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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