Ministry of Social Development: Preventing, detecting, and investigating benefit fraud

The Ministry of Social Development (the Ministry) is responsible for providing policy advice and services for improving the social well-being of New Zealanders. This includes safeguarding the integrity of the social security benefits system, which makes payments amounting to billions of dollars a year. To protect the integrity of the benefits system, the Ministry must effectively counteract benefit fraud – attempts by some people to receive or keep receiving benefits that they are not entitled to.

The scope of our audit

We carried out a performance audit to assess the effectiveness of the Ministry's systems, policies, and procedures for preventing, detecting, and investigating benefit fraud. We wanted to ensure that the Ministry had assessed the risk of benefit fraud, and had implemented procedures to minimise and respond to those risks. We also wanted to see that the Ministry had effective fraud detection and investigation procedures.

We did not look at how the Ministry's debt collection and minimisation activities related to benefit fraud, or how the Ministry deals with internal fraud.

Our findings

We found that, overall, the Ministry has good systems, policies, and procedures in place to prevent, detect, and investigate benefit fraud. However, we considered that the Ministry could make better use of its intelligence and data-matching functions to identify areas of emerging risk and potential instances of fraud. We also considered that the Ministry should regularly review its activities to ensure that it is targeting the highest risks and allocating the right priorities to potential instances of fraud. We also recommended that the Ministry upgrade its computerised case management system.

We made eight recommendations in our report.

The response to our findings and recommendations

We are pleased that the Ministry has accepted our recommendations and taken a proactive approach to addressing our concerns. We consider that the actions taken by the Ministry so far, and the actions planned for the future, will address the issues raised in our report.

Preventing benefit fraud

We recommended that the Ministry periodically carry out assessments of emerging fraud risks in the social security benefits system, and use the findings to guide and target its management of fraud prevention activities. In response, the Ministry's intelligence unit has carried out fraud risk assessments for the range of benefits administered by the Ministry. Also, the Ministry is participating more in cross-agency intelligence groups, and intelligence from these and other inter-agency contacts are incorporated into its data-matching programme. The risk assessments and other profiling work are used to target the Ministry's new Integrity Intervention Programme, which is a risk prevention and early detection programme. The Ministry intends to continuously refine this programme and feed the results into future risk profiling and detection work.

We also recommended that the Ministry regularly and formally evaluate its benefit fraud prevention activities, and use this evaluation to help target benefit fraud detection and investigation activities. In response, the Ministry has established a dedicated Integrity Intervention Unit to manage the Integrity Intervention Programme. The Ministry has also implemented a new fraud workflow model incorporating case studies of high-value cases as an ongoing, interactive learning tool.

Detecting benefit fraud

We recommended that the Ministry regularly and formally evaluate the effectiveness of its data-matching activities for detecting benefit fraud. We also recommended that the Ministry use fraud risk assessments of emerging benefit fraud risks to help evaluate and target its data-matching activities.

In response, the Ministry reviewed its existing data matching programmes to see if they were meeting performance expectations and to identify what it could improve. The Ministry has started a work programme to implement these improvements. The Ministry has also investigated how it can use its data-matching programmes for new purposes.

We also recommended that the Ministry use its Intelligence Unit to periodically analyse its client databases to ensure that detection programmes are targeting risks. In response, the Intelligence Unit is carrying out ongoing analysis of the Ministry's databases. This has led to several different activities, including risk assessment development and identification and mitigation of emerging fraud trends.

Investigating benefit fraud

We recommended that the Ministry periodically sample allegations of benefit fraud that are not assigned for investigation, to confirm that they were actually of a low priority. In response, the Ministry has made changes to how it manages, assesses, and prioritises allegations of fraud. More resources have been allocated to high-risk fraud, with medium-risk and low-risk cases being managed in a central unit. The Ministry is tracking the outcomes of these cases to ensure that it is rating cases accurately.

We also recommended that the Ministry upgrade its computerised benefit fraud case management system to improve the overall functionality and usability of the system. In response, the Ministry has identified which aspects of the system need to be upgraded, but is hampered by the system's limitations. The Ministry is working on a concept for a new fit-for-purpose system, which it hopes to have operational by December 2010.

We also recommended that the Ministry regularly and formally review the results of individual benefit fraud cases to identify any emerging trends or risks in the benefits system. In response, the Ministry has implemented a process whereby all cases illustrating exceptional features are reviewed to inform integrity improvements.