15. Fraud Investigation Team

Name of meeting:
Date:
Cabinet
24 March 2015
Title of report:
Fraud Investigation Team
Is it likely to result in spending or
saving £250k or more, or to have a
significant effect on two or more
electoral wards?
Is it in the Council’s Forward Plan?
No
Is it eligible for “call in” by Scrutiny?
Yes
Date signed off by Director & name
David Smith, Director of Resources
3 March 2015
Is it signed off by the Director of
Resources?
Yes
Is it signed off by the Assistant
Director – Legal, Governance &
Monitoring
Cabinet member portfolio
Julie Muscroft , 4 March 2015
Cllr Graham Turner
Electoral wards affected:
Ward councillors consulted:
All
N/A
Public or private:
Public
1.
Yes
Purpose of report
1.1
To inform members on the transfer of staff to the Single Fraud Investigation
Service (SFIS) on 1st Nov 2015.
1.2
For a decision on the retention of specialist fraud investigation and
prosecution staff to undertake work on council tax reduction, social housing
and blue badge fraud.
2.0
Key points
2.1
The formation of SFIS, covering all welfare benefit fraud, was announced in
the Autumn Statement by the Chancellor of the Exchequer on 5th December
2013.
2.2
The announcement confirmed that SFIS will be launched within the
Department for Work and Pensions (DWP) as a single organisation and
implementation has initially commenced with the pilot sites from 1st July 2014
with the main implementation programme running from 1st October 2014
through to 31st March 2016.
2.3
SFIS will operate to a single set of policies and procedures and will provide a
national service to tackle all welfare benefit fraud. It brings together: Welfare benefit fraud investigations currently undertaken by the DWP,
 Local Authorities Housing Benefit fraud.
 Her Majesty’s Revenues and Customs (HMRC).
2.4
Under the SFIS implementation programme, the Council is due to transfer
both Housing Benefit (HB) fraud investigations staffing resources and
associated HB fraud investigation and prosecution work to the DWP on 1st
November 2015. With regard to prosecution work, this will be conducted by
the Crown Prosecution Service (CPS). The Council’s legal officers are not part
of the transfer programme.
The table below shows the number of staff affected by the SFIS change:Current Benefits Investigation Team 2014/15
FTE's
Senior Manager Fraud Investigation
1.00
Team Manager Fraud Investigation
1.00
1.00
Team Manager Fraud Investigation
Investigation Officer
Investigation Officer
Investigation Officer
Investigation Officer
Investigation & Admin. Officer
1.00
1.00
1.00
1.00
0.92
Investigation & Admin. Officer
0.76
Financial Investigation Officer
1.00
Financial Investigation Officer
0.95
10.63
2.5
The HB staff currently undertaking fraud investigation work for the Council will
all transfer either under TUPE or under a statutory Transfer Scheme under
Section 38 of the Employment Relations Act 1999.
2.6
Six months in advance of the proposed transfer date, (1st May 2015) the DWP
will commence discussions with the Council regarding the transfer of affected
staff and the associated HB fraud investigation work.
2.7
Since the initial announcement of SFIS in the Autumn Statement in October
2010, the Government has repeatedly impressed upon local authorities that
they will be responsible for combating and tackling other fraud areas outside
of benefits fraud, e.g. council tax reduction fraud, social housing fraud, right to
buy fraud, blue badge fraud, single person discount fraud and other council
tax related fraud.
3.0
Implications for the Council
3.1
Due to the transfer of affected staff to the DWP there will be a £12 million
reduction in the Housing Benefit (HB) Admin grant funding to local authorities
in 2015/16 and £37 million reduction in 2016/17. For Kirklees the admin grant
loss related to this reduction is estimated at £242,988, this should take effect
in 2016/17.
3.2
Once the transfer of staff and the work has been completed, the Council will
lose the powers conferred by sections 110A (1B) and (1C) (a), 116A (2) (a),
189(4) and (5) and 191 of the Social Security Administration Act 1992(a) that
currently allows the Council to undertake HB fraud investigation and
prosecution work, however, the SFIS team will have no access to the
Housing benefit systems.
3.3
There is a legislative requirement within the “Council Tax Reduction Schemes
(Detection of Fraud and Enforcement) (England) Regulations 2013 that from
the 1st April 2013 local authorities will undertake fraud prevention, detection
and prosecution work in relation to the localised Council Tax Reduction
Scheme(s) (CTRS). SFIS have no legal power to investigate Council Tax
Reduction cases.
3.4
The implication of 3.2 and 3.3 above means that the Council will have to retain
some fraud investigation staff to: Administer Housing Benefits case files and referrals to the SFIS
investigation teams, this should be funded through new burdens
funding from the DWP. This should include cancelling and recovery of
HB overpayments following successful prosecutions.
 Fraud investigation staff to investigate and prosecute Council Tax
Reduction fraud,
 Linking CTR to HB cases for possible prosecution following
investigation by SFIS.
3.5
The Prevention of Social Housing Fraud Act 2013 introduced new criminal
penalties for sub-letting or parting with possession, without permission, for
social housing.
3.6
The Council has received Government funding during 2014/15 to combat and
tackle social housing fraud, however, this funding ends on 31st March 2015,
the Government’s expectation is that when the funding expires resources will
still be provided by the Council to continue tackling social housing fraud.
3.7
The Customer and Exchequer Services fraud investigation team already
investigates a number of other fraud areas outside of housing benefits fraud
and in 2013/14 the following results were achieved:-
3.7.1 Council Tax Reduction
The estimated number of sanctions/ prosecutions p.a is 25 and for penalties it
is estimated at 80 cases per annum, based on these figures and the
estimated reduction per case of approx £500, the overall fraud would be
£52,500 (105 case x £500) and for the additional £70 penalty this would result
in income of approx £5,600
3.7.2 Single Person Discount
The total number of properties canvassed in the (SPD) review was over 53k
and we cancelled SPD on 970 accounts which resulted in £276,000 being
added to the Council Tax collection fund with a further total of £68,000 added
in penalties issued.
3.7.3 Social Housing fraud
Successfully recovered 29 social housing properties, It is estimated by the
Audit Commission that on average it costs £18,500 per annum to house a
family in temporary accommodation whilst waiting on the Housing Register.
For 2013/14, had this accommodation not been made available it could have
cost the council £536,500.00.
The fraud investigation process will also cover Right to Buy (RTB) fraud,
including looking at the financing of the house purchase, cash buys and
residency checks. In total, we expect to investigate up to 20 cases per annum.
In 2013/14, the council stopped £127,750.00 in discounts that people would
have received had the right to buy applications progressed.
3.7.4 Blue Badge fraud
Successfully formally cautioned 46 persons who had misused blue badges,
for every blue badge that is fraudulently misused and detected, it is estimated
by the Department for Transport that it costs the local authorities on average
£500 in lost car park revenues per badge per year. Therefore, had the misuse
of the blue badges not been stopped it could have cost the council additional
income of up to £23,000 in car park revenues.
3.7.5 Financial investigation
Using the Proceeds of Crime Act 2002, a total of 4 confiscation orders were
obtained with a total value of £756,515. The actual income expected to
Kirklees in 2014/15 is approx £102,000. See table in Appendix 1
3.8
Preferred Option
3.8.1 The Council needs to retain some of the skilled staff we have in the fraud
team in Kirklees to undertake the statutory obligations we are to retain
following the transfer of HB work to SFIS. The preferred option is based on
the following:1) The assumption that we retain resources to investigate fraud in, council
tax discounts, social housing, blue badge.
2) The sustainability of the Financial Investigation team, given that the
majority of the work is no longer in Housing Benefit and is expected to be
in Trading Standards. We transfer the financial investigation team staff
1.95 FTE’s to West Yorkshire Trading Standards.
3) We transfer the other remaining staff to SFIS on 1st November 2015
4) The future line management of the Corporate Fraud elements of Blue
Badge and Social housing fraud can be considered at a later point.
3.8.2 The resource within the team would be split in accordance with the table
below:1) Retain staff to investigate - Council Tax Single Person Discount (SPD), Council Tax Reduction
(CTR), Social Housing, Blue Badge
Income
Staff retained by the Council
1.5 FTE’s fraud staff to undertake SPD and CTR
fraud investigations, approx 33,000 cases p.a.
1 FTE fraud investigator to undertake social
housing fraud – to cover 25 – 30 cases per year
Income from
Fines CTR
and SPD
Funded by
Housing from
HRA
Current
costs
Est.
income
New
team est
cost
£47,187
£62,916
-£15,729
£31,458
£31,458
£0
0.5 FTE fraud investigator to undertake blue badge
fraud work. 100 cases per year
No specific
funding,
£15,729
£0
£15,729
1 FTE - Admin officer to provide support for the
internal team
New burdens
funding DCLG
£26,155
£26,155
£0
Sub Totals
£120,529
£120,529
£0.00
Total of 4 FTE’s
2) Transfer Financial Investigation (FI) to West Yorkshire Trading Standards (WYTS)
1.95 FTE’s - Financial investigation, Proceeds of
Crime – financial investigations 10-15 cases per
Self-financing FI work income
year
3) Transfer the remaining staff to SFIS
st
4.68 FTE staff remaining to transfer to SFIS
1 Nov 2015 transfer date
£85,050
£183,611
The main advantages for this are:




Investigation and prosecution skills already present for fraud areas
The Benefits team manager will take day to day control of the fraud team;
The main areas of work are still council tax and benefit related, i.e. CTR
and SPD fraud.
SFIS liaison requires Customer Information System Access which
benefits staff already have access
Financial Investigation Sustainability - Increased stability and resilience
for the financial investigation team, moving forward as trading standards
work will form the majority of the investigation cases (see Appendix 1).
WYTS are better placed to form the necessary partnerships across
trading standards.
Disadvantages for this option are: Managers in WYTS would require training in Fraud/PINS
3.8.3 Within this option it is proposed that the residual FI work would also be
transferred to WYTS along with the associated risks and part of the potential
income please.
3.8.4 In order to mitigate the risks associated with the transfer of FI staff to WYTS; it
is recommended that the Council agree a “one off” transfer of part of the
expected income to cover the salary costs for £85,050 for 1 year.
3.8.5 The Council is still owed; £187,150.77 from existing orders; this money is
collected by HM court services. This would leave £102,100.77 for Kirklees and
The remainder £85,050 should enable WYTS to take full responsibility for the
FI staff and allow sufficient time for future income to be generated from any
new confiscation orders. see table in Appendix 1
3.9
Legal Implications
The Government has introduced a statutory Transfer Scheme under Section
38 of the Employment Relations Act 1999 - the Transfer of Undertakings
(Protection of Employment) (Transfer of Staff to the Department for Work and
Pensions) Regulations 2014 and the Council will have to conform to the new
regulations during the transfer of the affected staff and the HB fraud
investigation work.
An agreement will also be required with WYTS on the additional transfer of
staff (2Fte’s) undertaking FI work.
3.10
Equality and Diversity
There are no considerations necessary.
3.11
Risks and financial implications
3.12.1 It is estimated that the implementation of the fraud investigation team should
be cost neutral to the Council; the assumed revenue income is shown in the
table above and is based on previous year’s findings from results achieved.
It is expected that the overall savings to the public purse will far outweigh the
cost of the investigation resources. The total estimated saving from all fraud
areas highlighted above (excluding HB) is £1,947,865 (see section 3.7 above)
4
Consultees and their opinions
Preliminary meetings have already taken place with WYTS to discuss the
possibility of transferring the FI staff; the discussions have progressed in line
with the proposal within this report.
Jane Brady, Assistant Director for Customer and Exchequer Services
supports the recommendations made.
Martin Dearnley – Head of Audit and Risk supports the recommendations
made.
5
Next Steps




Discuss the proposals with staff and the Unions.
To undertake a recruitment exercise from staff already in the fraud
investigation team to establish the staff who will remain.
Complete the transfer of staff to WYTS.
Complete the transfer of staff to the DWP
6
Officer recommendations and reasons
6.1
It is recommended that the Council implement the fraud investigation team as
set out in this report.
The financial investigation team are to move to WYTS, if a suitable transfer
can be agreed between the parties, if an agreement cannot be reached then
the FI team are to remain with Customer and Exchequer Services, and the
position would need to be reviewed.
Jane Brady, Assistant Director of Customer and Exchequer Services is given
delegated responsibility to progress the implementation of the fraud
Investigation team and transfer of staff.
Jane Brady, Assistant Director of Customer and Exchequer Services is
allowed to retain her delegated powers to authorise prosecutions and Dave
Thompson, Head of Customer Services is similarly allowed the powers and
responsibility in the absence of Jane.
7
Cabinet portfolio holder recommendation
The Portfolio Holder for Resources supports the principles and actions within
the officer recommendations.
8
Contact officer and relevant papers
Steve Bird – Head of Welfare and Exchequer Service
Nigel Armitage – Senior Manager Welfare and Exchequer Service
9
Assistant Director responsible: Jane Brady – Assistant Director of
Customer and Exchequer Services
APPENDIX 1
Type of Case
Total
Order
Value
Total
Collected
Still to
Collect
(HMCS)
Summary of
recent FI cases.
variance
£272.65
Kirklees
Council
Income
still to
collect
Income
Income
due to
due to
Bradford WYTS
Council
Historic
WYTS
Benefits
and
Cases no
Others
longer
investigated
Wakefield Council
Benefits
£5,375.46
£5,375.46
£0.00
£0.00
£5,375.46
Kirklees Council
Benefits
£9,771.29
£30.00
£9,741.29
£9,741.29
£9,771.29
Kirklees Council
Benefits
£57,150.72
£57,150.72
£0.00
£0.00
£57,150.72
Kirklees/ DWP
Benefits
£24,317.75
£24,317.75
£0.00
£0.00
£24,317.75
Kirklees Council
Benefits
£11,335.00
£11,335.00
£0.00
£0.00
£11,335.00
Kirklees Council
Benefits
£15,889.00
£12,650.00
£3,239.00
£3,239.00
£15,889.00
Kirklees Council
Benefits
£5,366.00
£3,366.00
£2,000.00
£2,000.00
£5,366.00
Wakefield Council
Benefits
£5,647.42
£5,647.42
£0.00
£0.00
£5,647.42
Kirklees Council/
DWP
Kirklees Council
Benefits
£23,830.35
£23,830.35
£0.00
£0.00
£23,830.35
Benefits
£11,932.54
£12,532.54
£0.00
£0.00
£11,932.54
Kirklees Council
Benefits
£8,061.90
£2,061.90
£6,000.00
£6,000.00
£8,061.90
Kirklees Council
Benefits
£11,137.39
£12.39
£11,125.00
£11,125.00
£11,137.39
WYTSS
Trading Standards
£13,536.79
£13,536.79
£0.00
£0.00
£13,536.79
WYTSS/ Leeds
Council
Kirklees Council
Trading Standards/
Licensing
Benefits
£25,625.00
£25,625.00
£0.00
£0.00
£25,625.00
£10,139.00
£10,139.00
£0.00
£0.00
Bradford Council
Environmental Waste
£848.00
£848.00
£0.00
£0.00
South Tyneside
Council
Kirklees Council
Benefits
£948.20
£948.20
£0.00
£0.00
£948.20
£2,500.00
£2,500.00
£0.00
£0.00
£2,500.00
£461.96
£461.96
£0.00
£0.00
£461.96
£581.20
£581.20
£0.00
£0.00
£581.20
WYTSS
WYTSS
Benefits/ Mortgage
Fraud
Trading Standards/
Mortgage Fraud
Trading Standards/
Mortgage Fraud
£10,139.00
£848.00
WYTSS
Trading Standards
£179,856.66
£90,003.51
£89,853.15
£30,010.95
Kirklees Council
Benefits
£7,628.05
£7,628.05
£0.00
£0.00
£7,628.05
Wakefield Council
Benefits
£389.52
£389.52
£0.00
£0.00
£389.52
Kirklees Council
Benefits/ Mortgage
Fraud
Trading Standards/
Benefits
Benefits
£13,455.40
£10,283.63
£3,171.77
£3,171.77
£13,455.40
£24,860.06
£3,626.85
£21,233.21
£6,177.23
£14,965.37
£3,500.00
£11,465.37
£11,465.37
£93,771.25
£0.00
£93,771.25
£93,771.25
WYTSS
Planning
Enforcement
Trading Standards
£16,927.07
£0.00
£16,927.07
£6,770.83
£10,156.24
£16,927.07
WYTSS
Trading Standards
£7,088.16
£0.00
£7,088.16
£2,835.26
£4,252.90
£7,088.16
WYTSS
Trading Standards
£0.00
£0.00
£0.00
£0.00
Bradford Council
Benefits
£3,146.07
£622.65
£2,523.42
£842.82
Stockport Council
Benefits
£250.00
£250.00
£0.00
£0.00
£250.00
£187,150.77
No longer FI
Cases
£243,236.43
WYTSS/ Kirklees
Council
Kirklees Council
Kirklees Council
TOTAL for ALL cases
£606,792.58
£328,653.89
£278,138.69
£59,842.20
£179,856.66
£15,055.98
£24,860.06
£14,965.37
£93,771.25
£0.00
£3,146.07
£1,680.60
£1,680.60
£0.00
£89,307.32
£363,556.15