By Tony Collins
The Department for Work and Pensions’ auditors have qualified the department’s latest accounts for the 26th year in a row because of “unacceptably high” fraud and mistakes.
The high level of fraud and error is despite the DWP’s now being able to check every claimant’s benefit entitlements – particularly inconsistencies in earnings – through HMRC’s real-time information [RTI] tax system.
In 2014-15, the DWP carried out a bulk exercise to match RTI data against the DWP’s benefits information. The DWP uses RTI data to provide information on earnings as part of the calculation of claimants’ Universal Credit entitlement.
The National Audit Office, in today’s report on the DWP’s 2014-15 accounts, says that misreporting and incorrect processing of income and are responsible for estimated losses in 2014-15 of £1.12bn
A further £340m is lost through undisclosed and incorrect processing of data on living arrangements.
The DWP is the same department that’s pouring money into a protracted FOI legal battle to stop four reports on Universal Credit being published on the basis that their disclosure could affect the DWP’s “effective management of public affairs”.
The DWP publishes none of the reports on the progress or otherwise of its major projects and programmes.
One question is, in the light of the DWP’s repeatedly qualified accounts, whether the department’s officials are better or worse off running their affairs in an atmosphere of great secrecy.
Would the DWP’s senior management be able to manage the business better – and particularly the Universal Credit IT programme – if they had to publish their commissioned reports on major projects?
The added external scrutiny of business partners – including local authorities – plus MPs, journalists and the public could give extra force to attempts within the department to manage affairs more professionally.
Such is the DWP’s detachment from external scrutiny that its managers are legitimately able to decide to avoid measuring the Personal Independence Payment for fraud and error until 2016-17.
Some may wonder how any major organisation can delay measuring a major part of its business for fraud and error.
Says Amyas Morse, head of the NAO:
“We believe that the absence of up-to-date information on error rates in such a large benefit stream creates a risk that the Department is making decisions based on out-of-date measurements.”
“Furthermore, some smaller value benefits have never undergone a (fraud and error) measurement exercise.”
Morse says the accounts DWP’s have been qualified because of the “unacceptably high level of fraud and error in benefit expenditure, other than State Pension where the level of fraud and error is lower”.
He says the accounts of the DWP and those of predecessor departments administering welfare spending, have been similarly qualified each year since 1988-89.
The DWP estimates total overpayments due to fraud and error in 2014-15 to be £3.2bn, which is 1.9% of the total forecast benefit spending of £168.1bn.
The Department estimates the total underpayments in 2014-15 to be £1.4bn.
Morse says the DWP is not on track to achieve its target to reduce fraud and internal mistakes.
“Furthermore, the Department has reduced the pace of the roll out of Universal Credit. As a result, Universal Credit has not yet realized the £200m annual fraud and error savings originally expected by March 2015…”
This failure to meet savings targets on Universal Credit highlights the speculative nature of central government’s business case estimates of programme and project savings.
Morse said: “Issuing an audit qualification is a serious matter, and the fact that similar qualifications have been in place for such a long period of time does not lessen that seriousness.”
Fraud and error is defined as
– Official error, which arises when a benefit is paid incorrectly due to inaction, delay or a mistaken assessment by the Department, a local authority or HM Revenue and Customs;
– Claimant error, which occurs when claimants make inadvertent mistakes with no fraudulent intent; and
– Fraud, which arises when claimants deliberately seek to mislead the DWP or local authorities which administer benefits on the department’s behalf to claim money to which they are not entitled.
The DWP’s managers say the largest proportion of error enters the benefits system due to changes in claimants’ circumstances after a correct initial award.