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There has been a reduction in the estimated loss of social security benefit through fraud and error compared to previous years, according to a National Audit Office report published today.

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However, the total amount of Income Support and Jobseeker’s Allowance overpaid in 2000-2001, over £1 billion, is still substantial. As a result, head of the NAO Sir John Bourn qualified his audit opinion on the Department of Social Security’s Resource Account. He also took this step because of deficiencies in the accounting systems operated by the Department (now the Department for Work and Pensions) resulting in weaknesses in audit trails and serious limitations in the evidence needed to audit debtor and creditor balances. Sir John has qualified the Department’s appropriation account for the past 12 years because of significant levels of estimated fraud and error in benefit awards.

Overpayment of the two benefits as a result of errors by officials and customers and of fraud fell from £1.38 billion (9 per cent of expenditure on the two benefits) in 1997-98 to £1.2 billion (7.4 per cent of expenditure) in 2000-01, according to the Department’s estimate. This reduction exceeds the Government’s target of reducing the percentage loss to 8.1 per cent by March 2002. The Department have also for the first time exceeded the Secretary of State’s requirement that 87 per cent of Income Support Awards be accurate.

The Department has various arrangements in place to further reduce error and fraud, including a Counter-Fraud Strategy. According to the NAO report, the complexities of regulations governing entitlement to Income Support and inadequate information technology systems until at least 2006 continue to be important barriers to improving performance. However, as the Department has already recognised, there is scope to achieve some improvement by reducing the wide variation in the levels of error and fraud across the Benefits Agency’s 13 Area Directorates and 118 Districts that handle Income Support claims.

Sir John also reports that some preliminary work has been done by the Department to develop risk management arrangements to meet Treasury requirements. But he warns that there is a risk that the challenges facing the Department, in particular restructuring and the implementation of new arrangements for decision making on benefit awards, mean that it may take some time before the principles and good practice of risk management permeate throughout the whole organisation.

"Despite the success that the Department has had in exceeding the targets they have been set to reduce the estimated overpayment of Income Support and Jobseeker’s Allowance, large amounts of these benefits are still being lost through fraud and error.

"Income Support is the benefit of last resort for those most in need in society. This makes it essential for the Department to make accurate and prompt payments while also protecting the public purse. I welcome the strategies being adopted by the Department to strengthen its defences against loss of this benefit and address variations in performance in local offices."

Sir John


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