NAO hopes Universal Credit will cut fraud and error

By Tony Collins

Amyas Morse, the head of the National Audit Office, has again qualified the accounts of the Department for Work and Pensions because of the high level of fraud and error in benefit spending.

The DWP’s accounts have been qualified every year since 1988-89. Morse hopes that Universal Credit will make a positive difference. In a report published today he says that new procedures and systems to verify identity and check entitlement  before payments are made, should mark an opportunity to eliminate some  of the key factors contributing to fraud and error.

But Margaret Hodge MP, Chair of the Committee of Public Accounts, said today the introduction of Universal Credit is full of risks which are compounded by the DWP’s secrecy over the scheme’s progress.

She said:

“The Department has the biggest budget in Whitehall and its inability, 24 years in a row, to administer its spending properly is just unacceptable.

“With fraud and error of £4.5bn in 2011-12, roughly the same as in previous years, huge sums of money are being lost to the public purse that could have been spent on our schools and hospitals. Government spending is at its tightest for over 50 years and it simply can’t afford to carry on like this.

“The Department is relying on the introduction of Universal Credit to get its house in order but the transition to Universal Credit is full of risks and the Department won’t even tell us if it is on schedule.

“The Department has got to get a grip on fraud and error now. Despite its assurances to my Committee, it has not done so and it must do better.”

 Complex benefit system

Morse says it is difficult for the DWP to administer a complex benefits system to a high degree of accuracy in a cost effective way.

“Some benefits, mainly those with means-tested entitlement, are more inherently susceptible to fraud and error due to their complexity, the difficulties in obtaining reliable information to support the claim and the problem of capturing changes in a customer’s circumstances.”

Claimants have to notify the DWP of changes in their personal circumstances.  “The Department has adopted this approach because it does not have routine access to verifiable third party sources of information, or the information may not exist that would allow them to track such changes…

” The complex administration of benefits also allows potential fraudsters the opportunity to present themselves differently to different administering agencies, which are not always sufficiently integrated to identify those instances.

“Because the Department does not have a readily available source of external information against which to verify some aspects of claims, such misrepresentations can result in fraud occurring.”

Errors commonly arise from poor or non-timely exchange of information between the Department and councils over whether a customer is in receipt of, or entitled to, a benefit.

“In practice, given the lack of direct integration between the Department’s systems and those of all local authorities, such errors will be difficult to eliminate.”

That said, the DWP has continued implementing Automated Transfers to Local Authority Systems (ATLAS), an IT development that automatically informs local authorities of new awards or changes in benefits.

From February 2012 councils have received details of changes in benefits administered by the DWP on a daily basis.

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