Findings

Introduction

2.1 Newham is one of 33 LAs in Greater London. It covers an area of 15 square miles. Newham serves a population of 230,000 comprising a wide ethnic and cultural mix.

2.2 It is recognised by the government as the third most deprived LA in England and Wales. (Source-DETR Indices of Deprivation 2000.)

2.3 In June 1999 Newham contracted out its administration of HB and CTB to CSL for a 7-year term, with an option to extend for a further 3 years, following a BV review of the benefit service. The contract covers the "back room" processing of HB and CTB claims. The "front line" telephone and public caller services are delivered corporately by Newham through a Caller Centre, LSC and ISCs. Counter fraud activities are provided by Newham’s fraud and visiting teams located in IA.

2.4 Newham manages the contract with CSL through a client team of 26 officers shown in Figure 2.1.

Fig. 2.1: LBN Housing client unit

Source: Newham

2.5 This includes 6 officers who monitor the contract reporting to the Head of Housing Client Unit and a separate team of 16 determination officers, 2 team leaders and a complaints officer reporting to a Principal Quality and Contracts officer.

2.6 During our inspection Newham transferred management of the client function from the Chief Executive’s department to the Director of Housing as it considered the contract could be more effectively managed from the Housing department. The estimated staffing cost of the client function for 1999/2000 was £499,986.

2.7 At the time of our inspection CSL employed 143 full-time equivalent staff on the Newham contract, including 45 temporary or contract staff. At the beginning of the contract 107 permanent staff, including 15 part-time staff, transferred to CSL from Newham under Transfer of Undertakings Protection of Employment (TUPE), and 42 temporary staff also transferred to CSL.

2.8 Since the beginning of the contract with Newham, CSL has increased the number of staff employed and established a benefit processing team in Barrow-in-Furness in Cumbria to undertake work for Newham and other CSL contracts. The annual cost of the contract to Newham is £4,900,000.

2.9 These organisational arrangements are complex and we explore the implications of this later in our report.

Factors affecting benefit delivery

2.10 The main factors affecting the way that Newham delivers its benefit service are:

· overall economic and political background

· internal working practices

· working relationships with other agencies.

Fig. 2.2: Unemployment rates (%) in Newham and UK– 1998/99

Source: House of Commons research paper

 

 

 

 

 

 

 

 

 

 

 

 

Overall economic and political environment

2.11 As mentioned earlier Newham is one of the most deprived and diverse boroughs in the country. It faces a wide range of social and economic problems. Although Newham had some success in promoting local regeneration and reducing unemployment, rates of unemployment are still more than twice the UK average, as illustrated by Figure 2.2.

2.12 During 1998/99 4 out of 10 households in the borough were claiming HB and CTB and 51% of the population were from an ethnic minority. Forty six languages are spoken in the borough.

2.13 Newham told us that it aims to be at the forefront of the government’s modernisation agenda. It has been a whole authority BV pilot since 1998 and has a stated commitment to improve performance so that its services rank in the top quartile as measured by AC performance indicators.

2.14 It has developed a cabinet-style political structure. All of Newham’s 60 Members are Labour. Newham was awarded Council of the Year in the 1999 Local Government Chronicle awards and also collected team of the year awards for its Housing and Finance management team.

Internal working practices

2.15 Newham decided to contract out its benefit service following a BV review of the service in the first year of BV. The aim of contracting out was to:

· improve claimant focus

· reduce costs

· improve performance.

2.16 The contract had been in place for 10 months at the time of our on-site inspection and had failed to achieve any of these outcomes. Since the start of the contract the backlog of open documents requiring action had risen from 15,000 documents (equivalent to 2 weeks incoming post) to almost 40,000 documents (equivalent to 5 weeks incoming post).

2.17 Newham estimated that the backlog of work related to 20,428 HB and CTB claims by April 2000. This means that over half of Newham’s caseload had work outstanding at the time of our on-site inspection.

2.18 Newham’s performance in terms of processing or paying claims within 14 days of receiving the required information had fallen from 70% to fewer than 40%. During our inspection Newham and CSL were heavily focused on tackling the backlog of work and this has dominated working practices and arrangements for contract management. We give further details of this below.

2.19 When Newham outsourced its benefit service it included a requirement for CSL to introduce VF and this was included in the specification and pricing schedule. Newham originally planned to implement VF in February 2000. However, implementation of VF has been postponed to October 2000 as Newham want to clear the backlog of work before implementing VF.

2.20 Internal working practices in Newham are also characterised by:

· a fragmented organisational structure

· extensive use of IT including DIP and its Caller Centre

· a large number of recent changes.

Organisational structure

2.21 The administration of HB and CTB in Newham is fragmented. The following activities are undertaken by different departments of Newham or CSL:

· benefit processing carried out by CSL in offices in Stratford

· benefit processing is also carried out by CSL’s "resilience team" based in Barrow-in-Furness in Cumbria

· determination of claims to HB and CTB carried out by Newham’s determination team in CSL’s offices in Stratford

· monitoring of the contract carried out by Newham’s client officer(s), based in East Ham during our on-site inspection but in the process of moving to the Housing department’s offices in Stratford

· 95% of HB and CTB telephone enquiries handled by Newham’s Caller Centre in East Ham

· 95% of public callers seen by LA staff in the Beckton LSC based on a "one stop shop" and the following ISCs, former Housing offices that deal with HB/CTB as well as housing and housing aid enquires:

– Forest Gate

– Manor Park

– Upton Park

– East Ham

· fraud and visits dealt with by Newham’s fraud and visiting teams based in IA.

2.22 Figure 2.3 shows the organisational structure of the contractor in administering HB and CTB for Newham.

Fig. 2.3: CSL contractor unit

Source: CSL

 

IT

2.23 Newham has been using DIP since 1997. DIP is fundamental to the council’s strategy of delivering accessible services and enables the Caller Centre, LSC and ISCs to view documents to advise claimants and determine claims in certain circumstances. It also enables the contractor to assess claims remotely in Barrow-in-Furness. Newham’s fraud and visiting teams have access to DIP, but were not connected as users during our inspection. However, Newham told us that they would become users in May 2000.

2.24 The Caller Centre, LSC and ISCs use a computerised customer tracking system to record caller enquiries. We give more details on the use of IT in Getting it right.

Changes in benefit administration

2.25 Newham has undergone considerable changes since contracting out its benefit service in June 1999 including:

· former Newham benefit staff applied for posts within the LA or transferred to work for CSL in June 1999

· opening a Caller Centre to deal with all telephone enquiries relating to HB and CTB as well as Social Services and Environmental Health from May 1999

· the benefit service restructured and relocated, from an HB and CTB service based in 6 decentralised Housing offices and a CTB owner occupiers team based in the Chief Executive’s department, to a centralised benefit processing site

· introduction of a new IT system to deal with overpayments in November 1999

· the establishment of CSL’s benefit processing team at Barrow in Furness in January 2000

· changes to working practices associated with the above organisational arrangements

· significant staff turnover, as illustrated by Figure 2.4.

Fig. 2.4: CSL‘s staff turnover at Newham 1 June – 31 December 1999
Staff	Permanent	Temporary	Total
Left	11.5	33	44.5
Started	4	70	74

Source: CSL

2.26 An indication of the rate and extent of changes is illustrated by the following list of changes that took place between 13 March and 20 April 2000 during our on-site inspection:

· CSL’s contract manager, with overall responsibility for managing Newham’s benefit service, left and was replaced by an acting contract manager while recruitment was taking place

· Newham’s client team changed reporting arrangements from Chief Executive’s department to the Housing department

· Members approved funding of £250,000 for a revised strategy to clear the backlog

· CSL formed a pre-assessment team

· CSL set up a landlord liaison team

· CSL increased the number of section managers and reduced the size of teams processing HB and CTB claims

· Newham’s determination team moved into the same offices as CSL’s assessment team

· CSL also introduced new working practices including:

– quality checklist for assessing claims

– hourly targets for specific tasks

– managers allocating specific functions to individual staff rather than generic working

– daily assessment team briefings

– management checks

· Newham closed 2 of its ISCs while they were in the process of refurbishment to re-open during the summer 2000 as LSCs.

Working relationships with other agencies

2.27 The main relationship is with BA which administers IS and JSA, ES and BFIS. Good communication between these agencies is essential to the sound administration of HB and CTB.

2.28 Newham deals with the Newham BA District Office (DO) based in Stratford with BFIS. Newham also deals with 4 Jobcentres at Stratford, East Ham Central, East Ham and Plaistow where JSA is processed.

2.29 The RS is also in Stratford opposite the contractor’s offices.

Benefit expenditure trend

2.30 In 1999/2000 Newham paid out £133 million to 35,777 claimants. This represents 20% of Newham’s gross expenditure of £665 million (including Housing revenue Account expenditure).

2.31 The breakdown of benefit expenditure by type of claim is shown in
Figure 2.5.

Fig. 2.5: HB/CTB expenditure 1996/97 to 1999/2000
Benefit	1996/97 (£ million)	1997/98 (£ million)	1998/99 (£ million)	1999/2000 (£ million)
RA	98.2	90.9	88.7	78.1
RR	39.9	38.8	38.2	38.5
Total HB	138.1	129.7	126.9	116.6
CTB	Not available	17.0	16.9	16.0
Total	138.1 (excludes CTB)	146.7	143.8	132.6

Source: Newham

2.32 The above Figure shows that HB expenditure has fallen by 15.5% over the last 4 years, a reduction of £21.5 million.

2.33 The HB caseload is split as follows:

· RA - 19,281 (47%)

· RR - 15,581 (38%)

· CTB only - 5,951 (15%).

2.34 There are no reliable estimates for the levels of fraud or error in Newham. However, applying estimates from the second National Housing Benefit Accuracy Review 1997/98 suggests HB losses in the region of £16.7million (see Appendix A for details).

2.35 This figure potentially sets a benchmark against which Newham can measure its performance in detecting fraud. This could help Newham assess how it can improve performance.

Fig. 2.6: WBS claims 1996/97 – 1999/2000

Source: Newham

 

 

 

 

 

 

 

 

 

 

 

 

2.36 WBS is often quoted as an indication of the levels of fraud detected. Figure 2.6 illustrates the WBS claimed by Newham compared to its WBS threshold for each of the year’s 1997/98 to 1998/99. The threshold is the target set in the Subsidy Order, above which LAs can claim additional subsidy.

2.37 This shows that Newham’s claims:

· did not meet the threshold for WBS in 1996/97 or 1998/99 and 1999/2000

· exceeded its threshold in 1997/98. Additional subsidy of £139,669 was claimed for 1997/98.

Newham attributes part of the reason for the decline in performance after 1997/98 to its response to clarification of DSS guidance.

2.38 Newham’s efforts to reduce fraud and error have focused on:

· visits to all new private (non HA) HB claimants

· use of data matching

· achieving WBS towards DSS threshold target.

2.39 Our findings and conclusions are set out using the objectives of the government’s fraud strategy. We examined Newham’s performance by assessing:

· what is being done and if it meets existing definitions of good practice

· if there are good practices that should have had wider recognition

· if there is scope to improve existing performance.

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