the December 2002 monthly service plan monitoring report. This report stated that 52% of overpayments had been recovered since April 2000 and that 62% of overpayments created since April 2002 had been recovered.
8.39 While we were on-site we asked London Borough of Harrow to supply us with the information it used to calculate the percentage of recoverable overpayments recovered. The authority told us that it had recently acquired another report for extracting overpayment information from its benefits IT system. Figure 8.2 provides details of the new information.
Category |
2000/01 £ |
2001/02 |
2002 – |
| Overpayments identified in the year |
1,362,226 |
982,864 |
1,238,296 |
|
Overpayments not recovered in previous year |
Not Applicable |
760,364 |
1,037,153 |
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Total |
1,362,226 |
1,743,228 |
2,275,449 |
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Recovered in current year |
601,862 |
706,075 |
804,886 |
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Recovery as a % of total |
44.2 |
40.5 |
35.4 |
Source: London Borough of Harrow
8.40 Figure 8.2 shows that in 2001/02 the London Borough of Harrow recovered 40.5% of its recoverable overpayments that had been created since April 2000 against a previously reported figure of 29%.
8.41 The overpayments policy and strategy stated that all possible means of recovery should be used. In practice the only methods that were being used prior to our on-site inspection were:
- recovery from ongoing benefit
- recovery by sundry debtors invoice
- limited recovery from other social security benefits
- recovery from the rent account.
8.42 When we arrived on-site the authority showed us detailed procedures for referring a debt to the County Court. They also had 3 overpayments that had been prepared to refer to the court. These were subsequently referred and accepted by the court. London Borough of Harrow told us that this method of recovery would be introduced and form part of its recovery procedures.
8.43 Figure 8.3 shows the amount of HB overpayments recovered by each method available. Since the authority only began using legal proceedings under section 75 of the Social Security Act 1992 when we arrived on-site, no overpayments had been recovered using this method.
Recovery method |
Used Yes/No |
Total amount recovered (£) |
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2000/01 |
2001/02 |
2002/03 – |
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From ongoing HB |
Yes |
372,986 |
428,512 |
378,513 |
Sundry debtor invoice |
Yes |
188,678 |
233,724 |
380,567 |
From ongoing social security benefit |
Yes |
2,706 |
3,427 |
5,036 |
From payments to landlords (section 75 of Social Security Act 1992) |
No |
Nil |
Nil |
Nil |
Legal proceedings (section 75 of Social Security Act 1992) |
Yes |
Nil |
Nil |
Nil |
Legal proceedings in full |
No |
Nil |
Nil |
Nil |
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Recovery by Housing Management after transfer to rent account |
Yes |
37,492 |
40,412 |
40,770 |
|
Debt collection agency |
No |
Nil |
Nil |
Nil |
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Total debt collected |
|
601,862 |
706,075 |
804,886 |
Source: London Borough of Harrow
8.44 In our first report we recommended that London Borough of Harrow should pursue the recovery of overpaid HB after the customer had been issued with an invoice and final reminder. The authority implemented this recommendation while we were on-site.
8.45 Staff told us that recovery from payments to landlords, under section 75 of the Social Security Act 1992, would be investigated during 2003/04. While we saw this as a positive step we were disappointed that:
- recovery using debt collectors had not been considered
- no overpayments had been referred for legal action prior to County Court action
- only 25 overpayments were being recovered from other social security benefits.
8.46 All outstanding overpayments were recorded on the benefits IT system if the customer continued to receive benefit or the sundry debtors IT system if the customer no longer had a claim for benefit. Individual debt accounts were held on the sundry debtors IT system and were easily identifiable from other debts to the authority. There was a direct interface between the benefits IT and the sundry debtors IT systems with accounts updated overnight. There was a procedure for monitoring debtor accounts and this was documented.
8.47 When an overpayment of CTB was calculated by the benefits IT system it was transferred to the Council Tax system and automatically recovered through adjustments to the Council Tax account. An overpayment decision letter was generated from the benefits IT system the following day.
8.48 The recovery of all recoverable overpayments should be actively pursued, providing it is economical to do so. We identified some good working practices by the Overpayments team who monitored debts either on a weekly or monthly basis depending on the type of arrangement the debtor had made. There were good procedures and work routines to ensure that debtors were contacted within 3 days of a payment date if a payment was missed. Figure 8.4 provides details of the authority’s outstanding HB debt.
2000/01 |
2001/02 |
2002/03 – |
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Rent Allowance on benefits IT system |
518,853 |
488,044 |
595,270 |
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Rent Rebate on benefits IT system |
204,491 |
268,908 |
299,940 |
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HB on sundry debtors system |
1,700,000 |
1,949,967 |
2,116,388 |
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Total |
2,423,344 |
2,706,919 |
3,011,598 |
Source: London Borough of Harrow
8.49 Overpayments staff told us that the higher rate of recovery was used to recover overpayments caused by fraud. Our sampling confirmed that recovery rates were applied in line with legislation and guidance.
8.50 To achieve Standard in this element, London Borough of Harrow should:
- set a budget to achieve upper quartile performance against other English authorities
- use all available recovery methods
- actively pursue recovery of debts.
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We recommend that London Borough of Harrow: |
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Classification of overpayments
8.51 The correct classification of overpayments is important as it:
- affects the level of subsidy attracted on HB and CTB payments
- can affect the level at which the recovery rate is set
- provides an indication of levels of fraud and error
- affects claims under the Security Against Fraud and Error scheme.
8.52 London Borough of Harrow was not at Standard in this element because it did not correctly classify overpayments. From our sample of overpayments, 35% had been incorrectly classified as claimant or other error, when they should have been classified as local authority error. As local authority error overpayments attract no subsidy and customer and other error overpayments attract subsidy of 40%, these errors meant that London Borough of Harrow had over claimed subsidy. While we were on-site we brought our findings to the attention of the authority who agreed with our findings and corrected the claims accordingly.
8.53 Figure 8.5 provides details of the classification of HB overpayments as provided by the London Borough of Harrow.
|
Category |
2000/01 |
2001/02 |
2002/03 – |
|
Claimant error/other |
949,142 |
816,675 |
1,030,464 |
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Departmental error |
0 |
0 |
0 |
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Local authority error |
224,337 |
93,387 |
144,700 |
|
Fraud |
331,696 |
99,429 |
74,349 |
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Total |
1,505,175 |
1,009,491 |
1,249,513 |
Source: London Borough of Harrow
8.54 London Borough of Harrow’s delay in dealing with notified changes of circumstances contributed to a 35% increase in local authority error overpayments between 2001/02 and 2002/03. Our sampling identified that 35% of the overpayments that had been incorrectly classified as claimant error should have been classified as local authority error. This means that the increase in local authority error overpayments was higher than the 35% reported by the authority.
8.55 A high proportion of overpayments had been incorrectly classified. The level of incorrect classification of overpayments should have been identified and corrected by London Borough of Harrow. Its failure to identify these errors can be attributed to the insufficient level of management checks that the authority performed. We have already made recommendations relating to management checks in Strategic Management and Processing of Claims.
8.56 To achieve Standard in this element, London Borough of Harrow should ensure that all overpayments are classified correctly.
We recommend that London Borough of Harrow: |
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Management of debt
8.57 Local authorities should attempt to recover all recoverable overpayments as quickly as possible to manage debt effectively. Managers should:
- ensure that recovery action is taken wherever possible
- monitor the amount of outstanding debt
- seek to keep the amount of outstanding debt as low as possible
- review working practices for continued efficiency.
8.58 London Borough of Harrow was not at Standard in this element. It had procedures in place to collect overpayments but it had no strategy in place to reduce the level of outstanding debt or reduce the age of the debt and it did not regularly report its performance in recovering overpayments to Members. We have already made recommendations about reporting to Members in Strategic Management.
8.59 Figure 8.6 provides an analysis of the aged debt on the sundry debtors system IT system for London Borough of Harrow.
|
Year |
Number of |
Amount |
|
Pre-June 1998 |
383 |
236,799 |
|
June 1998 – March 1999 |
407 |
156,136 |
|
April 1999 – March 2000 |
412 |
226,416 |
|
April 2000 – March 2001 |
497 |
427,932 |
|
April 2001 – March 2002 |
463 |
344,896 |
|
April 2002 – 16 February 2003 |
794 |
724,209 |
|
Total |
2,956 |
2,116,388 |
Source: London Borough of Harrow
8.60 Although London Borough of Harrow regularly produced this information it did not use it to manage or reduce its aged debt.
8.61 In our first
report we recommended that resources be applied to the design and
development of management information to show the level of
overpayments created and the amount being recovered. While we were
on-site we requested this information which was eventually provided
after some considerable work by London Borough of Harrow staff. This
type of information should be readily available so that management can
make informed decisions to improve recovery.
8.62 London Borough of Harrow had a comprehensive write-off policy with appropriate delegations. The overpayment policy and strategy stated that the authority recognised that where a recoverable overpayment was deemed to be unrecoverable, the regular write-off of debts was good business practice.
8.63 London Borough of Harrow’s overpayment policy and strategy stated that the authority would:
seek to minimise the cost of write-offs to local Council Taxpayers (sic) by taking all necessary actions to ensure that debts are proven and actively pursued.
8.64 London Borough of Harrow did not take all necessary action to recover overpayments of HB. However, all proven, recoverable debts, which were considered appropriate for write-off, were agreed and authorised in accordance with the council’s corporate governance rules which were as follows:
- debts below £3,500 had to be supported for write-off by the Housing Benefits Manager and the Head of Financial and Exchequer services and then after consideration of an outline report on each debt, authorised by the Chief Financial Officer
- debts between £3,501 and £6,999 had to be supported for write-off by the Housing Benefits Manager and the Head of Financial and Exchequer services and then after consideration of a detailed report on each debt, authorised by the Chief Financial Officer
- debts of £7,000 and over had to be supported for write-off by the Housing Benefits Manager and the Head of Financial and Exchequer services followed by the Chief Financial Officer after consideration of a detailed report on each debt by the Chair of the council’s Scrutiny Committee.
8.65 Senior officers told us that recoverable overpayments were only recommended for write-off in exceptional circumstances and often only after a period of 6 years had passed since the debt was raised.
8.66 London Borough of Harrow would achieve Standard in this element if it:
- developed a strategy and set targets to reduce the level and age of its debt.
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We recommend that London Borough of Harrow: |
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