Select Committee on Public Accounts Fourth Report


3  Managing debt

18. The Department's accounts were also qualified because of inadequacies in its systems for accounting for customers owing the Department money they had been overpaid, which totalled £1.1 billion at 31 March 2004. There is no satisfactory audit trail through these systems. At 31 March 2004 not all benefit overpayments had been identified, some had been identified but not referred for recovery action, and others were awaiting input into the recovery systems.[20]

19. The Department expected to only recover £550 million of the estimated £9 billion overpaid in the last three years. Fraudulent payments could only be recovered if they were tracked down, and some of the debt from official and customer error was of a kind that the Department would not seek to recover.[21] Four years after the introduction of resource accounting, the Department still does not know how much it is owed by a significant number of its customers.

20. The Department has decided on new ways to identify and manage debt as part of creating a more focussed organisation, standardising the processes, putting staff in a small number of centres where they can be experts, providing a set of commercial off the shelf software to help people manage the IT systems, and improving the linkages between debt management and the accounting systems of the Department as a whole. The Department expect to complete the migration of existing data on debt to a new debt management system by September 2005, and believe in around two years' time it will have made substantial progress in improving the management of debt.[22]

21. Around 2,600 staff work in debt recovery, at a cost of £48 million, or 23p per £1 of debt collected on average. Employing more on debt work might help recover more debt, but the Department believes that the improvements it has in train, on which it is spending some £100 million should increase recovery more effectively than simply increasing the number of staff engaged on debt management. In addition the Department had to live within agreed resources, with debt recovery just one of a number of priorities. It expected broadly the same number of staff on debt work after the job cuts, who would take on more debt recovery work as the Department centralised its business in this area. The Department had obtained funding, some £2million over 3 years, to pilot work with private sector debt collectors for pursuing claimants who were no longer in receipt of benefits.[23]

22. The Department was not authorised to use increased debt recoveries to fund additional posts to chase debts that were harder to collect. The amounts for the Department's staffing budget were set separately. But as part of each Spending Review the Department had an opportunity to make a case for additional staff on any part of its business.[24]

23. As regards the relative attention given to recovery of debt due to error and to fraud, the Department's focus was on recovering as much recoverable debt as possible, whatever the cause. There were distinct rules for recovering overpayments arising from official error. For fraud debt recovery was only one aspect of the Department's strategy which included, for example, sanctions and legal action including prosecution and imprisonment. The maximum amount the Department could recover was higher for fraud than for error (£11.20 per week compared to £8.40). There were rules about how debt could be recovered and who had first claim on the debt, and the Department was usually the last to be able to make a recovery.[25]

24. Where customers had been overpaid, the Department could write off arrears. If the overpayment was a result of its own mistakes it would ask for the money back, but would not necessarily press for it, especially if it had been spent in good faith. On the risk that some people, such as the elderly, would want to pay the money back and might go without food to ensure they could, the Department had to balance concern for individuals with responsibility to the taxpayer.[26]


20   C&AG's Report, paras 15-18 Back

21   Q 22 Back

22   Qq 134-135; C&AG's Report, para 16 Back

23   Qq 61-72 Back

24   Qq 136-144 Back

25   Qq 73-81, 99 Back

26   Qq 123-126 Back


 
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