Source: https://www.oag.govt.nz/2008/benefit-fraud/part2.htm
Timestamp: 2019-08-23 19:48:46
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Part 2: Preventing benefit fraud — Office of the Auditor-General New Zealand
Part 2: Preventing benefit fraud Ministry of Social Development: Preventing, detecting, and investigating benefit fraud. https://www.oag.govt.nz/2008/benefit-fraud/part2.htm https://www.oag.govt.nz/@@site-logo/controller_ag_international_400x37.png
In this Part, we state our expectations for preventing benefit fraud, and present our findings and recommendations about the Ministry's:
overall strategy for preventing, detecting, and investigating benefit fraud;
identification of benefit fraud risks;
systems, policies, and procedures for preventing benefit fraud;
relationships with external stakeholders; and
evaluation of benefit fraud prevention activities.
Benefit fraud prevention should involve the Ministry identifying benefit fraud risks, and using necessary policies, systems, and procedures to minimise the risks in all areas of its operations.
have a clear stance on benefit fraud and defined strategies for counteracting it;
thoroughly and regularly assess benefit fraud risks;
have effective systems, policies, and procedures to address and minimise identified benefit fraud risks; and
evaluate the effectiveness of its benefit fraud prevention activities.
Overall strategy for preventing, detecting, and investigating benefit fraud
The Ministry has a clear stance on benefit fraud and a defined strategy for counteracting it. The Ministry has recently revised its strategy with an aim to better anticipate and prevent benefit fraud.
The Ministry does not tolerate benefit fraud. Its policy is to investigate all allegations of benefit fraud, and to seek punitive action and recovery of overpayments with all proven cases.
The aim of the Ministry's management of benefit fraud is to protect the integrity of the benefits system by ensuring that people receive their full and correct benefit entitlements at the right time. There was strong understanding among Ministry staff we interviewed of the Ministry's position on benefit fraud and the importance of ensuring payment of full and correct benefit entitlements.
The Ministry has a defined strategy for counteracting benefit fraud. The strategy was established in the mid-1990s and focuses on:
prevention/deterrence - educating the Ministry's clients about their obligations when receiving benefits, and the consequences of not meeting those obligations;
intervention - using specialist staff to investigate allegations and work with clients to encourage them to meet their obligations;
detection - using systems and procedures to detect possible cases of benefit fraud; and
sanction - applying appropriate penalties in cases of proven benefit fraud.
Recent changes to the Ministry's strategy for preventing, detecting, and investigating benefit fraud
The Ministry revised its overall strategy for preventing, detecting, and investigating benefit fraud in 2007, in response to the country's largest benefit fraud (see Figure 5 in Part 1). The Ministry has called its shift in strategic focus an “intelligence-led approach”. The new approach aims to enable the Ministry to better anticipate, prevent, mitigate, and manage benefit fraud and its associated debt.
The Ministry's intelligence-led approach involves four main changes:
creating a dedicated Intelligence Unit within the Integrity Services group;
increasing the Integrity Services group's involvement and collaboration with other parts of the Ministry to ensure that appropriate standards are used to protect and improve the integrity of the benefits system, and also identify risk areas to be addressed;
moving the Ministry's Internal Fraud Unit into the Integrity Services group; and
establishing a new senior governance group in the Ministry to oversee integrity, security, and intelligence issues.
Identifying benefit fraud risks
We examined how the Ministry identifies benefit fraud risks at strategic and operational levels. In our view, the Ministry could carry out more assessment of risks in relation to benefit fraud.
The Ministry had not, at the time of our audit fieldwork, identified and assessed the risks associated with benefit payments. A fraud risk assessment would involve the Ministry:
identifying and assessing risks associated with benefit payments;
assessing the effectiveness of existing controls for benefit payments and identifying any improvement options; and
identifying wider emerging risk areas or trends affecting the benefits system.
The Ministry has recognised the usefulness of fraud risk assessments. The Intelligence Unit plans to carry out fraud risk assessments and update them periodically.
In our view, the Ministry could specifically link the findings of its planned fraud risk assessments to its overall strategy for counteracting benefit fraud. Good practice guides on counteracting fraud recommend using detailed fraud control plans to:
specifically link planned actions to issues identified in up-to-date fraud risk assessments;
set timetables and targets for addressing identified issues or risks; and
provide an ability to formally track and review progress against the plan.
We recommend that the Ministry of Social Development periodically carry out fraud risk assessments of emerging risks in the social security benefits system, and use the findings to guide and target its management of fraud prevention activities.
Other improvements to ongoing strategic risk identification
Continual changes to operating policies and procedures for the benefits system can introduce new fraud risks that need to be identified and managed. Therefore, it is important that the Integrity Services group works well together with other Ministry groups. The Ministry has identified that the Integrity Services group has had limited formal means to use the lessons learned from its benefit fraud prevention, detection, and investigation activities to influence the wider setting of standards and risk discussion in the Ministry. The Ministry plans to fix this deficiency through closer working relationships between the Integrity Services group and other groups of the Ministry.
At the time of our audit, the Ministry planned to set up a senior cross-Ministry governance group to oversee strategic integrity, security, and intelligence issues.
Because these strategic and governance changes were at the planning stage during our audit, we were unable to examine their effectiveness. However, in our view, they have the potential to improve the Ministry's strategic management of benefit fraud risks.
The 10 regional Benefit Control Units have systems and procedures in place to assess benefit fraud risks that are unique to their particular region.
The Benefit Control Units, as well as other business units within Integrity Services, use regular meetings and outcome reporting to identify emerging issues or potential region-specific risks. In the regions we visited, this included:
regular regional meetings of all of the Ministry groups to discuss existing or emerging risks in the region; and
weekly reporting of benefit fraud prevention, detection, and investigation activities and outcomes within Benefit Control Units and to the national office of the Integrity Services group.
The Ministry has several systems and procedures in place to receive and manage allegations of benefit fraud from staff and members of the public. A standard national risk assessment form is used to screen all allegations received by Benefit Control Units and to prioritise action to be taken. Allegations considered to be high risk are formally investigated. We discuss the system and procedures for assigning allegations for investigation in more detail in Part 4.
Systems, policies, and procedures to address identified risks and prevent benefit fraud
The Ministry promotes awareness of benefit fraud prevention, and encourages its clients to meet their obligations when receiving benefits. It has recently increased its collaboration with other public agencies involved in fraud prevention.
Benefit fraud prevention responsibilities
The Ministry views prevention of benefit fraud as an organisation-wide responsibility. However, the Benefit Control Units have specific benefit fraud prevention responsibilities. These include:
using early intervention programmes to help ensure that recipients of benefits get their full and correct entitlements; and
delivering regional programmes to prevent benefit fraud.
Staff in Benefit Control Units who have specific roles in preventing benefit fraud are Field Officers and Investigators. The Ministry was reviewing the Field Officer role during our audit.
The Ministry's service delivery arm, Work and Income, also has an important role in preventing benefit fraud through its network of service centres throughout the country. These Work and Income service centres are the main point of contact for people applying for benefits and maintaining an ongoing relationship with the Ministry.
Case Managers in Work and Income service centres regularly meet with the Ministry's clients and therefore have a critical prevention role. Their work to correctly and accurately assess clients' circumstances and benefit entitlements helps the Ministry to identify and prevent attempts to commit benefit fraud.
Benefit fraud prevention activities
The Benefit Control Units' activities to prevent benefit fraud focus on direct liaison with the Ministry's clients and the wider community, as well as close interaction with Work and Income service centres.
Benefit fraud prevention activities with clients
Field Officers in Benefit Control Units provide an important benefit fraud prevention role for the Ministry. Their main responsibility is to educate clients about their obligation to inform the Ministry of changes in their circumstances that might affect their benefit entitlements. Failure by clients to do this puts them at risk of committing benefit fraud. The Field Officers encourage this voluntary compliance by clients mainly through early intervention programmes.
Early intervention programmes are generally organised from the national office of the Integrity Services group, but on occasion can be initiated within a region. Each programme runs for three months and targets a particular benefit or client group. The targets are chosen based on analysis of proven benefit fraud cases and discussion within the Integrity Services group to identify issues or trends that present higher risk of benefit entitlement discrepancies.1
Clients are selected at random from a target group for each three-month programme. Field Officers arrange and conduct interviews with the clients selected in their region. These interviews are used to:
ensure that clients are receiving their full and correct benefit entitlements;
remind clients of their obligation to keep the Ministry informed of any changes in their circumstances; and
identify any cases of suspected benefit fraud or other entitlement discrepancies that may require further action to ensure payment of full and correct benefit entitlements.
The Ministry plans to increase targeting of higher-risk client groups, using more sophisticated data mining 2 and profiling by the Intelligence Unit. The aim is to increase the effectiveness of the early intervention programmes by focusing resources on areas of identified higher risk. The Ministry will shift the programmes from using random samples during a three-monthly period, to a continuous sampling process. Pilots of this new system were planned for early 2008 to mid-2008 and therefore were not examined in our audit.
The Ministry needs to carefully manage the shift away from random sampling of clients to ensure that it avoids unduly targeting people who are part of a client group identified as high risk but are properly meeting their benefit obligations.
Benefit fraud prevention activities in the wider community
Staff in Benefit Control Units have clear roles and responsibilities for preventing benefit fraud. An important activity is to promote to local communities the Ministry's position of not tolerating benefit fraud.
Networking with community groups is a defined role of Field Officers. The role also requires effective relationships with local government and community-based agencies that provide services to the Ministry's clients. The aim of this networking is to help ensure that those agencies know about and support the Ministry's position of not tolerating benefit fraud.
Investigators in Benefit Control Units also work with community groups and give seminars in their regions to promote the importance of people receiving their full and correct entitlements and avoiding benefit fraud.3
Staff in the Benefit Control Units we visited held community seminars and talks with:
major local employers and at career service expos;
youth groups and teen pregnancy groups;
ethnic groups representing communities with English as a second language; and
other social support agencies in their regions.
Benefit fraud prevention work with Work and Income service centres
There is good interaction between Benefit Control Units and Work and Income service centres in promoting prevention of benefit fraud. Investigators and Field Officers from Benefit Control Units are assigned to Work and Income service centres in liaison roles. They teach Work and Income staff about benefit fraud, and maintain regular contact to provide specialist assistance with any benefit fraud-related issues. This system was working well in the Work and Income service centres we visited. Work and Income staff were well aware of the Ministry's position of not tolerating benefit fraud, and regularly consulted with their Benefit Control liaison officers about potential benefit fraud-related issues.
Work and Income's benefit fraud prevention role
Because staff at Work and Income service centres have regular face-to-face contact with the Ministry's clients, they are in a vital position to help the Ministry prevent benefit fraud. For example, it is important that Case Managers at the Work and Income service centres are effectively trained to correctly and accurately assess clients' circumstances and benefit entitlements. This includes the need for systems, policies, and procedures to accurately verify the identity of clients.
Case Managers we interviewed were well informed about the importance of their role in helping to prevent benefit fraud. Induction training for new staff, and ongoing training for existing staff, focuses on the importance of benefit fraud prevention. This includes:
reinforcing the need to follow clear procedures to ensure that clients understand and agree in writing to their obligation to inform Work and Income about changes in their circumstances that might affect their benefit entitlements;
teaching the interviewing skills to ensure that staff get the necessary information from clients to accurately assess and verify their entitlements; and
training by Benefit Control Unit staff in general benefit fraud awareness.
Work and Income service centres apply rigorous procedures to check and authenticate benefit applications. All applications processed by Case Managers are checked by staff with specialist authentication roles. In addition, Trainers in Work and Income service centres do monthly quality assurance checks of this authentication work. Regular national sampling of applications against national quality standards also occurs. Importantly, from a benefit fraud prevention perspective, separation of role functions means that a staff member who processes an application for a benefit cannot also approve its payment.
Verifying the identity of Ministry clients is vital for ensuring correct entitlement to benefits and preventing benefit fraud. After the major benefit fraud in late 2006 (see Figure 5), the Ministry commissioned KPMG to conduct an independent review of the Ministry's identity-related controls on new applicants for benefits.
The review found that the Ministry has strong controls and checks in place to obtain evidence of the identity of clients. The review did make some recommendations for checks, which - had they been in place - might not have prevented the major identity fraud, but could have resulted in its earlier detection. Recommendations for changes to existing systems, policies, and procedures used for client verification in Work and Income service centres included:
requiring photographic identification from clients;
performing checks with issuing agencies to verify the authenticity of identification documents if photographic identification is not provided; and
improving training and support resources about identify-related fraud for frontline staff.
An internal audit by the Ministry's Risk and Assurance group in October 2007 found that progress has been made with implementing these recommendations. Changes include:
a preference in Work and Income service centres for at least one form of identification to be photographic;
a requirement for all cases involving questionable identification to be assessed by service centre managers;
a requirement for all forms of identification presented to be recorded in the client database;
a review by the Ministry of its classification of forms of primary identification to ensure that they can be verified at source; and
training for Work and Income service centre staff about client identification procedures, including information about anomalies to look for in identification documents.
Promoting client awareness about benefit fraud
The Ministry uses several methods to clearly communicate to clients its zero tolerance approach to benefit fraud. One of the most important methods for this is through clients' interaction with their Case Managers at Work and Income service centres. Training and procedures at the service centres reinforce the importance of ensuring that clients understand that they are obliged to advise Work and Income of changes in their circumstances. Clients must sign a form as part of the application process to confirm that they have had their obligations explained to them and that they understand them. This is a useful control for any fraud investigation where a client denies knowledge of their obligation to advise changes in their circumstances.
The Ministry also raises client awareness by displaying benefit fraud posters and supplying information pamphlets in Work and Income service centres. Pamphlets are handed out by Ministry staff to clients at seminars. This promotional material is available in several different languages, to cater for Ministry clients whose first language is not English. The obligations forms that are signed by clients are also available in other languages.
Fraud prevention collaboration with external stakeholders
The Integrity Services group is also involved in external fraud prevention forums and working groups, within New Zealand and overseas. These include the Combined Law Agency Group in New Zealand, which is an inter-agency group aimed at improving co-ordination between agencies at an operational level to deal with organised crime, and the international Six Nations Benefit Fraud Conference. The Six Nations Benefit Fraud Conference also has delegates from Australia, Canada, Ireland, the United Kingdom, and the United States. The annual conference provides opportunities for government agencies involved in managing social security benefits systems to share experiences and initiatives about fraud prevention, detection, and investigation. Ministry staff involved in the conference told us it is an effective way of keeping up to date with international developments.
Increased inter-agency fraud prevention collaboration
The Ministry has recently sought to increase its collaboration with other government agencies involved in fraud prevention, especially in relation to identity fraud, as a direct outcome of the detection of the major identity fraud in late 2006 (see Figure 5).
We were told that the Intelligence Unit - established within the Integrity Services group in mid-2007 - has recently formed working relationships with intelligence sections in other agencies involved in fraud prevention activities (such as the New Zealand Police, the New Zealand Customs Service, the Department of Internal Affairs, and the Inland Revenue Department).
Given that the Intelligence Unit had only recently been created when we did our audit, we could not specifically assess the effectiveness of this new inter-agency collaboration. However, the increased sharing of strategic intelligence information and strategies should be beneficial for:
identifying emerging serious fraud risks or trends;
promoting whole-of-government responses to identified risks; and
improving the sharing of information and best practice initiatives to counteract fraud.
The Ministry conducts a biennial survey to assess clients' awareness of the consequences of committing benefit fraud. The Ministry uses findings from the surveys to help identify ways to encourage clients to meet their obligation to advise the Ministry of changes in their circumstances that might affect their benefit entitlements. The next survey is due to be conducted in 2008.
In our view, there is scope for the Ministry to more comprehensively evaluate the effectiveness of its various benefit fraud prevention activities. Regular, formal evaluation would help the Ministry to measure the effectiveness of its prevention activities. Intelligence information from the evaluations can also help to inform benefit fraud detection and investigation priorities throughout the Ministry.
We recommend that the Ministry of Social Development regularly and formally evaluate its benefit fraud prevention activities, and use this evaluation to help target benefit fraud detection and investigation activities.
1: These discrepancies can include identification of errors made by Ministry staff, or situations where a client may not be receiving the full social security assistance they are entitled to.
2: Data mining is a process of selecting, exploring, and modelling large amounts of data to reveal previously unknown patterns, behaviours, trends, or relationships which may identify cases of fraud.
3: The main role of Investigators is to investigate suspected fraud cases. We discuss their role in Part 4.