Introduction

1.1  The Social Security Departmental Report, The Government’s Expenditure Plans 1999/2000, estimated that in 1998/99 Local Authorities (LAs) paid £13.7 billion as Housing Benefit (HB) or Council Tax Benefit (CTB). The National Housing Benefit Accuracy Review 1997/98 estimates that 16% of HB claimants are receiving the incorrect amount of HB through fraud and error, at an estimated annual cost to the taxpayer of £840 million.

1.2  A new contract for welfare: SAFEGUARDING SOCIAL SECURITY set out the government’s strategy for reducing 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
• making sure things work – 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 of Social Security (DSS) agencies we aim to:

• identify areas where improvements can be made to benefit administration to raise overall standards
• make recommendations to address weaknesses
• identify and spread good practices among administrators.

1.4  This report on Hart District Council (Hart DC) follows our on-site inspection conducted from 10 to 28 January 2000.

Main conclusions and recommendations

1.5  Hart DC demonstrates some good working practices, but the efficiency and security of the benefits system is compromised by a lack of a counter fraud strategy, by its failure to put an effective fraud team in place and by a number of significant weaknesses in benefits administration.

1.6  The LA underwent a difficult period during 1999, from which it has yet to fully recover. For a period of 18 months, Hart DC had been working towards outsourcing its benefit administration. The planned handover was scheduled for July 1999 but negotiations with the contractor broke down at the last moment. Further consideration was given to contracting out, but a final decision to retain services in house was agreed with Department for the Environment, Transport and the Regions in October. As a result, many of the key processes had been allowed to lapse, there was a high turnover of staff and a drop in morale of staff who remained behind.

1.7  Other legacies of the compulsory competitive tendering episode include:

• unsuccessful use of agency staff on fraud work
• failure to carry out ongoing management checks
• changes in overpayment responsibility (resulting in a failure to pursue overpayments)
• failure to update procedural guidance
• failure to update the benefit computer system.

1.8  Whilst some high-level fraud policies have now been agreed, Hart DC has not given sufficient attention to developing the detail of its counter fraud work. Hart DC Members approved a corporate approach to fight fraud and corruption in April 1996. XXXXX XXXXX XXXXX XXXXX XXXXX XXXXX XXXXX XXXXX XXXXX XXXX XXXXX XXXXX XXXXX XXXXX XXXXX XXXXX XXXXX XXXXX XXXXX .

1.9  External Audit (EA) produced a report on countering HB fraud in September 1998. This report provided a number of recommendations that would have improved security of the system. We found that few of the recommendations had been implemented at the time of our inspection. In addition, Internal Audit (IA) produced a report on Hart DC’s fraud activities in1999. Not all of the recommendations put forward in this report had been put in place. We endorse the comments made by EA and support its recommendations in this report. These recommendations are set out in more detail at Appendix D.

1.10  We have set out below, against the aims of the government’s fraud strategy, our main findings and conclusions following the inspection.

Getting it right

1.11  Our inspection found there are weaknesses in the processes Hart DC uses to secure the gateway to benefit. The interface with claimants is very poor. Benefit staff only make contact with claimants by telephone or, sometimes, in meetings made by appointment. Counter staff, who are responsible for front line contact with benefit callers, have limited benefits expertise. Post opening arrangements are insecure.

1.12  Hart DC does not require sufficient evidence to XXXXX XXXXX XXXXX XX XXXX XXXXX XXXXX XXXXX XXXXX XXXXX XXXXX XXXXX XXXXX XXXXX XXXXX X XXXXX XXXXX XXXXX XXXXX XXXXX XXXXX XXXXX XXXXX XXXXX XXXXX XXXXX XX XXXXX XXXXX XXXXX XXXXX XXXXX XXXXX XXXXX XXXXX XXXXX XXXXX XXX.

1.13  It is not clear from benefit files when original documents have been produced to support claims because staff copying them do not mark the copies as originals seen. No record is therefore kept to provide assurance to management or audit that evidence was verified.

1.14  Staff need more guidance in some areas on the verification of evidence. Although at the time of the inspection Hart DC had no backlog of claims awaiting action, for which we commend it, this has not always been the case.

1.15  Hart DC does little to deter fraud entering the system by publicising its counter fraud activities.

1.16  Hart DC pays the majority of rent monies due direct to Hart Housing Association (Hart HA). We are not satisfied, however, that the authority is complying with legislation by considering referral to the Rent Officer (RO) in all cases.

1.17  Our main recommendations in this area are that Hart DC:

• must ensure it has more face-to-face contact with benefit claimants who should be able to get interviews with benefit assessors on request
• must provide counter staff with fraud awareness training that is designed to improve their awareness of the potential for fraud entering the system in the claims reception process
• must improve the standards of evidence it requires to process claims, XXXXX XXXXX XXXXX XXXXX XXXXX XXXXX XXXXX XXXXX XXXXX XXXXX XXXXX X XXXXX XXXXX XXXXX XXXXX X.
• widely publicises a fraud strategy through the local press, by the use of posters and leaflets and by including more details on claim forms including a specific anti-fraud warning.

Keeping it right

1.18  Hart DC makes some efforts to keep payments right throughout the lifetime of a claim. For example, Hart DC makes clear to claimants their duty to notify changes of circumstances on its current and draft new claim forms.

1.19  Although Hart DC has recently begun to target review periods to perceived risks, in anticipation of adopting the Verification Framework (VF) later in 2000, at present most claims are awarded for 52 weeks. Hart DC’s visiting activities are only completed by the fraud team. The checking arrangements are not fully used to allow Hart DC to analyse where claims go wrong and use this information to target resources appropriately.

1.20  We found that the post opening procedures are very insecure. Consequently the arrangements for dealing with returned and unpresented cheques and cheque dispatch are insecure.

1.21  Entitlement to other benefits is verified, although use of the Remote Access Terminal (RAT) would help to improve turnaround time in processing claims as it allows the LA access to claim detail information held on BA's computer system.

1.22  Our main recommendations to Hart DC about the steps necessary to ensure payments continue to be right will mean:

• undertaking a risk analysis incorporating VF to target in-claim checks
• analysing where things go wrong (for example appeals and complaints)
• reviewing its post opening procedures in line with the BFI Good Practice Guide.

Putting it right

1.23  Hart DC is aware of requirements to identify and investigate why benefit fraud takes place but has not yet implemented effective measures to carry this out fully. We found that investigative procedures are not rigorous or focused on the use of sanctions as a deterrent.

1.24  Hart DC is investing in training new fraud staff but maintaining an adequate level of fraud resource in the last 12 months has been a problem. At the time of the inspection the fraud investigation team was not being fully used.

1.25  Performance on investigative work in 1999/2000 has been disappointing. Hart DC needs to address this poor performance in order to:

• improve the source and quality of referrals
• improve the standard of investigative work
• instil confidence in the claiming and validation of WBS
• introduce effective management controls
• make full use of sanction options available in the Social Security Administration Act 1992, as amended by the Fraud Act 1997.

1.26  Hart DC uses data matching generated by the Housing Benefit Matching Service (HBMS) to counter fraud and error entering the system during the life of a claim. The LA does not undertake internal matching exercises because of anxieties raised by the trade union UNISON about Data Protection Act implications.

1.27  Hart DC has undertaken what it describes as proactive fraud work but this was not structured on a risk-based approach. The main counter fraud drive is reacting to referrals received. Hart DC does not undertake any analysis of fraud referrals to assess risks and target resources in the most effective and efficient way.

1.28  Overpayments are being identified and recovery from ongoing benefit is being pursued. We have reservations about the overpayment classification procedures and the consequent implications for subsidy. The absence of recovery where benefit is no longer in payment is a major concern. Some older overpayments have been passed to a collecting agency to recover.

1.29  Our major recommendations to Hart DC in this area will mean:

• reviewing the procedures for generating fraud referrals and providing feedback
• undertaking a risk analysis of referrals to help target resources more effectively
• improving and monitoring investigative standards and confidence in WBS claims
• recovery of outstanding overpayments where benefit has ceased and the introduction of overpayment classification controls.

Making sure things work

1.30  Hart DC has a Revenues Service Business Plan, agreed in late 1999, covering the period up to 2004, which includes goals covering the promotion of benefits, improved claimant interface and fraud awareness. Hart DC has a number of initiatives to be put into place but we were not convinced the LA had a systematic plan that would ensure implementation. Current performance is some way off meeting the agreed aims of Revenues Service and the absence of staff targets means that progress against objectives cannot be measured.

1.31  Hart DC Members approved a corporate strategy to counter fraud and corruption in April 1996. However, this has not been translated into action for the benefits service. No operational or procedural guidance has been put in place setting out how the policy should operate in relation to HB.

1.32  Management checks currently undertaken are also insufficient to provide assurance that claims are being accurately assessed, both in terms of quality and the regularity with which they are undertaken.

1.33  We were particularly concerned that Hart DC had failed to implement a series of EA and IA recommendations which would have provided the action plan to support its counter fraud strategy. Although the number of planned IA days have been exceeded, this falls short of the level of risk posed by HB.

1.34  Our recommendations in this area will mean:

• the early introduction of a fraud business plan
• bringing in a system of management checks which will allow targets to be set and performance to be monitored
• introducing a system of management checking designed to provide more assurance of the quality and accuracy of claims
• implementing EA and IA recommendations to improve the security of the HB system and reviewing the number of audit days used
• the production of a detailed plan for implementing VF, to realistic timescales and signed up to by all other stakeholders
• the LA improving its planning regime to ensure that strategies are implemented.

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