Part 4: Investigating benefit fraud

4.1
In this Part, we set out our expectations for the investigation of benefit fraud, and present our findings and recommendations on how the Ministry:

• assigns and manages investigations;
• meets investigation standards; and
• deals with the outcomes of investigations, including deciding on enforcement action.

Our expectations

4.2
Investigating benefit fraud should involve the Ministry systematically and thoroughly reviewing, to required standards, all actions that are suspected to be fraudulent.

4.3
We expected the Ministry to have systems, policies, and procedures in place for:

• assigning and managing investigations – this includes using an intelligence and risk-based approach to assign allegations of benefit fraud for investigation, and having a case management system to effectively track the progress and outcomes of investigations;
• meeting consistent and lawful standards of investigation; and
• managing the outcomes of investigations with an overall aim of improving the Ministry’s benefit fraud prevention capabilities – this includes having systems in place for internally reporting the results of investigations and learning from their findings, and taking enforcement action for confirmed benefit fraud cases that is appropriate and proportional to the seriousness of the offending.

Assigning and managing benefit fraud investigations

Our findings

4.4
The Ministry has well-defined systems, policies, and procedures for assigning and managing allegations of benefit fraud, although its computerised case management system for benefit fraud investigations could be substantially upgraded.

Arrangements for investigating benefit fraud

4.5
Investigations of suspected benefit fraud are carried out by Investigators in the Ministry’s 10 regional Benefit Control Units. The Ministry has 90 full-time Investigators throughout the country. Investigators also determine what action to take for substantiated benefit fraud cases. Technical Officers in the Benefit Control Units assist Investigators with preparing cases for investigation. Investigation Managers oversee investigations. This includes coaching and managing Investigators, and ensuring that investigations meet quality standards.

Assigning allegations of benefit fraud for investigation

4.6
All allegations of benefit fraud received by Benefit Control Units are screened using a standard national risk assessment form. This risk assessment involves reviewing the available information about an allegation to prioritise the action to be taken. Investigation Managers decide the action to take on allegations. Although the standard assessment form helps ensure consistency of allegation screening among Benefit Control Units, we found that Investigation Managers also use their experience with investigations to assess the potential complexity and risk of cases.

4.7
Allegations prioritised as high risk are assigned to Investigators in the Benefit Control Units. Allegations assessed as lower risk, or lacking sufficient information for investigation, are assigned to letter campaigns. These letter campaigns involve Technical Officers writing to remind clients of their obligations for benefit entitlement and to request information on their current circumstances.

4.8
The Ministry has recognised the potential for using more sophisticated data analysis and statistical modelling programs to help determine the risk level of various allegations of benefit fraud. The Intelligence Unit has a project planned for introduction in early 2008 to mid-2008 to use computer programs to filter all allegations using criteria that help identify high-risk factors. Because our audit preceded the use of these computer programs, we were unable to assess the effectiveness of the project. However, this planned filtering has the potential to improve the targeting of high-risk benefit fraud cases. It should also help Benefit Control Units to prioritise their investigations.

4.9
There is potential for the Ministry to use its Intelligence Unit to carry out evaluative sampling of allegations of benefit fraud that are not assigned for investigation to confirm that they were actually of a low priority. This is important for the Ministry to show that it is appropriately prioritising allegations according to risk.

Case management system for benefit fraud investigations

4.10
The Ministry uses its computerised TRACE case management system to:

• record all allegations;
• record information relating to individual investigations, including all interviews conducted by Investigators with clients;
• monitor the workload of Investigators; and
• track the progress of investigations.

4.11
From interviews with TRACE users, and our own observations of the functionality of the system, we consider that the system could be significantly upgraded (or replaced) to improve the overall effectiveness of case management. Although the system accurately records and reports information about investigations, data entry of this investigation evidence is slow and cumbersome. Interview transcripts and other evidence collected by Investigators cannot be easily entered into the system in a time-efficient manner. Text can be entered into the relevant notes screen only line-by-line, as there is no word-wrap functionality.

Meeting standards for investigating benefit fraud

Our findings

4.12
We found well-established systems for reviewing cases of benefit fraud and ensuring compliance with relevant standards and legal requirements. Investigations are guided by requirements of the Social Security Act and the Ministry’s own national standards. The staff we interviewed understood well the relevant quality and compliance standards.

4.13
The Ministry’s national standards for auditing of investigations are rigorous. Investigation Managers are required to conduct detailed audits to make sure investigations meet standards and legal requirements. This includes assessing:

• all the case work of new Investigators until they are deemed competent in the role by Investigation Managers or Benefit Control Centre managers;
• at least 10% of cleared investigation cases carried out by all other Investigators; and
• all cases where the estimated benefit fraud is $5,000 or more. This is to ensure that there is sufficient evidence to establish a debt against a client.

4.14
Investigation Managers’ auditing of investigations is required to be fully documented and to address a well-defined set of minimum quality standards. These standards cover the full range of Investigators’ work, including the taking and recording of statements from clients, complying with legal requirements, and meeting appropriate investigation procedures.

4.15
Quality Assurance Officers in Benefit Control Units also have a role to ensure that investigations meet required standards. The Quality Assurance Officers assess the investigation-related work of Technical Officers by audits that are similar to the audits carried out by the Investigations Managers. The Ministry’s national office also conducts periodic checks of samples of investigations.

4.16
There is a formal process in place for clients to seek reviews of decisions made about them resulting from investigations. This review process is covered by provisions in the Social Security Act.

Managing the outcomes of benefit fraud investigations

Our findings

4.17
The Ministry could increase its use of data analysis and statistical modelling to review investigation results to help improve identification of causes of benefit fraud or any systemic issues. The Ministry has clear processes for deciding enforcement action to take with substantiated benefit fraud cases.

Internal reporting of investigation outcomes

4.18
The Integrity Services group reports monthly to the Ministry’s executive leadership team about the outcomes of both external and internal fraud activity. Reporting on external fraud covers monthly and annual results of cases. It includes some analysis of case types and individual cases involving benefit fraud of $100,000 or more. These high-value cases are individually analysed by staff of the Integrity Services group to identify how to prevent similar situations.

4.19
There is potential for the Ministry to use the more sophisticated data-mining and analysis capabilities of its Intelligence Unit to review the results of individual benefit fraud cases to identify their causes. This analysis could help reinforce current practices, which are based on informally and manually reviewing cases to identify any trends, risks, or lessons to learn.

4.20
The existing computerised benefit fraud case management system (TRACE) is not designed to easily allow automated extraction of information about benefit fraud causes for trend and pattern analysis. This is because most investigation evidence gathered (including interview transcripts) is contained in a generic notes screen, with only limited use of standard category fields for specifying characteristics of individual benefit frauds. Any improvements to the system (as we recommend above) should consider improving its functionality to ensure that information can be readily extracted for analysis.

Enforcement action

4.21
The Ministry has a clear process for deciding on types of enforcement action for substantiated benefit fraud cases. This is guided by provisions in the Social Security Act. The Crown Law Office’s Prosecution Guidelines also guide the Ministry’s actions when deciding if a client should be prosecuted.

4.22
Investigators in Benefit Control Units have responsibility for determining what action to take, including deciding whether to prosecute. Types of action available are prosecution, monetary penalties, or written warnings. The Ministry has clear criteria for guiding Investigators’ decisions on which form of action to take. In practice, prosecution is always considered where deliberate intent to defraud the Ministry has been established. Warning letters tend to be used where intent cannot be proved, or where other mitigating factors suggest not to prosecute.

4.23
Benefit Control Units we visited rarely impose monetary penalties (although the Ministry always seeks to recover overpayments). This partly reflects that the Ministry must take into account its social development role when taking enforcement action. The Ministry also considers excessively large monetary penalties to have a limited punitive or deterrent effect.

4.24
Investigations Managers are required to audit all cases that proceed to prosecution, to ensure that the appropriate criteria have been applied and that sufficient evidence has been collected. Ministry solicitors also review cases going to prosecution. Successful prosecutions are reported in the Ministry’s statements of intent and annual reports. The performance target for the year ended 30 June 2007 was for successful prosecutions to exceed 85%. The actual result for the year was 95.5%.

4.25
The Ministry has not formally evaluated the effectiveness of the types of enforcement action it takes in benefit fraud cases. However, on the basis of justice sector research, the Ministry considers that the belief that a person will be detected committing benefit fraud is a bigger deterrent than the penalties imposed.