CHILD SUPPORT AGENCY: CLIENT FUNDS ACCOUNT
1996-97
THE AGENCY'S
MANAGEMENT OF
DEBT
39. In their examination in 1995, the Committee
were concerned that the Agency were unable to provide an estimate
of the amount of uncollectible maintenance, and recommended that
in improving their computer and management information systems,
the Agency should include a requirement to provide this information
.[36] In their response,
the Agency accepted that information on the amount of uncollectible
debt was important, and that they were taking steps to provide
this information which would assist them in deciding how to proceed
with debt collection.[37]
40. In their accounts for 1996-97, the Agency
noted that at 31 March 1997 there was £1,127 million of debt
due from absent parents. This debt had arisen from two types
of assessment: full maintenance assessments, which are issued
when both parents provide sufficient information for the Agency
to make an assessment; and interim maintenance assessments which
are usually set at punitive levels, taking no account of an absent
parent's ability to pay, and are imposed when absent parents do
not provide sufficient information.[38]
41. In their accounts, the Agency estimated
that the total debt arising from full assessments at 31 March
1997 was £513 million of which £195 million (38 percent)
would probably be uncollectible, an increase of £131 million
since 31 March 1996.38 & [39]
In addition, the total debt outstanding on interim maintenance
assessments was £614 million, and the Agency estimated that
less than five per cent was likely to be collectable.[40]
42. We asked the Agency why the position was
getting worse.[41] The
Agency told us that part of the increase was simply a reflection
of the overall increase in the level of activity and that this
was exacerbated by the increasing amounts which the Agency had
collected and arranged-£400 million in 1996-97 and estimated
£500 million in 199798. [42]
The Agency added that they expect the overall amount of debt
outstanding to rise during the period in which they were tackling
the backlogs and that they would be unable to set a target to
reduce the debt until the financial year 1999-2000 .[43]
The Agency also told us that interim maintenance assessment debt
had its main roots in the early years of the Agency when such
assessments had been widely used, and many of these cases continue
to build up debt. [44]
43. As regards getting absent parents to pay,
the Agency told us that they were concentrating on three areas.
[45] In the first place
they were trying to prevent debt arising in the first place by
making early telephone contact with absent parents to explain
what their liabilities were likely to be in order that they could
put aside money during the period in which the assessment was
being made, and by speeding up the time taken to make assessments.
The Agency said that they had explored the possibility of introducing
accounts prior to the initial assessment being made, but that
this could not be done under current legislation. [46]
In the second place, they were improving enforcement where a
debt had already arisen by increasing significantly the use of
deduction from earnings orders. 45 Thirdly, they were
tackling self-employed absent parents and increasing their compliance
rates.
44. We asked the Agency whether setting interim
maintenance assessments at punitive rates without reference to
absent parents' ability to pay was an effective mechanism for
encouraging co-operation. 4 The Agency agreed that
imposing a punitive interim maintenance assessment on an absent
parent without, perhaps, knowing his address or his employer was
a waste of time. [47]
They said that they now used these assessments relatively sparingly,
for example they had only issued 11,700 in 1996-97, compared
with 73,000 in 1993-94.
45. We asked the Agency whether, since they
considered that 95 per cent of interim maintenance assessment
debts were uncollectible, the time, resource and effort expended
on chasing after these debts was good value for money. [48]
The Agency told us that where an absent parent refused to cooperate,
interim assessments were the only lever they had to require him
to cooperate, and in that sense it was a worthwhile investment.
However, they confirmed that they had learned the lessons from
the past, and improvements in their arrangements for imposing
interim maintenance assessments meant that they would now be collecting
a progressively higher percentage of this debt.
46. We asked the Agency whether, where debts
arose due to their error, they should declare an amnesty. [49]
The Agency told us that errors they had made did not make up
the bulk of the outstanding debt, but would have compounded the
figures. They added, though, that in any case they did not have
the authority to wipe out debt. The Agency introduced a "deferred
debt" scheme in April 1995 to reduce the amount of accumulated
maintenance absent parents have to pay when there have been significant
delays by the Agency in making their assessments. Provided absent
parents regularly pay the maintenance due, the Agency can pay
the deferred amount to the person with care from Exchequer funds.
If the absent parent subsequently defaults the deferred debt
will be reinstated.[50]
The Agency had paid £95,000 under this scheme to parents
with care in 199697.[51]
47. We asked the Agency whether they envisaged these
payments increasing.[52]
They explained that amounts were only paid from Exchequer funds
where an assessment was delayed beyond six months due to the Agency's
fault; and the absent parent, having received his assessment,
then met his commitments in full for the following twelve months.
The Agency told us that they had paid £240,000 on 165 cases
in the first half of 1997-98 and forecast that they would pay
£400,000 for the year as a whole. In 1998-99 they expected
to pay a further £600,000.
48. We asked the Agency how they monitored the
increasing amount being spent in this way and whether it could
escalate out of all possible control.[53]
They assured us that this scheme would not cost great amounts
in the future because the Agency have been setting their house
in order to assess cases more quickly and to get up to date with
their caseload.
Conclusions
49. We are disturbed that the Agency's level of outstanding
debt now stands at over £1 billion, and that the Agency
expect no more than £258 million to be recovered. Despite
the improvements the Agency have made in their use of interim
maintenance assessments and in debt recovery, this suggests to
us that the arrangements need a more radical overhaul. We note
that a significant proportion of uncollectible debt relates to
interim maintenance assessments made in the Agency's first two
years. We urge the Department and the Agency to examine the scope
for eliminating a significant amount of this debt, since it is
unlikely ever to be collected, may divert resources from the addressing
the legacy of error, could delay the making of maintenance assessments,
and may distort the Agency's performance. Where debt remains,
we expect the Department to set the Agency challenging targets
for recovering the sums due.
50. We note that delays by the Agency in processing
maintenance assessments are likely to cost over £1.2 million
in compensation over three years and that expenditure is increasing.
We expect the Agency to minimise the costs to the Exchequer of
the deferred debt scheme by avoiding delays in making assessments.
36 First Report, Session 1995-96 (HC 31) para 30 Back
37 Treasury
Minute on 1st and 2nd reports from the Committee of Public Accounts
1995-96, Cm 3172 Back
38 CSA's
Client Funds Account (HC 124 of Session 1997-98), Notes 5 to 7 Back
39 C&AG's
report (HC 124 of Session 1997-98), para 29 Back
40 C&AG's
report (HC 124 of Session 1997-98), para 32 Back
41 Minutes
of Evidence Q 9 Back
42 Minutes
of Evidence Qs 9 and 31 Back
43 Minutes
of Evidence Q 104 Back
44 Minutes
of Evidence Q 87 Back
45 Minutes
of Evidence Q 9 Back
46 Minutes
of Evidence Q 92 Back
47 Minutes
of Evidence Q 97 Back
48 Minutes
of Evidence Qs 97 and 98 Back
49 Minutes
of Evidence Qs 54 and 55 Back
50 C&AG's
report (HC 124 of Session 1997-98), para 43 Back
51 C&AG's
report (HC 124 of Session 1997-98), para 44 Back
52 Minutes
of Evidence Q 82 Back
53 Minutes
of Evidence Qs 84 and 85 Back
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