Department for Work and Pensions failing to make a “sustained reduction” in benefits fraud and error — spending watchdog

National Audit Office issues another qualification of department’s accounts and says fraud and error levels remain “unacceptably high”

Fraud and error accounts for 1.8% of forecast benefit expenditure, according to the NAO. Image: PA

By Jim Dunton

08 Jul 2016

The National Audit Office has once again issued a qualification on the Department for Work and Pensions’ annual accounts because of “unacceptably high” levels of fraud and error in benefits expenditure.

According to the qualified accounts, total overpayments due to fraud and error during 2015-16 were estimated to be £3.1bn of forecast benefit expenditure, a level of 1.8% based on a total benefit spend of £172bn.

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The NAO said that while the figure essentially maintained the previous year’s lowest-recorded level, the headline level “indicates that a step change and sustained reduction in fraud and error has not been realised”.

Conversely, underpayments of benefits were estimated to have hit a new high of 1%, or £1.8bn of total benefit expenditure, increasing from 0.9% in 2014-15.

DWP and its predecessor departments have received repeated audit qualifications since the late 1980s, but comptroller and auditor general Sir Amyas Morse said the latest one should not be treated lightly.

“Issuing an audit qualification is a serious matter, and the fact that this is another in a long line of qualifications does not make it any less serious,” he said.

“The value of fraud and error in benefit expenditure remains unacceptably high. The department has made good progress in understanding causes of fraud and error to develop new strategies, but has some way to go to put these into effect and achieve sustainable reductions fraud and error.”

A DWP spokesman said the report recognised that benefit fraud and error was at a record low, reflecting the department’s work to improve detection and recovery.

“Last year around £980m was recovered in benefit overpayments – the highest amount ever — and our fraud investigators work tirelessly to bring those who cheat the system to justice,” he said.

He added that figures for claimant error had reduced from £1.1bn to £900,000 year-on-year, while official error figures had reduced from £700,000 to £600,000.

However, the NAO report also said that one of the two systems being used to administer Universal Credit had estimated overpayment levels that were proportionally more than double that of the latest overall rates, while cautioning cautioning that it was difficult to draw inferences from the figure.

According to the NAO, the Universal Credit Live Service — which is being rolled out for new single claimants — has an estimated fraud and error overpayment rate of 7.3% for 2015-16. 

However the watchdog pointed out that the methodology used to determine that rate was still under development, which made it difficult to draw conclusions from the initial results.

Morse said DWP needed to develop and implement controls to tackle the inflow of fraud and error in Universal Credit claims as the new system was rolled out, as well as dealing with issues already identified.

“It will require continued commitment and focus on behalf of the whole department, including operational and strategy teams to implement and fully embed these initiatives on a sustainable basis if the department is to reduce the level of fraud and error in UC to the lowest feasible level,” he said.

The NAO report also questioned the DWP’s introduction of a new net loss indicator in its report that it said “may mask the accuracy of benefit administration in year”.

It said the measure offset overpayments recovered from previous years against in-year losses in a way that did not compare like with like.

The report said DWP’s “net loss target” for 2017-18 was 1.6%.

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