In a report today on the 2012-13 accounts of the Department for Work and Pensions, Amyas Morse, the Comptroller and Auditor General, has concluded that the Department has not to date achieved value for money in the development of Universal Credit and to do so in future it will need to learn the lessons of past failures.
The C&AG recommends that the Department properly commission and manage IT development; that it exercise effective financial control over the Universal Credit programme; and that it set realistic expectations for the timescale for delivery.
Separately, the C&AG has qualified his audit opinion on the accounts in respect of the level of fraud and error in spending on benefits which he considers as remaining unacceptably high. The Department’s accounts and those of predecessor departments administering this expenditure have received similar qualified audit opinions since 1988-89.
Universal Credit assets
The C&AG has not qualified his opinion on the accounts in respect of the value of Universal Credit IT assets. However, he does wish today’s report to draw Parliament’s attention to the implications for the use of public funds of the decisions made on the use of the Universal Credit IT assets.
The report follows on from the earlier finding from the National Audit Office, which found that, at this early stage of the Universal Credit programme, the Department had not achieved value for money.
Up to 31 March 2013, the Department had developed assets with an initial value of £196.1 million for the delivery of Universal Credit. In these accounts it has written off £40.1 million of those assets as it will never use them. It also now expects to write down £91.0 million of the remaining assets to nil value by March 2018, owing to the considerable reduction in their expected useful life.
Fraud and error in benefit expenditure
The Department estimates that total overpayments due to fraud and error in 2012-13 are £3.5 billion (2011-12: £3.2 billion), which equates to 2.1 per cent of total benefit expenditure of £166.8 billion (2011-12: 2 per cent of expenditure of £159 billion).
The Department estimates total underpayments in 2012-13 are £1.4 billion (2011-12: £1.3 billion), which equates to 0.9 per cent of total benefit expenditure (2011-12: 0.8 per cent).
This qualified opinion does not apply to the State Pension where the level of fraud and error is lower. The C&AG estimates that, in 2012-13, fraud and error within State Pension resulted in overpayments of £0.11 billion (2011-12: £0.1 billion), which is 0.1 per cent of related expenditure (2011-12: 0.1 per cent), and underpayments of £0.18 billion (2011-12: £0.15 billion), which is 0.2 per cent of related expenditure (2011-12: 0.2 per cent).
Today’s report explains the significant challenge the Department faces in administering a complex benefits system to a high degree of accuracy in a cost-effective way. Given this, the NAO is working with the Department to develop the spending watchdog’s approach to evaluating the adequacy of the DWP’s fraud and error response.