Appendix O:
Investigations

Introduction

We looked at Stoke’s methods for establishing if a fraud or irregularity has occurred.

Our study focuses on Stoke’s Visits and Investigation team. The team has the following:

• one team leader
• 3 staff, one is Challenge funded, who undertake visit and investigation work
• 2 administrative staff.

Our study does not include counter fraud investigations made by IA. Records of investigations by IA did not come to our attention until late in the inspection.

Compared to other areas of business within Stoke, the quality of its counter fraud work is poor. This appendix highlights some practices that should improve current performance.

Strategic focus

There is no evidence that strategic planning forms part of Stoke’s counter fraud activity. Stoke does not have a:

• counter fraud strategy document
• business plan for its Visits and Investigation team
• formally approved prosecution policy
• reporting mechanism to inform members on counter fraud performance.

As a result, the organisational set up is confused and WBS arrangements are misplaced.

Organisation

Stoke’s counter fraud activity is currently going through a transitional period and is divided between 2 sections, both with different management:

• the Visits and Investigation team report to the Benefit Services Manager
• IA report to the Assistant Director of Audit Services.

Both sections have specific roles. The Visits and Investigation team deal with routine counter fraud work, such as residence checks and certain new claim visits (NCVs). IA deals with other counter fraud work, such as missing and lost cheque enquiries, failed reviews and some referrals from the Visits and Investigation team. The counter fraud activities of both sections need to fit together neatly, to ensure WBS is accurately claimed and recorded.

At the time of our inspection, this process was not seamless. We found that the lack of one management line has led to problems in pulling together key aspects of performance.

Roles and responsibilities

Welfare traditions

The Visits and Investigation team’s fraud focus is reduced because of its:

• previous roles
• current mix of duties.

One of the team’s posts continues to be dedicated to welfare visits, prolonging the team’s move from a welfare to counter fraud culture. The team as a whole admit it is still unsure about its main purpose. We consider that a clear line needs to be drawn between fraud and welfare work, clearly communicated in a counter fraud strategic document.

Stoke has not appointed any of its staff as inspectors under section 110A of the Social Security Administration Act 1992, which provides additional powers to nominated officers to:

• enter premises
• examine documents
• interview people.

Stoke has no current plans to make an appointment and we consider this increases current confusion.

IA involvement

Until recently, cases investigated by the Visits and Investigation team were referred to IA to decide if prosecution was appropriate. The benefit manger now makes decisions on prosecutions and administrative penalties.

Outcomes from investigations by the Visits and Investigation team have considerable affect on Stoke’s subsidy claims and yet it is:

• IA who:

• validates WBS claims
• tracks and reports WBS achievement against profile each month to the Visits and Investigation team

• the Visits and Investigation team which has most tactical flexibility and needs to be sharply alert to trends and successes.

Problems and risks

The lack of one management line confuses ownership and awareness of WBS. For example, we found some staff were unsure of the criteria for claiming WBS.

We were also advised that, due to the late receipt of the September 1997 figures from IA, the Visits and Investigation team was unaware that its performance against profile had dropped to 50%. As a result, the team had to take urgent remedial action to improve WBS claims and avoid WBS penalty. In fairness to IA, it should also be noted that no action was taken by the investigation team to pursue the late receipt of these figures.

By giving these examples, we do not seek to attribute blame. Our intention is to highlight actual problems from the split management and control responsibility. We recommend that fraud work is brought together under one reporting structure.

Management targets

With the exception of Challenge Fund, Stoke does not have an internal WBS target. In the 2 years since the introduction of the WBS subsidy scheme, Stoke has reported performance below the national average of 247% as follows:

• 1996/97 – 74%
• 1997/98 – 78%.

Stoke’s reported performance for 1998/99 is better with a projected return of 102%. However, our sampling of WBS suggests this figure may be incorrect and without a change in procedures, it is likely that performance in 1998/99 and beyond will continue to be low.

Stoke’s aim in counter fraud work focuses on the number of visits made per day by the Visits and Investigation team:

• 18 visits per day for Welfare work
• 15 visits per day for counter fraud work.

There are no targets or systems to measure outcomes, financial or otherwise.

Our discussions with the Visits and Investigation team confirm that challenging investigation time scales are needed to achieve target. Staff advise us that the time available for each investigation is between 10 and 20 minutes.

We consider the present targets may affect quality investigations and the achievement of best value returns.

Management information

Until recently, management information has been limited. Stoke advised us that the information supplied on our questionnaire had been estimated. The lack of information about previous years casts doubt over the accuracy of statistical returns made to DSS.

Encouragingly, Stoke has addressed its informational problems. It has invested in FIMS and since its introduction, all new fraud cases have been recorded on this system.

We consider this to be a good and forward thinking move by Stoke. FIMS is a robust case management system. If used to its full potential, it will not only provide meaningful management information, but help Stoke’s file management, risk analysis, case review, and work prioritisation processes – current areas of weakness which are discussed below.

Investigative approach

Fraud files

Stoke does not keep separate fraud files. Papers relating to investigations are stapled to the benefit case papers, these also are not kept in files. Stoke had difficulty locating fraud papers for a number of the cases we sampled.

There is a risk that confidential information supplied both by claimants and third parties could be seen by an unauthorised person. There is also a risk of losing fraud papers - this would affect investigations and prosecution therefore invalidating WBS claims.

Referrals

Incoming referrals and self-generated cases are dealt with on a ‘first come, first served‘ basis. Greatest priority is given to cases awaiting payment. We found no delay between receipt of referrals and the start of investigative action.

However, in some of the cases we examined, referral forms were missing.

Supporting documentation

In other cases, a lack of supporting documentation meant a variety of information could not be established, such as the:

• date of referral
• reason for the investigation
• date that the investigation began
• action taken, the date of that action, and the investigation outcome
• date that WBS was claimed.

Target groups

Before our visit and in response to our questionnaire, Stoke advised us that its own risk assessment pinpointed living together and non-commercial tenancies as the highest risk areas for the LA as they are the most difficult to prove.

Our sample produced no evidence to suggest that Stoke is investigating these types of fraud. We consider it essential that Stoke reviews its risk assessment of the community to establish the true high risk areas.

Undertaking investigations

We found very little depth to the investigative work carried out by Stoke. The LA rarely makes observations and enquiries are generally limited to talking to neighbours. There was little evidence of the LA following up enquiries to third parties, such as landlords and employers, and few interviews were conducted with the suspect.

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Prosecutions, sanctions and publicity

Prosecution

During 1997/98, 33 cases were referred to IA. Of these, 9 were identified as suitable for prosecution, 3 were successful. The police and CPS deal with all prosecutions. Some cases have been with the police and CPS for up to 18 months.

Stoke advised us that there is a general problem with feedback on these cases to both the LA and the police due to delays at CPS. We could not verify this statement with CPS and we suggest that the general poor state of the files, together with Stoke’s investigative approach, could also be a contributing factor to slow progress.

Sanctions

Stoke is currently developing and agreeing its policy to implement administrative penalties. The investigation and documentation of cases where penalties are being considered must be of a sufficient standard to be referred for prosecution, if the penalty agreement fails. Current arrangements do not allow this.

Publicity

There is limited counter fraud publicity, with only one prosecution case, in December 1997, receiving publicity. An article outlining the forthcoming BFI inspection and describing the BFI role, appeared in the in-house newspaper City News in November 1998.

Stoke does not have a publicised hotline. It does not make use of publicity to deter fraudulent claims or to encourage the public to report fraud. This means the LA is missing out on a large source of referrals, which could be generated by encouraging the public to become more fraud aware.

WBS

Performance against threshold

Stoke informed us that its key aim in WBS achievement is to avoid the subsidy adjustment which is applicable if achievement falls below 75% of the baseline.

To maximise the potential of DSS subsidy funding, Stoke needs to reprioritise its resources to investigating all types of fraud. This will help to reduce the risk of subsidy adjustments for the remainder of 1998/99 and the following years. One way of achieving this will be to work more closely with BFIS to identify other potential areas for fraud investigation and WBS.

Challenge Funding

Challenge Funding was awarded to Stoke for proactive fraud work to be conducted during 1998/99. The Challenge Fund post has a required rate of return of £122,500 for 1998/99.

Stoke estimates that this target has already been achieved. However, this figure will need to be reviewed:

• to allow for the new WBS rate for ‘gone-away’ cases
• as the validity of some of these claims is questionable.

WBS records

To support a WBS claim, actions and dates need to be clearly recorded to provide a clear management and audit trail.

During our sampling, we had difficulty in establishing when the WBS claim was made. In addition, form WBS1, which is used to record the WBS claim, did not always include the signature and date of the officer making the WBS claim.

Management checks

In our sample of 50 WBS cases, we found no evidence of management checks. The team leader estimates that they spend only 25% of their time on general management and administration.

The team leader allocates cases to VOs but VOs can close their own cases without reference to the team leader. There is a risk that cases could be suppressed or closed without any proper investigation.

IA is currently responsible for checking and approving all claims for WBS. At Stoke, there was no evidence of WBS claimed being checked by the team leader before referral to IA. If applied correctly, using IA as a second officer check is good practice.

Internal security

The Visits and Investigation team is located in one room, which is neither secure nor private. Secure accommodation reduces the risk of non-fraud staff:

• seeing fraud papers
• overhearing fraud related phone calls or conversations.

All of these issues could compromise the ongoing investigation.

Training and procedures

Training

Training needs are identified through the LA’s employee development scheme discussion sessions, which are part of the IIP process. Two officers have attended both the effective investigation and LTAHAW (part 1) courses. Only the team leader has been trained to undertake IUCs.

The team leader has regular discussions with staff to:

• keep them informed about legal change
• consolidate their current counter fraud knowledge.

However, visiting staff said that they do not see DSS Fraud circulars, nor do they have personal copies of the DSS Fraud Investigators Manual.

Procedural guidance

Stoke has produced a fraud awareness guide. The guide is issued to all benefits staff and is used to:

• increase staff awareness of potential fraud
• encourage referrals to the Visits and Investigation team.

A large number of the LA’s referrals come from Benefit section staff.

Stoke has not produced written procedures or guidance for its staff who investigate fraud. We are advised by Visits and Investigation team that the lack of guidance has led to confusion about the appropriate action for investigating fraud.

Liaison with BFIS

Liaison with BFIS is detailed at Appendix E. The key findings are as follows:

• the existing SLA, signed 2 years ago, is outdated and not tailored to more recent legislation, local conditions or current business
• there is little evidence of Stoke and BFIS working closely. Both Stoke and BFIS confirmed their last meeting was in February 1998
• before the introduction of FIMS, which will automatically issue these forms, SLA1s were not being sent to BFIS. No SLA1s had been issued in any of the 37 IS/JSA(IB) linked cases we examined and only one SLA3 form had been issued
• by not liaising closely with BFIS, Stoke is missing an opportunity to share information and investigation techniques, which would increase its source of referrals and improving counter fraud WBS performance
• Stoke needs to consider BFIS overload, referrals which BFIS does not intend investigating because of other priorities, and No Fraud Action (NFA) cases, as a source of potential work and WBS. Stoke has made no approach to BFIS who told us that these cases are available to Stoke should it wish to consider them.

Stoke is missing out on the following joint working areas:

• joint working
• joint publicity
• fraud awareness training sessions
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Recommendations

Our full recommendations are in sections 4 and 5 of this report. Some short term solutions include:

• ensuring all fraud staff are aware of the correct criteria for claiming WBS under the 1998 Subsidy Order
• urgent review of 1998/99 claims for WBS for ‘gone-away’ cases to ensure correct criteria has been used and appropriate subsidy level claimed
• ensuring all fraud staff have access to appropriate instructions and circulars
• improving liaison with BFIS by:

• issuing SLA forms
• responding to BFIS enquiries on time

• reviewing allocation of welfare visiting posts.

Conclusions

The investigation work examined at Stoke is not of a high quality.

Documentation of investigations is poorly recorded and maintained making it difficult to establish the chronological order of events and the final conclusion reached.

Evidence to support WBS claims or any consequential action could not always be identified.

Closer liaison with BFIS needs to be established to build greater knowledge and expertise into the fraud process and also to help widen the range of fraud investigations leading to WBS claims.

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