APPENDIX 2
Letter from Ian Pearson MP, Parliamentary
Under-Secretary of State, Northern Ireland Office to Rt Hon Michael
Mates MP, the Chairman of the Committee
Thank you for your letter of 14 October in which
you requested clarification of a number of points arising from
evidence given to the committee on 8 September.
DEPARTMENT OF
FINANCE AND
PERSONNEL
Resource Accounts and Financial Management
I would agree that, in the initial years of
resource accounting, there were a relatively high proportion of
qualified audit opinions on the resource accounts of the Northern
Ireland Department. However I would point out that there has been
a significant improvement in this area from the first year of
published resource accounts in 2001-02 to the accounts for 2003-04.
There are two main reasons for the relatively
high proportion of NI Departments with qualified accounts:
In Northern Ireland resource accounts replaced
appropriation accounts in 2001-02 following one dry run year in
2000-01. This contrasts with Great Britain where there was an
unpublished dry run in 1998-99 followed by two more years (1999-2000
and 2000-01) where resource accounts were published alongside
appropriation accounts. Therefore Great Britain had an additional
two years to prepare for the introduction of resource accounts
compared to Northern Ireland.
The reason for only having one dry-run year
in Northern Ireland was because the introduction of resource accounts
coincided with devolution when six Departments were expanded to
11 new Departments. This involved considerable upheaval in reallocating
budgets, programmes and assets etc in a short timescale. The draft
financial statement and especially the balance sheets of the original
six departments which were being drawn up, were no longer relevant
and the new departments had to start again in pulling together
draft accounts. Accounting systems also had to be changed and
this significantly disrupted the work on resource accounting.
Therefore the Departments missed out on two years of parallel
running and were effectively two years behind Great Britain in
terms of experience of resource accounts. This lack of experience
contributed to the relatively high number of qualified audit opinions
in Northern Ireland.
As further experience has been gained and procedures
have settled down the number of qualifications has fallen from
10 in 2001-02 to four in the 2003-04 resource accounts that have
recently been published.
(b) Lack of sufficient numbers of staff with
financial skills.
In common with GB departments, NI recognised
the need to enhance the skills of finance staff and recruit additional
accountants. The larger number of departments, each requiring
financial advice, added to this requirement.
When resource accounting was introduced in 2001-02
it was clear that, despite the preparations, some Departments
did not have enough staff with the financial skills necessary
to prepare sufficiently robust resource accounts. This has been
addressed in the past few years as more accountants have joined
the Northern Ireland Civil Service from the private sector. A
financial skills strategy is now in place to improve the financial
skills of the staff currently working in the finance branches
of Departments.
In summary, there has been a continuous pattern
of improvement in the quality of the resource accounts presented
to the C&AG, largely as a result of increased experience of
the new requirements and an improvement in the financial skills
of staff in the Departments. This is evident in the number of
qualified audit opinions, which has fallen from 10 in 2001-02
to seven in 2002-03 and now to just four in the resource accounts
that have recently been published for 2003-04. Of the four accounts
that have been qualified in 2003-04, two would have been qualified
anyway under appropriation accounting rules and the other two
have been qualified because of the introduction of a new accounting
standard in 2003-04 and are unlikely to be qualified in future
years.
ACCOUNTING SERVICES
PROGRAMME
HM Treasury has instituted a faster closing
initiative in the last couple of years where the objective is
to have all resource accounts signed by the C&AG and laid
before the summer recess.
In Great Britain this will be a considerable
advance on the current position whereby accounts have to be laid
by 31 January of the following year. In Northern Ireland, accounts
must be laid by 15 November following the year-end which is already
over two months earlier than in Great Britain. It is certainly
our objective to meet the Treasury deadline of faster closing
by 2006, if at all possible.
HM Treasury, and the National Audit Office,
have produced guidance for departments in meeting this deadline,
and both recognise that modern accrual based accounting systems
and processes will be of great benefit. They are not essential,
but to produce accounts in this timeframe without such systems
requires a considerable amount of resource.
That is raising a significant management challenge
for DFP and departments. It is the intention to begin imilementation
of the new Accounting Services Programme during 2006 and this
in itself will require a considerable resource input. That project
offers the potential for significant improvements in financial
management and greater efficiencies. The challenge facing us is
determining the extent to which allocating extra resources to
enable us to meet the 2006 deadline for faster closing will adversely
impact on the implementation of the Accounting Services Programme
and to what degree we can minimise the risks in both projects.
I note your comment on the "continuing
high levels of negative audit opinions". As outlined above
considerable progress has been made to reducing the level of qualified
audit opinions and it is anticipated that this progress will continue
up to the introduction of the ASP systems in 2008 as a result
of further experience, improved financial skills etc.
The ASP project continues to proceed according
to the timetable outlined by DFP. A successful bidder will be
chosen in March 2005 and will then have a year to work alongside
departments to fully develop the system. On current plans departments
will prqgressively migrate to the new system from April 2006.
EFFICIENCY REVIEW
TARGETS
As with Whitehall Departments, Northern Ireland
Departments will be producing Efficiency Technical Notes (ETNs),
which will provide specific and quantified information on the
actions Departments will take over the next three years to ensure
delivery of the efficiency gains published in the draft Priorities
and Budget document. The Notes will provide clarity about how
the gains are to be measured and delivered, with a strong focus
on ensuring clear performance measurement methodologies. ETNs
will be published for all departments by the end of January 2005,
following a process of scrutiny and validation. Consistent with
the approach in Whitehall, the Northern Ireland Audit Office (NIAO)
will participate in the scrutiny of proposed departmental ETNs
before publication.
USE OF
CONSULTANTS
Revised guidelines for the use of consultants
are being finalised by DFP and will be issued to Departments before
the end of this year.
The Central Procurement Division (CPD) of DFP
has now taken responsibility for the maintenance of a database
of all consultancy assignments it arranges for Departments or
for those that Departments arrange using the CPD framework. This
should cover virtually all consultancy work within the NI Civil
Service.
DEPARTMENT FOR
SOCIAL DEVELOPMENT
I have also consulted with colleagues in the
Department for Social Development and have obtained the following
replies in relation to your questions on that Department.
DISCLAIMER AUDIT
OPINION IN
2001-02 AND 2002-03
During 2002-03 the Social Security Agency undertook
a comprehensive review of its Benefit Security Strategy. The review
confirmed that the Agency was doing the right things but concluded
that it could improve the way they were done.
To underpin the strategy the Agency took the
following steps in 2002-03 to reduce the levels of fraud and error:
— introduced new procedures for the
allocation of National Insurance Numbers. to provide a greater
degree of security and confidence in the process;
— carried out a detailed analysis of
the causes of official error to improve accuracy and quality of
decision making;
— worked alongside staff from the Benefit
Fraud Inspectorate (in the Department for Work and Pensions) to
carry out an inspection of Income Support and Jobseekers Allowance;
— introduced Fraud Liaison Officers
into all districts and divisions to ensure a better co-ordinated
and more effective approach to the reporting and prevention of
fraud;
— produced a Code of Practice that
governed the use of powers contained within the Fraud Act;
— introduced and evaluated a successful
pilot exercise to improve the quality of decision making in cases
where couples living together claim benefit as single individuals;
— participated in the newly created
Joint Shadow Economy Team alongside staff from the Inland Revenue
and Customs and Excise in investigating matters of joint interest,
— created a Departmental Data Sharing
catalogue that lists all available datamatching opportunities
and started work on creating the legal gateway for other potential
datamatches; and
— set up a lost order book validation
service to provide a central point of contact for post offices
and social security offices.
In 2003-04 the Agency took the following additional
actions:
— created a new team to provide increased
support for centralised benefits (such as Disability Living Allowance
and Carers Allowance) to help them make inroads on reducing fraud
and error;
— introduced a team of Programme Protection
Accuracy Officers to ensure Pension Credit is being paid correctly;
— within Programme Protection Plans
(which all Benefit Managers signed up to) introduced an improved
ratio of savings to be achieved against every £1 of costs
to provide better evidence of value for money;
— made changes within Benefit Investigation
Services to provide new opportunities for fraud instigators to
make increased use of the Social Security Fraud Act;
— protected the gateway to benefit
by continuing to vet applications for National Insurance Numbers
thus preventing the processing of fraudulent claims;
— worked with the Post Office to prevent
incorrect encashment of giros and order books;
— introduced improved procedures for
the replacement of girocheques; and
— introduced new procedures for investigating
cases where customers are living together and claiming as single
individuals (following the successful pilot in 2002-03).
The combined levels of fraud and error in Income
Support and Jobseekers Allowance reduced from 5.7% in 2002-03
to 5.6% in 2003-04. Early estimates from the latest benefit review
findings would indicate that the initiatives taken by the Agency
are continuing to impact on the levels of fraud and error, which
have been further reduced to 5.1%.
In relation to Housing Benefit (HB), during
2002-03 the Northern Ireland Housing Executive (NIHE) was committed
to developing and maintaining effective controls to minimise the
risk of Housing Benefit fraud and to ensuring if it did occur,
it was detected and appropriate action taken to deal with it.
Through a range of measures introduced under
the Housing Benefit Security Strategy the Housing Executive has
undertaken several initiatives, by targeting particular claims,
to determine the level of fraud in certain tenure groups.
The organisation has put in place arrangements
and a process for identifying and detecting benefit related fraud.
The process describes the working methods used to establish whether
fraud exists in cases and, if so, ensures that it is referred
to the designated fraud officers and to the Benefit Investigation
Unit in the Social Security Agency.
Other initiatives were:
— Providing HB data to the Housing
Benefit Matching Service (HBMS) for matching against a variety
of other databases in order to identify potential fraud or error;
— Investigating reports produced by
the National Fraud Initiative, which emanates from the Audit Commission,
in particular the Occupational Pensions report, which provides
a match between Pensions declared for HB purposes and the pension
payment records of providers;
— Data matching between the Rates Collection
Agency Housing Benefit records and the Housing Executive's Housing
Benefit records with results being investigated under headings
such as duplication of claims and undeclared property assets for
an additional dwelling;
— Data matching with the Child Support
Agency;
— Data matching against the Housing
Executive Payroll System;
— Income Support/Job Seekers Allowance
Housing Benefit claim file matched against the Social Security
Agency Income Support/Job Seekers Allowance claimants, file to
identify any inconsistencies;
— Linking up House Sales information
to Housing Benefit information;
— Fraud awareness training programme
for all District Offices;
— HBMS were asked to do a National
Insurance Number scan to validate all National Insurance Numbers
held on record, essential to the accurate and smooth running of
any form of data matching exercise with HBMS and other agencies;
and
— A study of the working relationship
between the Housing Executive and Social Security Agency's Benefits
Investigation Unit was undertaken.
In 2003-04 the NI Housing Executive took the
following additional actions:
— The adoption of the Public Service
Agreement to reduce fraud and error in Housing Benefit by 25%
by the year 2006;
— A Fraud Awareness programme;
— A review of the targeting of anti
fraud investigations;
— The use of data and data matching
to identify possible fraud;
— The pursuit of more prosecutions
and sanctions;
— An attempt to gain greater public
support in the fight against fraudsters;
— The implementation of the principles
of good practice, common core training and continuous improvement;
— The promotion of closer working with
the Benefits Investigation Unit;
— The exploration of a risk analysis
approach to identifying potential fraudsters;
— The maintenance of a regular system
of review of quality and effectiveness of referrals and investigations;
— The exploration of access to claimant
financial intelligence;
— Comparison of NIHE performance with
other agencies within Northern Ireland and Local Authorities within
GB; and
— Analyses of causes of official error
and identification of means of reducing these.
In the current year 2004-05 the NI Housing Executive
plan to:
— Implement a systematic recovery ;
plan for historic overpayments;
— introduce new methods of measurement
of performance (Security against Fraud and Error);
— Introduce a new computerised Fraud
Management module;
— Prepare for changes to the verification
framework, the abolition of benefit periods and the introduction
of risk based interventions;
— Explore data matching with the Inland
Revenue;
— Establish a composite register of
fraudsters;
— Research further the extent of landlord
fraud;
— Explore greater involvement in claimant
intelligence gathering; and
— Carry out a further datamatching
exercise with the Rates Collection Agency to identify duplicate
claims.
The NI Housing Executive has undertaken and
completed a review of its Housing Benefit—Fraud/Error Strategy.
The combined levels of fraud and error in Housing
Benefit administered by NIHE reduced from 3.8% in 2002-03 to 1.9%
in 2003-04. Early estimates from the latest benefit review findings
would indicate that the initiatives taken by NIHE are continuing
to impact on the levels of fraud and error, however, it is too
early in the year to be able to categorically state that there
will be a decrease in 2004-05.
REASONS FOR
FRAUD AND
ERROR
Following criticisms by the Public Accounts
Committee and others in the mid 1990s, the Social Security Agency
developed a major strategy for tackling fraud and error which
included an emphasis for the first time on comprehensively measuring
levels of fraud and error across the benefit system. Since 1999
the Agency has regularly measured fraud and error in relation
to Income Support, Jobseekers Allowance and Housing Benefit and
the results are published every year.
As well as measuring the fraud and error levels,
the strategy also covers getting cases right at the gateway to
benefit, putting things right when things go wrong and keeping
things right by updating benefit entitlement when circumstances
change. The Agency recognises that further improvement is needed
and the current action plans are focused on meeting aggressive
targets to reduce fraud and error in all the major benefits. The
latest figures for Income Support and Jobseekers Allowance show
that the Agency is on target to meet the objectives set out in
the current Public Service Agreement (PSA).
Due to the nature of the business of delivering
of social security benefits, fraud and the risk of fraud will
always be present, however the Department is actively addressing
this issue through the actions noted in response to the previous
question and current performance measures indicate that PSA targets
are being achieved. In addition, training continues to be a major
commitment for the Social Security Agency to ensure that its staff
are fully equipped with the necessary skills to pay the right
benefit to the right customer first time—every time. During
2003-04 the Agency spent £2 million (equivalent to 6,000
staff man-days) on benefit training.
More focused training and material on complex
decision making issues are now being provided and there is increasing
emphasis being put on development of staff. The new Learning Pathways,
introduced in April 2003, provided greater flexibility and allowed
training to be targeted at specific needs. This has resulted in
more effective training and contributed to improved accuracy.
Training has always been recognised as an essential
part of the Benefit Security Strategy, which introduced a comprehensive
range of initiatives, designed to reduce fraud and error and improve
accuracy.
Recent developments have been:
— A training package, which leads to
a professionally accredited qualification, has been introduced
for all fraud investigators. In July 1999 a new training package
was developed titled "Professionalism in Security" (PINS).
This is a Foundation Level Training package, accredited by Portsmouth
University. The training encompasses seven modules and is delivered
to Agency Fraud Investigators by Department of Work and Pensions
(DWP) Trainers. Staff receives full training in investigative
techniques, Data Protection and Human Rights legislation. Successful
completion of these modules results in the award of a professional
qualification, which is recognised in the wider fraud community.
It is mandatory for all Fraud Investigators to undertake this
training;
— Benefit Security Directorate has
continued to analyse the causes of fraud and error, risk assess
offices and carry out a series of Benefit Reviews. These initiatives
help to identify areas of weakness that are then addressed by
local training;
— Benefit Security have also been responsible
for providing consolidation centres where staff are able to receive
the necessary support required whilst learning a new benefit;
— Training is targeted at identifying
weaknesses and complex areas, increased levels of checking, more
frequent interventions on cases which are deemed to be susceptible
to error and more regular sharing and feedback of information
through staff fora.
In relation to Housing Benefit, the current
method of measuring of the level of fraud and error in the Housing
Benefit system is performed by Housing Benefit Review and began
in the year 2001-02. This system estimates the levels of customer
fraud, customer error and official error both as a percentage
of caseload and benefit expenditure. The performance figures since
then are as follows:
| | % of Caseload
| % of Expenditure |
| 2001-02 | 7.0%
| 3.8% |
| 2002-03 | 7.3%
| 3.8% |
| 2003-04 | 6.2%
| 1.9% |
| | |
|
These figures compare favourably with other benefit administering
authorities in Great Britain.
Although this method of measurement commenced in 2001-02,
the Housing Executive has always been actively involved in reducing
fraud and error in HB. The Housing Executive's current approach
to dealing with fraud dates back to the Public Accounts Committee
hearing on HB fraud in 1996. Following this hearing, where it
was accepted that the Housing Executive needed to introduce a
more structured approach to counter-fraud work, the Executive
established its HB Security Strategy, which became effective from
April 1998. This strategy introduced a number of initiatives including
the operation of the then new Verification Framework; data-matching;
other initiatives under the HB Fraud Order 1997; and the establishment
of a new Service Level Agreement with the Benefit Investigation
Unit of the Social Security Agency. Prior to this strategy, while
the Executive was still engaged in anti-fraud work, there was
no formal recording mechanism for the level of fraud found. The
Housing Benefit Security Strategy was subject to a major review
and updating during 2004.
As part of the updated strategy the Housing Executive has
identified the source and extent of the risks of fraud and error
and has ensured that a wide range of measures is in place to address
these risks. In doing so, it is planned that the downward trend
in fraud and error levels will continue into the future.
The Housing Executive has been involved in a significant
recruitment exercise over the past three years and this has played
a part in error rates, although its effect is considered to be
limited. In an organisation like the Housing Executive there will
always be a degree of staff turnover. This can create problems
in the administration of a complex benefit such as Housing Benefit
and, until new staff are fully trained and their expertise has
built up, it is possible that there will be a higher level of
error than with more experienced staff. However, in the evidence-taking
session on 6 September the impression was incorrectly given to
the Sub-Committee that during 2002-03 the Housing Executive had
300 inexperienced, casual staff dealing with Housing Benefit.
This in fact was not the case. The point that should have been
made was that over the three year period 2001-02—2003-04
the Housing Executive has recruited over 300 new permanent staff
at the grade responsible for assessing Housing Benefit claims
(though not all these staff were on Housing Benefit duties). Officials
have indicated that they wish to apologise to the Committee for
providing this misleading information.
Considerable investment is made in ensuring that staff are
trained in all aspects of the administration of Housing Benefit.
During 2002-03, a wide range of courses was run, covering such
issues as Housing Benefit Audit, Fraud Awareness, Housing Benefit
Assessment, Housing Benefit System Usage, providing 1,000 training
places. Housing Benefit training courses run in 2003-04 provided
1,300 training places.
CHILD SUPPORT
AGENCY
On 25 November 2002, the Child Support Agency began processing
cases on the new integrated computer and telephony system (CS2)
and from 3 March 2003, new applications for child support have
been assessed using the new computer system and the new legislation.
The introduction of the new computer system has been beset
by problems. Since January 2004 the Agency has introduced a number
of system fixes designed to improve performance and stabilise
the new computer system in advance of Migration. However there
are still considerable and unacceptable problems and it is anticipated
that this programme of system fixes will continue into 2005.
The current law states that existing cases will be transferred
in bulk to the new scheme when Ministers are satisfied that it
is working well. However there is no assurance that this will
be possible and the Minister for Northern Ireland will be discussing
with Secretary of State for DWP possible options.
November 2004
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