Benefit audit fails because of fraud

Widespread fraud together with wrongly calculated payments and overspending led Sir John Bourn, the comptroller and auditor general, to refuse to ratify the accounts of welfare payments for the eighth year running.

In a report issued by the National Audit Office (NAO), Sir John qualified his audit opinion on the Benefits Agency 1995/6 accounts because it had spent more than was approved by Parliament, there was "material error" in income support and family credit awards, and spending was "materially affected" by fraud.

Overspending in 1995/6 amounted to pounds 184.7m, compared with pounds 139.7m in 1994/5, the fourth successive overspend. While Sir John accepts that estimating the agency's overall spend, which amounted to pounds 34,384m, is difficult, the repeated failure of the agency to estimate accurately its future expenditure shows that its forecasting techniques are flawed.

The NAO found errors led to income support overpayments of an estimated pounds 485.4m and underpayments of pounds 167.5m, a total of 3.8 per cent of the pounds 17bn spent on the benefit.

This was considerably better than last year's performance, when 5.1 per cent of the total involved wrong calculations. It also found that family credit payments, on which pounds 1.7bn is spent, had a higher rate of inaccuracy. Research revealed that 10.6 per cent of family credit awards contained an error, which suggests that there are pounds 29.8m of overpayments (1.7 per cent) and underpayments of pounds 11.6m (0.7 per cent).

The NAO report acknowledges that efforts being made by the agency to tackle fraud have improved, and found that in 1995/6, the agency received a payback of more than pounds 5 for every pounds 1 invested in anti-fraud measures.

The national "Beat a Cheat" campaign - a hotline for members of the public to report benefit fraudsters - resulted in more than 50,000 calls in the first six weeks of its operation. Other measures being undertaken include an increase in home visits to claimants, and more cross-checking of information.

Sir John also says that the Benefits Agency needs to take action to ensure that losses are reported to Parliament promptly. At the end of March 1996, 290,000 potential overpayment cases were awaiting investigation to determine whether the amounts should be recovered or written off.

Appropriation Accounts 1995-6 - Class XIII, Vote 1: Central government administered social security benefits and other payments, NAO.