Amyas Morse, Comptroller and Auditor General, has qualified his audit opinions on the Client Funds Accounts of the Department for Work and Pensions on the grounds of material errors in the calculations of child maintenance assessments. He has also given an adverse opinion on the truth and fairness of the outstanding maintenance arrears on the 1993 and 2003 schemes.
The statutory child maintenance schemes in Great Britain are delivered by the DWP which is leading the schemes through a period of major reform.
The current scheme (the ‘2012 Scheme’) is the third scheme to process child maintenance cases (previous schemes were introduced in 1993 and 2003). The Department is running the older ‘legacy’ schemes concurrently with the new 2012 Scheme. At the same time, it is starting to close legacy cases, and, if the client chooses to re-apply, the Department establishes cases on the new 2012 Scheme. This year the Department has reported the 2012 scheme separately from the 1993 and 2003 schemes.
The Client Funds Accounts record the receipts of child maintenance from non-resident parents; payments to parents with care and the Secretary of State; arrears of unpaid assessments from non-resident parents; and a statement of cash balances held at the year end (the value of maintenance received which has not yet been paid out).
Irregular receipts and payments – 1993 and 2003 schemes
In 2014-15, the Department received £756.6 million in respect of child maintenance from non-resident parents assessed under the 1993 and 2003 schemes. The NAO has estimated that errors in assessments result in overpayments of child maintenance amounting to £4.2 million (0.54% of receipts) and underpayments totalling £6.5 million (0.85% of receipts).
Irregular receipts and payments – 2012 scheme
In 2014-15, the Department received £25.7 million in respect of child maintenance from non-resident parents assessed under the 2012 scheme. The NAO has estimated that errors in assessments result in overpayments of child maintenance amounting to £305,000 (1.19% of receipts) and underpayments totalling £295,000 (1.15% of receipts).
Outstanding maintenance arrears on 1993 and 2003 schemes
The balance of £3.957 billion as at 31 March 2015 is the cumulative total of outstanding arrears since the Child Support Agency was established in 1993. This balance represents the total amount owed by non-resident parents to either the parent with care or, in some instances, the Secretary of State. Current legislation allows the Department to write off arrears only in very limited circumstances. The NAO considers that these figures do not give a true and fair view because of the level of error in the underlying case data, which is a result of both inaccurate maintenance assessments by caseworkers and incorrect processing of cases. The best available estimates of the impact of incorrect processing of cases indicate that the reported arrears at 31 March 2015 are overstated by around £15.9 million and understated by around £113.7 million.
The future of the Client Funds schemes
The Department is currently part-way through the process of closing cases on the 1993 and 2003 schemes, issuing letters to customers who have cases on the 1993 and 2003 systems informing them that their cases are to be closed and inviting them to apply under the 2012 scheme rules. The Department is already reporting improved levels of accuracy in the 2012 scheme as compared with the same stage for the 1993 and 2003 schemes. Cases assessed under the 2012 scheme use an automated interface with HMRC systems for the majority of maintenance assessments, which the Department believes will further enhance accuracy. However, any arrears that have accumulated under the 1993 and 2003 schemes will not transfer to the 2012 scheme account and are likely to remain in the 1993 and 2003 scheme account for a long period of time, with no current plans to address these.