I advise witnesses that they are protected by absolute privilege in respect of the evidence they give to the committee. However, if they are directed by the committee to cease giving evidence on a particular matter and continue to do so, they are entitled thereafter only to a qualified privilege in respect of their evidence. They are further directed that only evidence connected with the subject matter of these proceedings is to be given and are asked to respect the parliamentary practice to the effect that, where possible, they should not criticise nor make charges against a Member of either House, any person outside the House or an official either by name or in such a way as to make him or her identifiable. Members are reminded of the provision within Standing Order 163 that the committee shall also refrain from inquiring into the merits of a policy or policies of the Government or a Minister of the Government, or the merits of the objectives of such policies. I welcome Ms Niamh O’Donoghue, Secretary General of the Department of Social Protection, and ask her to introduce her officials.
Social Insurance Fund – Annual Accounts 2011
Ms Niamh O'Donoghue
I am accompanied by Mr. John Conlon, assistant secretary responsible for finance, Mr. Seán Reilly, principal officer in our finance unit, Ms Anne Vaughan, deputy secretary, and Ms Kathleen Stack, assistant secretary in charge of our control and regional operations.
I welcome Mr. David Moloney from the Department of Public Expenditure and Reform. All the witnesses are very welcome. I ask the Comptroller and Auditor General to introduce the accounts.
Mr. Seamus McCarthy
Social welfare scheme expenditure arises on Vote 38 and through the social insurance fund, and there are inter-account transactions between the Vote and the fund. Consequently, chapter 21 was compiled to present a consolidated view of the expenditure on welfare and employment schemes.
Expenditure on welfare schemes in 2011 was just over €20 billion, which was 3% below the peak figure reached in 2009. Trends on some of the key categories of welfare expenditure have been more volatile. In particular, support for people in the labour market more than doubled over a three-year period to reach €5.8 billion in 2010, but then fell by more than 7% in 2011. This reflects the substantial movements in the live register figures in recent years, transfers of claimants between jobseeker's benefit and jobseeker's allowance as benefit entitlements run out, and payment rate changes. Expenditure on employment schemes amounted to almost €1 billion in 2011.
The main income source for the fund is pay-related social insurance contributions, which are collected by the Revenue Commissioners and remitted to the fund. The fund’s resources are used to pay for a range of social insurance payments including pensions, jobseeker's benefit and illness benefit.
At the end of 2007, the fund had accumulated reserves of €3.6 billion arising from surpluses over many years. However, due to consecutive deficits each year from 2008, those reserves were exhausted during 2010. The Exchequer has been meeting the shortfall since then. For 2011, the Exchequer subvention to the fund was almost €1.5 billion.
This was a charge on Vote 38.
By law, an actuarial review of the financial condition of the Social Insurance Fund must be carried out at least every five years. A review commissioned by the Department, taking end-2010 as a baseline, projected that the current shortfall between receipts and expenditure will grow substantially over the long term. It projected that the deficit on the fund will double to €3 billion by 2019 and will have increased to €26 billion a year by 2066. The actuarial review necessarily was based on a set of assumptions about uncertain future events and conditions. For example, the review assumed, as a base case, that real earnings will grow by 1.5% a year or more over the projection period. Analysis of the sensitivity of the projections to alternative assumptions indicates that if real earnings grow by just 1% a year – which is a significant growth rate over the 50 to 60-year horizon of the projection – the projected deficit in 2066 would be €16 billion, rather than the €26 billion deficit under the base case. Another critical factor relates to assumed further substantial improvements in life expectancy. When lower rates of expected improvement from the European Commission's 2012 Ageing Report, are used in the projections, the deficit for 2066 is projected at €21 billion, rather than the baseline €26 billion. Given the importance of these actuarial projections for decision-making about pensions policy, I recommended that the basis for the key assumption rates in the baseline should be subject to more detailed analysis and testing, including scenario testing where a number of assumptions are changed together, in a consistent way.
Chapter 22 reviews the Department’s management of recorded welfare overpayment debts. The total value of recorded overpayment debts at the end of 2011 was €343 million. Debt recovery during the year increased by half to €52 million but this was more than offset by the value of new overpayment debts recorded, which came to €92 million. Debts to the value of €12 million were either cancelled or written off during the year. The net result was an increase in 2011 of €28 million in the total recorded debt for recovery. The results of audit fieldwork indicated that the Department’s guidance about procedures for debt recovery was not being applied consistently in local welfare offices. It was recommended that the Department should develop procedures to monitor more closely the proportion of debt recovery plans in place and to assess the performance of local offices in terms of debt recovery rates and rates of referral of appropriate cases to the Department’s central debt management unit. The examination also found that while there is an approval procedure in place for cancellation or write-off of debts, such decisions are not subject to review by management. The chapter recommended that the Department should examine the current arrangements with a view to implementing a consistent approach across all offices including, at a minimum, a standard form to record the background and reason for all decisions to cancel or to write off overpayment debts. The examination included a review of the Department’s overpayment debt management system. We found that the system lacked a number of the features required to be an effective debt management tool. In particular, the system was not capable of performing analysis or of producing management information with an appropriate level of detail. It also does not enable the recording of recovery actions taken or pending in respect of individual cases. The proportion of fraud cases prosecuted is typically below 3%. The Accounting Officer stated that prosecutions are taken only in the more serious cases, where there is strong evidence of fraud.
Chapter 23 deals with the regularity of social welfare scheme payments, that is, whether recipients were properly entitled to the amounts they received or have received payments in excess of their entitlements. Detection and recording of overpayments is evidence that payments in excess of entitlements occur but the Department does not record an overpayment in all cases detected. Based on the available evidence, I consider that there is a material level of expenditure on the Vote that does not meet the regularity test. The Department carries out periodic fraud and error surveys, based on a random sample of scheme cases, to assess the risk of excess payments on individual welfare schemes and the likely causative factors. The results of the fraud and error surveys indicate there is a significant level of underlying irregular payment on certain Vote-funded schemes. The more recent survey reports include estimates of the net financial loss to the Department, which tends to be a lower figure than the scheme losses. This occurs because claimants found to be in receipt of an excess payment may be eligible for a payment under a different scheme or may become a dependent of another claimant. Even taking this into account, the estimated levels of financial loss borne on the Vote appear to be significant, including 4.1% of expenditure on disability allowance and 2.7% on one-parent family payments. Given the lack of survey coverage for some major expenditure schemes, I recommended that the Department should design a programme of surveys based on the level of annual scheme expenditure, with the larger schemes to be reviewed on a continuous basis, mid-size schemes on a cyclical basis and small schemes to be surveyed occasionally or not at all.
In conclusion, I consider that fraud and error surveys are an important tool in combatting losses due to irregular welfare payments. The Department needs a reliable estimate of the overall incidence of excess payments across schemes. This would allow it to assess whether the targeted control activity it undertakes is on a sufficient scale and is effective in detecting excess payments. Ultimately, unless there is a combination of a high probability of detection, followed by prompt recovery of payments in excess of entitlements, persons tempted to submit false claims for welfare benefits are unlikely to be deterred from doing so.
I thank the Comptroller and Auditor General. I invite the Secretary General to make her opening statement.
Ms Niamh O'Donoghue
I thank the committee for allowing me to make a brief opening statement this morning. As well as examining the appropriation account for the Department of Social Protection and the Social Insurance Fund statutory account for 2011, I understand the committee wishes to examine three of the four chapters relevant to the Department that are included in the Comptroller and Auditor General’s annual report for 2011. As requested last week I provided the committee with an update on the conclusions contained in the three chapters, together with expenditure data from 2011 to date. I also have provided the committee with three separate reports on our implementation of the fraud initiative 2011-2013, the non-compliance analytics pilot project undertaken with Accenture consultants and the recently completed child benefit fraud and error survey.
As chapter 21 of the Comptroller and Auditor General’s annual report confirms, the Department of Social Protection spent almost €21 billion on welfare and employment schemes in 2011. As members will see from the material I have provided, the provisional outturn figure for 2012 is €20.7 billion. I and my colleagues in the Department are very aware of the responsibility we carry in ensuring the proper disbursement of such a significant proportion of Government income and expenditure. The Department has three main functions, namely, the delivery of income support, activation and control of fraud and abuse and in my view, it must maintain a balance between these in the conduct of its overall business. I wish to take the opportunity to comment briefly on each.
Delivery of income support was the traditional role of the Department and still is a vital one. It involves payments to approximately 2.2 million citizens, comprising approximately 1.4 million weekly and 600,000 monthly payments. We strive to make all these payments in a timely way, as delays can cause hardship and unnecessary concerns for vulnerable people. While the vast majority of claims and payments are processed on time, there are backlogs in certain schemes, as we discussed last year. I can now report that good progress is being made and that the backlogs have been almost eliminated in the case of invalidity pension and will be eliminated by end-March for family income supplement and carer’s allowance and by end-June for disability allowance. In the social welfare appeals office, the chief appeals officer has also made significant progress and the number of appeals to be finalised through her office will be increased substantially again this year. It should be noted that the elimination of backlogs in scheme areas also will have a positive knock-on impact on processing times in the appeals office.
I will turn to activation and Intreo. Pathways to Work provided for the establishment of an integrated employment and income support service. The integration of three previously separate services, namely, the Department of Social Protection, FÁS and the community welfare service, is in line with international best practice. This new service model includes the provision of an integrated service centre, that is, Intreo, a single point of contact for clients where they can come for benefit and employment services, the profiling of clients to help develop an individual progression plan, that is, a pathway back to employment and a group engagement process in which clients with similar profiles receive a briefing on the options and supports available to them.
It also includes a follow-up series of one-to-one meetings between clients and employment advisors; a closer engagement between Department local offices and their corresponding vocational education-skills training agency to improve the planning and scheduling of courses for unemployed people; formalisation of the concept of rights and responsibilities in a social contract - a record of mutual commitments; more intensive engagement with employers in order to encourage and facilitate the recruitment of people from the live register - this is a vital part of the new service and there has been some good progress to date; and, finally, greater targeting of activation places for long-term unemployed.
We have a demanding and challenging schedule of change with Intreo rolled out to ten offices last year and a target of another 33 this year with full completion by end 2014. I can assure the committee that the Department, with the assistance of other agencies, will be doing its best to make this happen. Turning to the control of fraud and abuse, I have provided material and reports in this regard. While the majority of people in receipt of social welfare payments are entitled to these, there is an onus on the Department to ensure that abuse is minimised and that resources are targeted at those who have an entitlement. We are examining ways of using data and information in a smarter way, as set out in the material we sent to the committee, while, of course, always being conscious of the requirements of data protection.
As regards debt management, the Comptroller and Auditor General made four recommendations in his chapter on welfare overpayments and in my update to the committee I have reported progress on all of them. Section 13 of the Social Welfare Act 2012 allows for deduction of an amount up to 15% of the weekly personal rate payable to customers for the purpose of recovering an overpayment. This equates to €28 per week in the case of customers receiving a weekly payment of €188. This is a significant advancement as previously we could deduct no more than €2 in many instances.
Our governance committee has approved the introduction of a new debt management system for the Department, which will be tendered for later this year. The recommendations of the Comptroller and Auditor General and his team will be incorporated into the specification for the new system.
We are continuing to develop our computer systems which reliably deliver 87 million payments per year. Although developed independently, mechanisms exist on our major systems whereby significant changes made to customer or claim details are automatically notified to other relevant systems. The Department is working towards consolidation on a single ICT platform - the business object model implementation, known as BOMi. This work is being carried out as part of the Department’s continuous service delivery modernisation, or SDM, programme. As this programme progresses, all of the Department’s client and claim-related systems will be integrated on the one platform, ensuring that all client and claim information is fully and automatically available across all of the Department’s schemes and places of business.
As a Department, we have completed our first year as a restructured and transformed DSP organisation with colleagues from a number of different organisations bringing their unique insights and experiences to the work. In this regard, the committee may wish to note that some 3,000 new people have joined the Department since 2009 which, while challenging from a HR, culture and training perspective, represents a huge opportunity for us in terms of different talents and skill-sets. While adapting to and meeting all the challenges, we remain focused on our three core objects of providing income support particularly to those most in need, providing activation and employment supports and ensuring our controls minimise incidents of fraud and error.
Thank you, Ms O'Donoghue. May we publish your statement?
Ms Niamh O'Donoghue
Yes.
Deputy Seán Fleming
Ms O'Donoghue and her colleagues are very welcome. I thank her for the opening statement. I glanced at it last night and I want to deal with a couple of specific aspects in the Department's budget for the year we are discussing.
The first issue which is probably the most relevant to many people in light of the Government's announcement yesterday, is that of the mortgage interest supplement. As Ms O'Donoghue is aware, 94,000 people have been in mortgage arrears for over 90 days. In total, 150,000 people are in mortgage arrears to some extent. The latter figure has doubled in the last two years. The Department of Social Protection is the only direct line Department that helps people with mortgage difficulties through the mortgage interest supplement. I understand that the departmental Estimate for mortgage interest supplement payments in 2011 was €77,246,000. I also understand that the Estimate for 2013 under that heading is €41,820,000. That is a reduction of 46%. The Department's overall Estimate - based on the draft Estimates published on budget day and the revised Estimates to be published on 21 March - indicates a possible reduction of approximately 2%. However, I do not understand why Ms O'Donoghue's Department has a 25% cut in mortgage interest supplement payments this year alone, on top of the cuts in the previous year, and almost a 50% cut under that heading, even though the Government says that area is the number one priority.
Ms O'Donoghue might tell me her Department's role in light of yesterday's announcements by Ministers and the regulator. Today, we are looking at whether the Government is doing what it says it will do. The only tangible issue concerning the Government and the Department of Social Protection, when it comes to dealing with those in mortgage arrears, is a massive cut in the mortgage interest supplement.
Major changes were made in the Social Welfare Bill last year to people's eligibility for mortgage interest supplement payments. Can Ms O'Donoghue say how many people were in receipt of the mortgage interest supplement in 2011, as well as the current number in receipt of it? More importantly, how many new people have been put on the mortgage interest supplement payment since the beginning of this year, and especially since last July when the Department made those changes in the Social Welfare Bill? Those changes seem to run counter to everything that is being said. We are trying to help people in mortgage arrears, yet the one Department with a role in this matter has halved its budget in this area over the past two years.
I would like Ms O'Donoghue to answer those specific questions concerning numbers, amounts, cuts, rule changes and how difficult the situation is. She should also explain her Department's role with the financial regulator who deals with the same banks to which she provides the mortgage interest supplement. She should also outline the discussions she has been having with the regulator, specifically concerning yesterday's announcement, so that we can see the overall joined-up approach by Government and her Department's role in this.
I would have thought that if one group was to get some relief from expenditure cuts, it should be those in mortgage arrears. I have posed a number of questions about this specific issue, which the public is very concerned about, so perhaps Ms O'Donoghue can discuss those issues.
Ms Niamh O'Donoghue
There are two different elements to discuss. The Deputy is correct to say that the number of people in receipt of mortgage interest supplement has reduced, and the budget line has reduced between 2011 and 2012, and what is projected for 2013. There are a number of factors involved in that. Primarily, there have been two changes to the way in which the scheme is operated. As the Deputy might be aware, a number of different interdepartmental and working groups have examined the issue of support in the mortgages area. We had our own direct review in 2010. We participated in the Keane review and were a party to its recommendations. We continued to work with the various interdepartmental groups leading up to yesterday's announcement.
The rationale for the mortgage interest supplement scheme was to provide short-term relief for people who were in mortgage difficulties.
It was mentioned in the Keane review that immediate access to mortgage interest supplement might actually be a deterrent for people to engage properly and quickly with the banks or their lenders in the first instance. This gave rise to a change in conditionality under the scheme which was introduced in law last year, which means people have a 12 month window period in which to engage with their lender before they can access the supplement. This would have introduced a change to the numbers of those eligible to apply.
The second change was that the actual contribution of individuals to their mortgage interest payments was increased in line with other increases in social welfare rates and contributions. The contributions of the households of individuals and couples have been increased since 2010. What this meant, particularly for those in receipt of local authority mortgages, was that the level of contribution required exceeded the amount in interest to qualify in the first instance. Again, this reduced the actual numbers eligible for relief under the scheme.
Will Ms O'Donoghue explain that?
Ms Niamh O'Donoghue
Since 2010 the minimum contribution payable by the majority of households of couples has increased from €24 to €37 per week or from €104 to €160 per month. This increase has had a proportionately larger impact on local authority mortgage recipient numbers because the outstanding capital amounts and annuity repayments are significantly lower under than standard private household mortgage arrangements. As the minimum contribution has increased, it has meant that these cases are no longer receiving support under the mortgage interest supplement scheme because the minimum contribution is now higher than the actual interest only portion of their repayment.
Is Ms O'Donoghue saying the change in the rules effectively ruled out many people who were in receipt of local authority mortgages?
Ms Niamh O'Donoghue
They would potentially have been covered by the previous conditionality, but they would have had lower mortgages than those in the private sector.
At an end-of-year review, those in receipt of mortgage interest supplement might have had it discontinued. Is it the case that those who even had it were likely to lose it in a review, not to mind it being cut off for new applicants?
Ms Niamh O'Donoghue
Again, the scheme was always intended as a short-term relief measure and was expected to last, in the main, for about one year.
How many were in receipt of the relief in 2011 and how many are in receipt of it now?
Ms Niamh O'Donoghue
There were 18,988 recipients in 2011. I only have the figure at the end of December 2012 which was 14,987.
It is down to 15,000. How many new applicants for this payment have there been since last July?
Ms Niamh O'Donoghue
I do not have the figure to hand, but I will provide it for the committee.
How long does it take to process an application?
Ms Niamh O'Donoghue
It is very quick. Bear in mind, the number of new applicants from July would have changed because of the change to the conditionality about having to wait 12 months.
Am I right in saying the mortgage interest supplement scheme was essentially a preventive measure to help people to avoid falling into serious arrears? Despite this, the Department changed it last year such that a recipient had to be in arrears for 12 months, negotiate with the banks and have an arrangement in place for a further 12 months. One then has to be well in arrears before one becomes eligible.
Ms Niamh O'Donoghue
A 12 month restriction on the scheme was introduced in June 2012. One had to be engaged with one's bank for 12 months to access the scheme. The change to the conditionality stemmed from a recommendation of the Keane group in trying to provide a package of assistance measures for those in mortgage difficulty.
Regarding the Deputy's question on the role of the Department in yesterday's announcement on mortgage resolutions, two critical agencies of the Department, the Citizens Information Board and the Money Advice and Budgeting Service, MABS, are involved in highlighting access to independent mortgage advice for persons trying to renegotiate or restructure their arrangements with their banks. These are new services that have been put in place.
Owing to this change, by and large, it would be correct to say very few new applications have been approved since last June. Does Ms O'Donoghue have information on the figures?
Ms Niamh O'Donoghue
I do not.
In fairness Deputy Sean Fleming, this is part of a different chapter into which we will go in much greater detail later.
Which chapter is it?
It is the chapter on supplementary welfare allowances. It was not meant to form part of today's discussion.
I took it that this scheme would have been covered by the Vote we are discussing.
I am not objecting to the Deputy raising the matter; I am just pointing out that we could deal with it in greater detail at the later meeting.
In the meantime, Ms O'Donoghue can send us the information on the number of applications since last July and how many have been granted.
Ms Niamh O'Donoghue
Certainly.
It looks as if this scheme is being wound down. If one moves from a provision of €77 million to €45 million-----
Ms Niamh O'Donoghue
No.
It looks like it when half of the recipients are gone.
Ms Niamh O'Donoghue
Again, the critical point is that this is a short-term scheme. The majority of recipients are only in receipt of the allowance for a defined period. There is no attempt to wind it down.
I look forward to receiving the information on the scheme, to which we can come back at the subsequent meeting.
I note chapter 6.6 of the Comptroller and Auditor General's report on Vote 38 states:
There were eight cases of possible misappropriation of public moneys by employees of an approximate total value of €45,229. Amounts in some cases have not yet been determined.
When did these cases arise? Were there Garda investigations of these misappropriations? Was any of the eight cases linked? What were the outcomes of these cases and how much has been recouped?
Ms Niamh O'Donoghue
I have to speak in general terms, as I cannot give details because some of the investigations have not yet concluded. If the amount involved warrants it, the Garda is involved.
What is the threshold for involving the Garda?
Ms Niamh O'Donoghue
It depends on the circumstances of the case. It would not be significant.
Would it be €1,000?
Ms Niamh O'Donoghue
It would not be significant. The Department takes extremely seriously any case in which there is a misappropriation of funds.
I am none the wiser. How many of the eight have been concluded?
Ms Niamh O'Donoghue
I do not have the exact figure.
The Department has excellent staff, but there are bound to be one or two cases in which people did not match the standards one would have expected.
Ms Niamh O'Donoghue
In an organisation in which we have close on 7,000 staff, this represents an extremely small number. I can assure the Deputy that in any instance of misappropriation, it is fully investigated and action is taken against the individual and the moneys are recouped.
Were these eight separate cases or did they involve just one individual? Were they linked?
Ms Niamh O'Donoghue
I want to ensure that my answer relates to the Deputy's question and the report. I ask his indulgence to allow us to respond later because we do not have details to hand on the individual eight cases.
Will Ms O'Donoghue send on the information?
Ms Niamh O'Donoghue
I will, of course.
If it is concluded in respect of some of the cases that misappropriation took place, would the individuals concerned remain on the payroll?
Ms Niamh O'Donoghue
If an investigation established that there had been inappropriate behaviour of that order, they would go through a disciplinary process. We have taken sanctions to the extent allowed in the disciplinary process, including dismissing people, over the last couple of years.
How many people have been -----
Ms Niamh O'Donoghue
I ask the Deputy to forgive me. I want to be clear that I am giving him correct information.
In the last year or two, or during whatever period Ms O'Donoghue can recall, how many civil servants have been dismissed from her Department for misappropriation of funds? Does the dismissal of a public servant have to go to the Cabinet?
Ms Niamh O'Donoghue
It does not if he or she is below the level of principal officer.
How many were dismissed?
Ms Niamh O'Donoghue
In 2012 and 2013 one employee was dismissed for fraudulent activity and one was dismissed for inappropriate behaviour. Two employees were sanctioned with reductions in pay for a different offence. One employee retired before the disciplinary process was completed. Seven cases are still being progressed through the disciplinary code process. In regard to three cases referred prior to 2012, one employee resigned prior to dismissal and the remaining two cases are still to be finalised. I want to make sure I am relating the report to the precise nature of the cases.
In regard to the first two cases, one individual was dismissed because of fraud.
Ms Niamh O'Donoghue
One employee was dismissed for fraudulent activity.
What was the outcome? Was there a successful outcome in court for the prosecution?
Ms Niamh O'Donoghue
I do not have that information to hand.
The Department cannot discipline individuals for fraud unless the court proves there was fraud.
Ms Niamh O'Donoghue
There are two different avenues of pursuit. If we refer a case for prosecution, it is prosecuted by An Garda Síochána through the courts. Under the disciplinary process we can also pursue issues against individuals with an investigation and the full rigour of the disciplinary process. One of the categories under the disciplinary process is fraudulent behaviour.
None of the aforementioned cases went to the Garda.
Ms Niamh O'Donoghue
I am referring to the second stage or the second phase. It is likely that some or all of those were also subject to criminal or civil prosecutions.
Ms O'Donoghue referred to the big issue of recouping overpayments. Up to 15% can be deducted, which equates to €28 per week in the case of a single person on full jobseeker's allowances. What arrangements are in place to deduct the local property tax from social welfare payments and will that be deducted in addition to the 15%? Has an application form been prepared for clients? I have not seen copies of such forms yet but I am sure they will land in my constituency clinic one of these days. I ask her to outline the arrangements between her Department and Revenue for collecting the local property tax.
Ms Niamh O'Donoghue
As the Deputy will be aware, the Revenue Commissioners are responsible for collecting the local property tax. All dealings with members of the public will be carried out by Revenue and my Department will not be involved in any instance. The Department's role in facilitating deductions from social welfare payments is to act on instruction from Revenue. When people get their correspondence from Revenue they will be presented with a number of methods of payment, including the option of having a deduction at source from a social welfare payment. The schemes that have been agreed for this purpose are the long-term stable schemes in the first instance, such as pensions and carers' allowances.
I ask Ms O'Donoghue to send us a copy of that list.
Ms Niamh O'Donoghue
Certainly. They are defined in the booklet that the Revenue Commissioners are circulating. If an individual opts for payment through a social welfare payment, Revenue will instruct the Department to make a deduction. Two protections have been put in place in this regard. First, the legislation governing the deduction at source from social welfare payments provides that the net effect of the deduction cannot reduce the level of payment below the level of supplementary welfare allowance.
How does that compare with the 15% deduction?
Ms Niamh O'Donoghue
That is different because in that instance we are recouping a payment that has already been made. We reserve the right to recoup overpayments before other deductions from source, and this is reflected in the law governing the property tax. Where an overpayment has been made, our first obligation is to recoup the money before we facilitate an additional deduction.
There is ongoing exchange of information between Revenue and the Department. More than a year ago we examined the issue of the letters issued to the 115,000 who had various pensions and may have been liable for tax. Some of the cases with longer tails are still working their way through the system. Given the increased level of co-operation between Revenue and the Department in comparing information, is a mechanism in place for the Department to get information on people's property from Revenue to compare with the addresses of those to whom it makes payments? They seem to be co-operating for income tax purposes but will the local property tax information on Revenue's files be examined to find out if individuals in receipt of payments have houses the Department does not know about?
Ms Niamh O'Donoghue
The potential certainly exists for us to do that. We have not done so yet because the file is not live but there is extensive provision in Revenue and social welfare law for exchange of information for the purpose of payments. If, for example, we were establishing a means assessment of a social welfare applicant and wanted further points of verification, we have the option of accessing that information.
It will probably become routine when an individual applies for a social protection payment that the Department verifies with Revenue whether he or she owns property which was not declared.
Ms Niamh O'Donoghue
It is a possible option given that we already exchange data on a range of matters.
When does Ms O'Donoghue see that happening? Will it be next year or will it take a while to get the system up and running?
Ms Niamh O'Donoghue
The system in Revenue will have to get up and running in the first instance.
Can we take it that if somebody who receives a social protection payment owns property that is not known to the Department, he or she will be caught?
Ms Niamh O'Donoghue
Yes. A high level group operating between the Department and the Revenue Commissioners constantly explores areas and opportunities to share data and operate in a joint manner in pursuit of our business.
I ask Ms O'Donoghue to outline the recent changes to the household benefits packages. I have been contacted by pensioners in regard to their telephone bills in recent days. What happens to the person who received a telephone allowance until now? I am getting a considerable number of telephone calls from upset elderly people whose telephone bills are increasing as a result of the changes.
Ms Niamh O'Donoghue
It was one of the most significant changes under the various components of the free schemes. The rate of allowance was reduced to €9.
From what?
Ms Niamh O'Donoghue
I beg the Deputy's pardon. It was €22.50 per month and it has been reduced to €9.50 per month. That is effective from January of this year.
How many people did that affect?
Ms Niamh O'Donoghue
It is somewhere in the order of 300,000.
They were all by and large State pensioners, people getting disability payments, illness benefit and such.
Ms Niamh O'Donoghue
It would be-----
The elderly and disabled.
Ms Niamh O'Donoghue
It is primarily elderly, those in receipt of carer's allowance who are resident with the person they are caring for. It is 397,000 recipients. We understand that Eircom has responded to that change and has got agreement from the regulator to introduce a basic-level package targeted specifically at people in vulnerable situations.
How much does that package cost? Is it approximately €19?
Ms Niamh O'Donoghue
It is €19.50 per month.
I received that information by way of reply to a parliamentary question during the week. That only applies to Eircom and the others may follow.
Ms Niamh O'Donoghue
People have choice as to where they take their business.
Am I correct in saying that the monthly reduction was €13?
Ms Niamh O'Donoghue
Yes.
At €13 per month, it would be €156 per annum which is significant for a person in receipt of the State pension, disability payment or carer's allowance.
Ms Niamh O'Donoghue
Again, this would have been a choice made by Government in terms of the budget.
I know it is a budget day decision. Apart from the telephone allowances, were there changes to the energy allowance or the television licence?
Ms Niamh O'Donoghue
There were changes made in relation to the energy allowance. Previously the payment had been based on a unit allowance and effectively-----
Of electricity.
Ms Niamh O'Donoghue
For electricity or gas. The change made was that instead of it being a unit allowance, which actually was very unpredictable from the Department's point of view because obviously the cost of units could change over the course of the year, it is now based on a cash credit in relation to a bill. That cash credit has been determined having regard to the average cost available from all of the suppliers. In essence what has happened instead of getting a unit credit, there is now a cash credit on individuals' bills or, for those who are not customers of Electric Ireland, its cash value.
What is the effective change for the old-age pensioners?
Ms Niamh O'Donoghue
It is a €35 allowance as cash credit.
What was the average value of the old one?
Ms Niamh O'Donoghue
It depended on the supplier.
What was the average the Department worked out?
Ms Niamh O'Donoghue
Sorry, that is the average value. It is based on-----
So there is no cut at all there.
Ms Niamh O'Donoghue
Depending on the supplier, that was the average cost based on average market value at the time.
The only change was really on the telephone allowance. For the average person there was no change for the electricity allowance but there was for the telephone.
Ms Niamh O'Donoghue
Yes.
The Department carried out a review of the domiciliary care allowance. What is the situation on that? It involves a thorny application process, with which I have to help people.
Ms Niamh O'Donoghue
As the Deputy will be aware, we discussed this at length last year. The review was set up. The review is all but finalised and certainly I hope the Minister will be in a position to bring that to Government shortly. The view will treat a number of different things - administrative process, medical process and some of the policy issues that would have been signalled. Certainly any improvements in the administrative process that have been flagged over the course of the review we are putting in place. We are taking on board the various comments of all the stakeholders because as the Deputy will be aware that review included a number of representatives from the different groups. The review process involved talking to everybody in receipt of DCA and providing for public submissions, so it is a very comprehensive review.
I welcome Ms O'Donoghue and the other officials. This is a complex area involving many payments. I deal with many social welfare queries in my office. I am not saying I know everything about it, but we are quite busy. We have a slight concern over deterrents and how people view the system before they engage in fraudulent activity in particular. I will give an example of an application I printed. In many cases the only deterrent is the warning printed at the bottom of a typical application that states: " Warning: If you make a false statement or withhold information, you may be prosecuted leading to a fine, a prison term or both." Looking at the figures, the chances of that happening are quite small compared with other jurisdictions - I will come to that later.
In its Fraud Initiative 2011-2013, the Department recognised that an effective deterrent regime is important. It noted that effective debt recovery is an integral part of the deterrent regime and that the Department would take appropriate steps to effect the recovery of the debt, which is fine. The Comptroller and Auditor General has very comprehensively dealt with the issues on the surveys on fraud and error. He has identified the shortcomings in the local offices as being training, recovery of debt, etc. However, I am not concerned about after the fact but what happens beforehand and the thought process when an individual is tempted. There is considerably more temptation these days to commit welfare fraud for the obvious reasons. This can be compared with Revenue, for example. Among individuals thinking about going down the road of committing welfare fraud, is there sufficient deterrent in their mind before taking that initial step? That is our concern.
When I look at all these figures - I thank the liaison officer for putting all this together for me - the one concern I have is that we are dealing with it after the fact. Every year the Department issues press releases on the reviews and the savings made across the different payments. However, we need to work out how we can be more effective in deterring people from going down that road at the very beginning. I ask Ms O'Donoghue to outline her thoughts on that, which is clearly something the Department has identified through its initiative.
Ms Niamh O'Donoghue
I will refer to two different points I made in my opening statements. One is that we have a role that requires us to take a balanced view. We have to try to support people through income maintenance who are in vulnerable situations and ensure that need gets assessed and that payments get into payment quickly to those who are entitled to them while at the same time being extremely mindful of control of fraud. I suppose one of the things I would point to, which I mentioned in my opening statement, is that the introduction of our new integrated service presents us with a real opportunity to represent a cultural change in our engagement with our customers. So the social contract that I referred to where people's responsibilities are very clearly outlined is a new dimension to our engagement with customers. Part of that engagement with customers is a much more frequent interaction with them, both in terms of helping them on progression paths but also in terms of reinforcing our control agenda and ensuring that they continue to remain eligible for whatever payments they are entitled to. Absolutely, I understand that it is perceived that the level of prosecution is low.
Because it is.
Ms Niamh O'Donoghue
Absolutely, I understand that, but what I would point to is the level of overpayment and particularly the number of overpayments that are attributable to fraud - the average overpayment is quite small. So we have to make a judgment when we are bringing things to prosecution as to the resources required and the level of evidence required to support a full-scale prosecution versus the likely outcome, particularly having regard to the circumstances. On that basis we have a matrix that we apply in determining whether we prosecute something. That has regard, obviously, to the amount of money involved. It has regard to the number of times somebody has been in offence.
I believe 2% to 3% of fraudulent cases are referred to prosecution.
I asked the liaison officer to check in a different jurisdiction and look at what its rate is. There is a massive difference. Scotland was the one we looked at. The referral for prosecutions in Scotland was about 34%. Of that, probably 30% to 40% were prosecuted in criminal courts. I look at Irish figures of 2% to 3% and see that they are very small compared with that other jurisdiction.
Ms Niamh O'Donoghue
We focus on the more serious fraud cases. Some extremely high profile cases have been brought before the courts, particularly over the last year where very significant penalties have applied by the courts where people were found guilty.
They have, but my point is that very few cases end up going to court. I go back to the psychology involved and the psyche of an individual going down the road at the very beginning and taking one of these application forms. The reality is that many of them know that the chances of them being fined and prosecuted in this country are very low, and that is borne out by the figures. I am making the point that the deterrent is not there. The Comptroller and Auditor General and the Department are carrying out reviews, but the deterrent is greater in people's minds in other jurisdictions when they engage in fraud. It is borne out by the figures.
I will go back to Revenue, which has a reputation. Compliance levels in tax collection in this country are very high. It is due to the fact that Revenue is, unlike the Department, very willing to use very tough enforcement measures. When I compare the Department of Social Protection to the reputation of Revenue in people's minds, it is different, based on my experience as a Deputy. People with whom I deal would consider that the penalties and chance of being prosecuted and fined are quite slim given that they would think twice about going down that road with Revenue. We can put all the checks, reviews and surveys in place after the fact but we need to do far more work when it comes to the initial step, which is the deterrent in the first place. We certainly need to do more than the warning at the end of every application.
Ms Niamh O'Donoghue
As I said previously, it is more than just that warning in so far as what we have been trying to introduce in our internal processes from date of claim in terms of engagement is concerned. The use of data analytics to detect fraud is highlighted in the reports we provided to the committee. I accept that this is detection rather than deterrent. Our tools to detect fraud are becoming more sophisticated.
Ms O'Donoghue mentioned that in her opening statement and spoke about using data and information in a smarter way.
Ms Niamh O'Donoghue
In terms of deterrents, our primary role is to provide income support. Obviously, we do not want a situation to arise where people feel they can defraud us. We certainly use everything in our power to ensure people are aware of their obligations in that regard. If any payment is made to a person to which they are not entitled, there will be a consequence in terms of the recovery of that overpayment from them. Certainly, where it is considered a serious fraud, we will prosecute.
The Department has obviously thought about this because in her opening statement, Ms O'Donoghue mentioned that the maximum payment that can be deducted per week was €2 to €3. That was increased to 15% which translates to a deduction of €28 from a payment of €188, so the Department has thought about this. My guess is that nobody among the public knows this. It might be on the books for less than a year but I do not believe this deterrent is in people's minds. I looked at England where it has been proposed that the deduction be 25%. They are far tougher. How did the figure of 15% come about within the Department? How did it make a decision that it needed to be changed and why did we wait so long for that change to occur?
Ms Niamh O'Donoghue
It obviously required a change in policy and law. There was a provision within the law that protected the rate of recovery to the supplementary welfare allowance rate. On foot of the concerns expressed by the Comptroller and Auditor General, we considered what could be done. There was agreement and it was determined that 15% was a reasonable amount for us to look for. We will investigate what the Deputy is saying about the practice in England and Scotland. We have mechanisms for exchanging information on best practice and a conference is planned for September 2013 in Dublin which will involve representatives from a number of different countries and look at control agendas. We will look at deterrence issues there. I would not wish for there to be any confusion in anybody's mind but that we take it very seriously.
The Department does. I understand that we are talking about people with very little money. I deal with enough people who are in very tight situations. I will go back to the example of England. For those convicted in court, the Department for Work and Pensions has proposed introducing a two strike regime for imposing benefit deductions. It proposes to impose a loss of benefits for three months for a first conviction and six months for those convicted of benefit fraud on a second conviction. A third conviction would result in a loss of benefits for three years. It is a deterrent. I am of the opinion that a larger deterrent needs to be introduced in this country. We can spend a lot of time dealing with it after the fact. Ms O'Donoghue talks about the data and information the Department will utilise but we need to start thinking about the psychology before this occurs.
Every year, we receive reports from the Minister that are impressive with regard to the €600 million that has been saved when reviews are done throughout the different categories of payments, but we do not spend enough time thinking about how to deter people from doing this in the first place. The English obviously have thought about this and have put together proposals that are stricter. I think we need to consider it.
With regard to the recovery of overpayments, are there any new ways of examining how to recover overpayments? We have a debt bill of €343 million. Of that, 47% of the overpayment debt is more than five years old. Half those debts do not have any plan in place about how to get them back. When the study on the local offices in Clonmel and somewhere else was carried out, it was clear that there was no plan to recover many of the debts listed in that office. Could Ms O'Donoghue talk about that?
Ms Niamh O'Donoghue
Again, I have already gone into this in some detail in the update on the chapters I provided to the committee. Obviously, it was flagged in the Comptroller and Auditor General's report. We carried out our own assessment of practice in local offices and on foot of that, we certainly concluded that there was work to be done in terms of updating and reissuing guidelines to deciding officers and recovery officers. With the new legislation that was brought to bear and only signed into law less than one month ago, which relates to the recovery of up to 15%, we are in the course of briefing and training our recovery officers in respect of the approaches to be taken not only with new debt incurred but also re-examining existing debt on our books with a view to seeing how we can improve recovery rates where such recovery can be effected.
The committee will appreciate that in a number of instances people who are overpaid and have a debt are no longer on our books because they have got out of payment for whatever reason. The overpayment and debt, however, do not die. We take the ultimate sanction of recovering from estates. The debt remains live and valid in every circumstance.
In reality, those are not really reviewed.
Ms Niamh O'Donoghue
It is a very substantial recovery.
The Comptroller and Auditor General found that there is no provision for the approval or review of a decision to cancel or write off overpayment debts.
Ms Niamh O'Donoghue
My point is that there are a number of different elements. I have detailed them in the update. They include the train that is going on for recovery items, revised guidelines on write-off and revised guidelines on recovery. All of those things have been progressed since the audit was carried out last year. There are two other elements I can draw to the committee's attention. We have also been investigating the possibility of using attachment orders.
That was my next question.
Ms Niamh O'Donoghue
This is work that has been progressed through the high-level group I referenced earlier with the Revenue Commissioners to see what we can do in that space. We are confident of making progress in that space.
Ms O'Donoghue is going back to the deterrent. If people understood that an attachment order was coming if they were convicted or found to have perpetrated welfare fraud, it would act as a deterrent. Is Ms O'Donoghue saying that is moving on now?
Ms Niamh O'Donoghue
Indeed. Finally, in a much more macro way, one of the areas that is being examined by the Department of Public Expenditure and Reform in the context of public service reform is out-sourcing debt collection across various different agencies of the State. There is an exercise going on currently to examine the feasibility and potential of that. Debt in the social welfare Vote will potentially be part of that. We will wait and be informed by whatever comes out of that particular process.
There was no recovery plan in place in the two local offices I mentioned where it was in the high 50th percentiles range. Obviously, that sets off alarm bells in Ms O'Donoghue's head with regard to every social welfare office in the State. What did she do when she heard about that?
Ms Niamh O'Donoghue
We must recognise that in very general terms the vast majority of staff in our local offices have been working over the last number of years under enormous pressure. I am sure members acknowledge that.
Enormous pressure, yes.
Ms Niamh O'Donoghue
There have been huge increases in claims and demands on processing times. There is even pressure on the types of claims that must be considered and the work that must go into that. For a period of time, there was an imbalance in terms of the focus being on claims progression rather than on recovery and control. Over the last year or so, we have been trying to redress that balance. We must do that by ensuring that people are appropriately trained and that vacancies are filled where possible and that people understand all elements of our business rather than just one. A great deal of training was carried out in 2011 and 2012 and it continues, particularly in the areas of guidelines, recovery and debt write-off. All of these areas have been developed and are being progressed following the publication of the report of the Comptroller and Auditor General.
Ms O'Donoghue is right about the pressure staff are under. We know it. A significant issue we come across is delay which I have raised with Ms O'Donoghue before. I acknowledge that the Department is trying to deal with it but an application for disability or invalidity benefit might take a year to deal with. Fraud, however, adds greatly to the stress of staff. I revert to the issue of deterrence. If we can stop this at point A, it would make a significant difference to the system.
Ms Niamh O'Donoghue
Our control activity starts at point of claim. When someone makes a claim, assessment, consideration of eligibility and the validation of information provided are all very important. Control activity starts at that point and is about trying to achieve a balance between preventing overpayment and ensuring that people who are entitled to payments receive them as quickly as possible. It is a balance that must be constantly managed.
Of the €343 million which is outstanding, how much can be recovered? Ms O'Donoghue has referred to the improved systems being put in place in terms of reviews. Of the total amount, 47% has been outstanding for at least five years.
Ms Niamh O'Donoghue
If we can develop the power to attach debt which is off book - that is where people are not currently in receipt of payments - it gives us another tool and area for leverage. The 15% facility provides us with a whole new dimension for people who are currently in receipt of payments and have debt against them and in respect of any new overpayments that arise. We write off approximately €5 million per annum, which is not significant in terms of the overall amount of debt because our view is that we will pursue all debt.
An interesting statistic I came across is that of 66,000 people called for an interview between January and July 2012, 13,200 left the live register before the interview. It is a large number. That 13,000 approximately of 66,000 called did not show up for interview tells its own story. The Department does not track these people in any respect I am told.
Ms Niamh O'Donoghue
The introduction of the Intreo process represents a sea change in the way we deal with customers and in terms of tracking to see where they go and what happens to them. The amount of churn that happens in the normal course of events in the live register is very significant. Approximately 420,000 people are on the live register currently. In 2011, the churn - that is the number of people coming on and off - was approximately 900,000. The average duration on the live register is not long. A very significant proportion of people will move off anyway. I would not necessarily jump to the conclusion that it was because we invited them to an interview.
I am not jumping to a massive conclusion. I am just making-----
Ms Niamh O'Donoghue
Merely to make that point.
They jump to a conclusion, very quickly. That is my point.
Ms Niamh O'Donoghue
My point is that a proportion of them would have.
The one point I wish to make today is borne out of my experience in my offices over 12 or 13 years. My secretary has been doing the job for 25 years and would be the expert. She sees that the big problem is to stop people going down this road from the get-go. Everyone is thinking about how to deal with this and about better reviews and systems within the Department. My view is that we must inform people about what is out there and increase the level of deterrence from the initial stage.
According to a headline on Sunday, 130,000 pensioners could be entitled to a British fuel allowance. More than 130,000 pensioners in Ireland who receive a British state pension have until the end of the current month to claim a winter fuel allowance worth up to €350 per annum. This follows a European Court of Justice ruling that pensioners who lived and worked in the UK and who are residing permanently in Ireland will qualify for this annual payment. It is a significant amount of money. It is obviously a significant number of pensioners. In the case of an individual, the minimum entitlement will be £100 and the maximum £300. For pensioners, it is very significant. A rough calculation suggests there would be 3,000 or 4,000 people who potentially qualify for the allowance in respect of my constituency in Waterford. I do not believe many of them know they can avail of it if they apply before the end of the month.
I realise completely that this is not the Department's bailiwick. I do not expect the UK Department for Work and Pensions to issue a press release stating it owes £20 million or £30 million. Is there some way the Department of Social Protection could facilitate the passing on of information to the pensioners who might be able to avail of it? It would be significant money for somebody during the winter. In some cases, it could amount to €350.
Ms Niamh O'Donoghue
There are two aspects to this. The Deputy is correct that it is not our scheme. It is a British scheme and the judgment has just been made. The implications are still being assessed. As we are in regular contact with our colleagues in the Department for Work and Pensions, we can certainly raise the issue with them. Pensioners with either contributory or non-contributory pensions may be in receipt of a British pension with a top-up Irish pension.
Many of them have it.
Ms Niamh O'Donoghue
In total, we are aware of approximately 118,000 pensioners in Ireland who are in receipt of a British pension. If those in receipt of means assessed pensions here were to apply for and receive additional income from the United Kingdom, it would potentially have implications for their means assessed pension here.
That is an important point.
Ms Niamh O'Donoghue
It needs to be known.
As long as they are aware that receiving a payment would have an effect.
Ms Niamh O'Donoghue
The onus would be on them to tell us that their means or circumstances had changed. Otherwise, if we were to subsequently establish that their means had changed, it would be a case of overpayment recovery.
That brings us back to the question of deterrents. As long as they are informed, they can make up their own minds. I take the point being made.
Ms Niamh O'Donoghue
We have a process in place for most of our means-tested schemes, whereby people must confirm their continued eligibility and declare to us on a regular basis that their circumstances have not changed.
Privacy issues are also involved. The Department needs to think this out before it goes to the Department for Work and Pensions.
Ms Niamh O'Donoghue
Absolutely. We can certainly have a conversation with our colleagues in the Department for Work and Pensions to establish what are the implications. In some cases, their customers are also our customers. We obtain some information from the Department for Work and Pensions on pensions payable, but there are strict confidentiality rules in using this data. We must be very careful to preserve this agreement.
Fair enough. Today is 14 March and one must apply before the end of the month. Will the Department think about this issue quickly and consider issuing a protocol to inform those pensioners who do not know this information and who may be able to avail of it? That would be useful.
Ms Niamh O'Donoghue
We will certainly engage with our colleagues at the Department for Work and Pensions and see what its proposals are.
If it is £20 million or £30 million of which we can avail, why not?
Ms Niamh O'Donoghue
People must understand the difficulties this may present, particularly where a means assessment is required.
I thank Ms O'Donoghue.
I thank Ms O'Donoghue and her staff. It is worth saying I very much appreciate the work the Department does because it helps to keep a very significant number of people afloat and also helps to circulate money in the economy. This point is not always sufficiently appreciated.
I may get into trouble because of some of the questions I wish to ask, but if Ms O'Donoghue cannot answer them today, perhaps she will be able to do so the next time she comes before the committee. Will she tell me a little about the upgrade of the Department's computer system? I gather from remarks made by the Minister that the system was very antiquated and that it was necessary to upgrade the entire system in order that different areas could speak to each other and also to the Revenue Commissioners. Has the Department reached a stage where all areas can interact with each other?
Ms Niamh O'Donoghue
As the Deputy can imagine, the computer systems in the Department are extremely sophisticated and complicated in servicing 70 schemes with different eligibility requirements and providing for 87 million payments in a way which can be tracked and accounted for on an annual basis. In developing our computer platform we must be careful to ensure we do not create problems in terms of business continuity and that we do not risk making so many changes at a particular point in time that the fundamental role of the Department would be undermined and payments would not be made.
Having said all this, the Deputy might appreciate that over time we have had systems developed to service and support various areas of activity as the Department's activities have expanded and the profile and the way in which payments are made have changed. We have been undertaking a programme to modernise our computer systems for approximately six or seven years and it represents a significant investment by the State. Our overall approach, in the first instance, was to modernise and have the most sophisticated systems in areas in which there was less risk and volatility. The first area we examined was that of pensions, which was followed by child benefit. We have been modernising our systems systematically and migrating schemes to our new platform. We have considerably multiplied the level of activity in this regard. The most recent movement to our systems involved schemes which were the source of so much discussion last year, namely, disability allowance, carer's allowance and invalidity pension. All of these schemes have now migrated to our new platform, which gives us much more integrated information and much better ways to manage the information and understand our customers.
We have always had data interaction with the Revenue Commissioners who collect PRSI on our behalf. This informs all of our client eligibility records. We host the client identity services and the personal public service numbers for the entire public service. On the back of this we are rolling out the public service card to customers in the first instance and potentially to other users of public services. We have systems in place which are very much at the height of sophistication and modernisation, but there is no doubt that, equally, we have schemes that we need to migrate. The most delicate of these are probably in the areas of greatest volatility such as those involving jobseekers, in respect of which there is movement in and out and approximately 900,000 or 1 million claims a year, as I mentioned to Deputy John Deasy. We have been examining ways in which to do this, while ensuring we can continue our business and yet progress. We have been taking a few approaches to this task. While we have invested hugely in developing our own systems, we have also received great support through e-government moneys because where we develop systems and a means of holding information which is potentially of value to the rest of the public service, the infrastructure put in place not only supports the core activity of the Department but it also supports agency services in other areas of the public service. Systems developed in this way include those for the birth, marriage and death records held by the General Register Office which are published to 50 agencies in the public service and have generated huge savings, particularly in the issuing of medical cards and in respect of Department of Social Protection schemes.
The other central area encompasses the identity service that I referenced which involves the public service card and validating PPS numbers. Several hundred thousand such validations are carried out every year for other agencies. Progress is being made and it is our database which supports what is known as the single customer view.
This would be pivotal to the next generation of public services in terms of other agencies being able to access and validate customer identity by being able to look at this customer view. More recently, we have developed a system to capture means data, so when we capture data for the purpose of means assessment, we are working towards developing a system to allow that data be shared with other public bodies. In other words, if people declare means to us and we validate and capture it, we would be able to share it with other public service providers where means assessment is carried out. That potentially has much value in other spaces, such as housing, education or health services.
Considering my case load as a public representative, I almost never get representations on child benefit, for example, and I presume that is because the system works very effectively and efficiently. I can see it is a simpler case than jobseeker's allowance, etc., because there is so much change in the area. Does Ms O'Donoghue envisage getting to a stage where the likes of me as a public representative will not be pursued so much on issues like jobseeker's or disability allowance because the system works so effectively and will deal with people more quickly? It effectively deals with child benefit.
Ms Niamh O'Donoghue
I certainly hope so. There is a difference when somebody applies for something which relies entirely on a contribution history and we have that to hand. We can then process something very quickly. In other words, if somebody applies for jobseeker's benefit, that claim can be potentially be decided within a very short space of time, which has been the experience in recent times. It becomes more complicated if the employment history stretches across Europe and we must validate insurance contributions elsewhere.
Considering the other schemes we organise, there are dimensions to conditions of eligibility. For example, for assistance-based schemes, there is a means assessment, which takes some time. We hope that if a person has previously given means data, we should be able to use it again, which can shorten the process. If the information can be validated through another public source, it can also shorten the process. There are various opportunities available to try to reduce processing times for a number of different schemes.
The schemes which have given us greatest cause for concern over the past couple of years has been those where there is additional conditionality due to medical assessment, and where there is a need for somebody to provide information for a desk assessment, or if it is a review case to attend for in-person assessment. That can lengthen the process and what we have tried to do in that space is increase the number of medical assessors working in the Department and change our business processes and the kinds of forms and information we are seeking from people at initial application so we can ensure we get the range of information we need to make an assessment on a case. I hope all those kinds of elements will lead to a position where processing times for claims are no longer an issue on the political agenda.
I will ask about rent allowance for people on the housing list. I appreciate it is not dealt with in particular in the information we received over the week but it has come under the remit of the Department from the Department of Health. There are a number of concerns and I would appreciate if the witness could respond to them.
Does the Department see itself as just the instrument for paying out these sums of money to people on the housing list in private rented accommodation or is there any sense of a need to take an active interest in the process? For example, does it consider whether private landlords are offering a house fit for living in or in seeing how the tenants behave? Does the Department simply act as a paymaster and should the area be covered with a responsibility on local authorities?
Ms Niamh O'Donoghue
The primary focus of the Department is in providing an income support to people with a housing need on a short-term basis. The regulation of housing and oversight of housing provision is a matter for the Department of the Environment, Community and Local Government. If there are concerns about the offerings, we work very closely with officers in the community welfare service and local authorities in order to determine where there are problems and how they can be addressed. Equally, we have very close working relationships with the Private Residential Tenancies Board, and there is much exchange of data. Our primary role is absolutely to be the paymaster and we do not have a responsibility for housing per se, although we work closely with other agencies in the space.
Is there an argument for putting all that responsibility on local authorities, for example, so that they could become the paymasters? As a result of the way our social housing has developed, many more people are living in private rented accommodation than was the case 20 years ago. The system is not very satisfactory for a number of reasons, although the problem has been dumped on Ms O'Donoghue's shoulders. I have concerns about that area.
The next issue is not entirely within Ms O'Donoghue's ambit but it is no harm for her to be aware of it. Some of the people who bought properties to rent to others are in serious trouble with mortgage payments. I do not know how widespread is the practice but there are cases where landlords will lose the property because the mortgage is not being paid. My concern is what will happen to the tenant. Although I am not sure how widespread the problem is, in other cases the landlord will not take anybody on the housing list. What happens if a house is sold? Has the Department of Social Protection considered the issues that may arise in this respect? The Government is facing one of its most serious challenges in the problem of people not being able to pay mortgages. It is a particularly acute problem for some people who may have bought multiple properties to the one they use.
There is another concern with regard to poverty traps, where it may be difficult for people to work because they would lose rental allowance. Is there any work being done by the Department, in conjunction with councils, in trying to progress the rental accommodation scheme, which puts tenants in a better position in that they can work while paying rent. I appreciate that there are many issues and some are not on the shoulders of the witness. The issue should be grappled with because I am very concerned. There may not be enough housing available for people on the housing list and we must get people out of poverty traps.
Ms Niamh O'Donoghue
There are a number of different dimensions to the questions. Housing policy is the responsibility of the Department of the Environment, Community and Local Government in conjunction with local authorities. My understanding of government policy is that we want to move to a position where rent supplement is a short-term support for people.
Assistance for people who have longer-term housing needs would be delivered through a new system called the housing assistance payment. It has been designed specifically to reduce the perceived disincentive to progress from unemployment to work or from dependence to working. Measures are being taken to progress the policy over the course of the year. There were concerns regarding rent supplement in terms of local authority housing and shifting people from rent supplement into the rental accommodation scheme, RAS.
With regard to the security of the payment and the contribution of the individual, one measure that was put in place by the most recent Social Welfare Bill was a mandatory deduction at source facility or household budgeting system that is operated by An Post. In order words, when a local authority offers a house under RAS it would be on condition that the individual that is due to benefit would sign up to a mandatory deduction of their rent that is payable through the household budgeting system. That system is now on a statutory basis and we are working with the local authorities and the Department of the Environment, Community and Local Government to put it into effect. Ultimately, it is about shifting to the new housing assistance payment system which I am not at liberty to discuss today because it is the prerogative of a different Department.
There was an issue raised about the potential for houses to be sold thus reducing the availability of rental accommodation for people who could benefit from a rent supplement. We monitor it closely by ensuring that the current rent limits are still operable and we also review rent limits. One of the things that we take some comfort from is that somewhere between 45,000 and 48,000 new rent supplements were agreed last year. That is evidence that there was sufficient housing and private rented accommodation for people to avail of. Obviously the role of my Department's community welfare service officers exists to facilitate and assist people to find alternative accommodation when the need arises. That measure continues in place.
Another review of the rent limits will take place in July. Therefore, the rent limits will be assessed in order to ensure that rents are operable. A real issue for us is that rent limits can have a push or pull factor when it comes to determining rent payable in the private sector. A number of different facets are moving at the same time such as the rent limits and our continued assessment of them. We must also ensure that there is enough accommodation available within the rent limits and areas. Our supplementary welfare allowance colleagues in Sligo monitor the scheme on a continual basis. There is also the ongoing work in the Department of the Environment, Community and Local Government. For example, the progress of the pilot projects of the housing assistance payment scheme for some time later this year and moving more people into RAS pending that measure.
I have three related questions on the issue and then I shall move on to another topic.
With regard to payments, is the Secretary General aware that some landlords also seek an under the table payment? People in receipt of social welfare are often in the very difficult situation of being in receipt of rent supplement but a landlord may ask for a significant extra payment. Has the Secretary General a view on how the issue should be tackled? How much money does her Department spend on the area?
Ms Niamh O'Donoghue
There are two different types of top-up payments. The basic idea of rent supplement and rent supplement being payable is to ensure that somebody has sufficient money to keep him or herself at a basic standard of living in which case he or she will qualify for rent supplement. It may well be that somebody, who is potentially in receipt of rent supplement, has some other income through means, some sort of rehabilitative employment or whatever. I shall comment on situations where a person has additional income above the rate of supplementary welfare allowance. In such instances it may very well be that the scheme allows him or her to top-up his or her rent to secure accommodation that is at a higher rent level than would normally be given under the rent supplement scheme.
In other circumstances if a landlord contracts, under the rent supplement scheme, to provide something or a tenant asks a landlord to provide accommodation at a particular rent but that rent is under declared, in terms of what the landlord is seeking, then that is an offence and should be reported to the Department. There is specific legislation to take account of it and our inspectors have received additional powers in recent social welfare legislation to deal with such landlords.
I want to make sure I understand the Secretary General correctly. Is she saying that if a tenant feels that he or she is being overcharged he or she should make a formal complaint to her Department?
Ms Niamh O'Donoghue
Yes, if there has been a misdeclaration of the level of rent that is payable for the purpose of allowing an assessment. In other words, if the landlord seeks a rent higher than what has been declared then that is an offence and should be reported to us.
I appreciate that. I have a last query on the matter. My party colleague in my neighbouring constituency, Deputy Emmet Stagg, has stated that in certain counties the level of rental assistance for one part of a county is not appropriate for another. Kildare is a good example and the same might apply to Kilkenny. I represent the Clondalkin-Lucan area but the rental assistance in Lucan is significantly higher than in Leixlip which is only a mile and a half away but happens to be in a different county. Yet the cost of renting a house in Leixlip is very significantly higher than renting a house in Athy which is at the other end of the same county. To what extent does the Department address the issue? I am sure that the Kildare example is replicated in Wicklow, Meath and other places.
Ms Niamh O'Donoghue
There is a very detailed continuous assessment of the availability of rental properties and within the rent limits. I am aware of the concerns expressed by Deputy Stagg. I am aware that he spoke to some of the people involved who are directly involved in providing the service in the Department.
How will those issues be addressed?
Ms Niamh O'Donoghue
As I said, another overall review of rent limits will be undertaken in the middle of the year and in the meantime we will continually monitor the situation. The information that is available indicates that the rent limits can be worked as they currently exist. Obviously the rent limits will be reviewed on a national level in July.
Will rent limits be changed in the situations that I outlined?
Ms Niamh O'Donoghue
It depends on what the assessment shows in July. In previous reviews the rent limits have been reduced and reflected the changes that took place in the property market. With regard to the overall assessment, we would not expect to see too much change this year.
How much is spent on rents annually?
Ms Niamh O'Donoghue
In 2011 there was €500 million spent on rent supplement and in 2012 it was €423 million.
Why the decrease?
Ms Niamh O'Donoghue
The change is a result in the amount of contribution that was required and the change in rent limits.
In other words, the tenant had to pay more.
Ms Niamh O'Donoghue
Yes. There were two dimensions, the tenant had to pay more and the rent supplement payable was reduced.
The Deputy is out of time.
I apologise. May I ask a question on community employment schemes?
Yes.
Last year major changes were made to the community employment arrangements, some of which I understand. There was also a great reduction in the amount of money available for what was termed "materials" which in reality was not just stationery and so on. The money was used to pay for fuel, audits and so on. Has the Secretary General a sense of how those changes impacted on the delivery of the CE schemes and put them in a difficult situation?
Ms Niamh O'Donoghue
A large amount of work was done by staff of the Department in the course of last year in dealing on a very close basis with community employment schemes to assess what the exact levels of expenditure were, where there were difficulties and to solve these difficulties. In the original Budget Statement there were reductions to be achieved under the heading of the training and materials grant. Subsequent to that announcement, the Minister found money elsewhere within the Vote to subvent it; therefore, when we carried out the assessment, the level of cutback originally flagged did not have to be enforced during 2012. A very extensive review was undertaken of all community employment schemes and their financial basis. It identified various areas where there were savings to be achieved, for example, in insurance, where there were different arrangements for different schemes. There were other savings to be achieved where potentially we could amalgamate schemes to achieve better efficiencies, or where we could increase the ratio of participants to supervisors within the agreements in place to get greater benefit from the expenditure being made. In terms of delivering better value for the moneys available for training, arrangements were put in place to secure more cost effective training solutions for many of those involved in the schemes.
Did that apply to audits also?
Ms Niamh O'Donoghue
Yes; it covered insurance audits, training and the ratio of participants to supervisors. In some areas there were opportunities for us to make progress. The net effect is that we managed to achieve savings on our community employment programme spend, while at the same time putting in place better financial foundations and structures for further delivery in the next few years. No scheme had to close on foot of the measures put in place, although there were some changes because there were amalgamations. However, no schemes were impacted on to the extent that they had to close.
I welcome Ms O'Donoghue and her colleagues. I will refer to two areas. Ms O'Donoghue has said there are three main functions - delivery of income support, activation and control of fraud. On the issue of fraud, any system must give the appearance of being fair. How much was recovered in 2012 in the investigation of fraud?
Ms Niamh O'Donoghue
When we recover money, it is recorded in our overpayments system. As the Comptroller and Auditor General has previously said, one of the problems we have with the current system is that it does not differentiate between recoveries in terms of error and fraudulent payments. It is a recovery against a debt that is included in our system; therefore, I cannot give the Deputy that breakdown.
What was the total amount recovered in 2012?
Ms Niamh O'Donoghue
We recovered €51 million in 2011.
Was that out of a total budget of approximately €21 billion?
Ms Niamh O'Donoghue
Yes, there was total expenditure of €21 billion.
On the €51 million recovered, what was the total value of overpayments?
Ms Niamh O'Donoghue
Overpayments to the value of €92 million were recorded in 2011, of which we recovered €51 million.
What was the total spend overall? Was it €21 billion?
Ms Niamh O'Donoghue
Yes.
Does the figure of €21 billion include the administration costs of the Department?
Ms Niamh O'Donoghue
They are included in the figure of €21 billion.
What is the total value of social welfare payments?
Ms Niamh O'Donoghue
The entire cost of administration in the Department is approximately €600 million which accounts for a figure 3% to 4%. Everything else is included in the programme spend.
Approximately €20 billion is spent on scheme payments. Of the €92 million in total-----
Ms Niamh O'Donoghue
They were recorded as overpayments. It represented less than 0.44% of expenditure.
It appears to be very low.
Ms Niamh O'Donoghue
Once an overpayment is recorded, it becomes a debt. In order to decide on and record an overpayment, there obviously must be an evidence base to show that an overpayment occurred.
I have raised this matter previously and will do so again. Community welfare officers, CWOs, were always funded through the Department of Social Protection, but they operated under the HSE. How many of them transferred to the Department of Social Protection and when did they transfer?
Ms Niamh O'Donoghue
They transferred on secondment from 1 January 2011 and substantively from 1 October that year. There are approximately 1,000 staff, of whom approximately 700 are CWOs.
How many CWOs have been assigned to the investigation of fraud?
Ms Niamh O'Donoghue
Everybody has a control of fraud brief. In the last year an additional 600 warrants have been issued by staff in the Department, but bear in mind that 1,000 staff have come from the HSE and 700 from FÁS employment services and community employment programmes. We have also had additional staff redeployed.
I wish to be very specific. In my experience as a public representative nobody has the intelligence CWOs have. They deal with people on the ground and administer the rent supplement scheme. They know what is happening. They are the ones with whom we deal on the front line in many cases. I cannot understand why a significant proportion of them were not assigned to inspection and fraud duties.
Ms Niamh O'Donoghue
What I am trying to say is that inspection and fraud control form part of their functions. We have activation control teams operating-----
No, I will be very direct. My understanding is that there were not as many involved in inspections in 2012 as there were in the previous year. One can have all the systems in the world, but they rely on intelligence about whether people are abusing the rent supplement scheme and so forth. CWOs have this intelligence in abundance because they are the first line of call. If people are making an application to the Department of Social Protection, their first port of call is the CWO. CWOs are on the ground in health and community centres.
We are pulling back less than 0.5% in terms of fraud. I have a fundamental belief the system should be fair. If people are entitled to be receive social welfare payments, they should be paid. They are not receiving a fortune by any means. However, there is a perception among the general public and many on social welfare that there are people who are abusing the system. I expect Ms O'Donoghue would probably also accept this - that it is probably higher than the figure of 0.44%. To deal with this, specialist staff must be put in place, people who can devote their attention to inspections. If a general official is working on a file and then pulled away to the counter, there is no way he or she can devote his or her attention specifically to that file. When the CWOs arrived in the Department, I would have expected this to present an enormous opportunity to use their intelligence effectively to put in place a crack team, which would give comfort to the general public and the vast majority, if not nearly all, of those on social welfare who are genuine that the system was working. In many cases, the general public believes there is large-scale abuse in the social welfare system.
Ms Niamh O'Donoghue
I agree with the Deputy and what I was trying to say was that since the community welfare officers came into the Department, we have been trying to emphasise their control brief. They have been working as part of joint teams with our inspectors, particularly on different projects specifically based on intelligence and information identified through the community welfare officers. Where we have developed integrated Intreo offices, community welfare officers are part of the integrated decision team. They are feeding their intelligence on fraud and control into that space. There is significant training on emphasising the control dimension and the need for greater exchange of information and intelligence across all streams in the Department. That has been happening.
I do not want to be personal but Ms O'Donoghue should then explain to me why only €51 million was recovered in fraud out of a budget of nearly €20 billion in social welfare payments.
Ms Niamh O'Donoghue
That is because we must have the evidence to support it. By the same token, there were 100,000 reviews of claims last year. I have provided information to the committee in respect of targeted investigations and using data in a more intelligent way to target specific areas where we think there is a potential for fraud and reviewing claims on that basis.
Does Ms O'Donoghue believe the Department's systems are working in coming up with an accurate figure on social welfare fraud?
Ms Niamh O'Donoghue
I must operate on the basis of evidence. We can continually improve our system, which is precisely the point in terms of non-compliance analytics and how to marry our intelligence in a better way to target this level of fraud.
How many additional social welfare inspectors have been put on specifically to deal with inspections and fraud?
Ms Niamh O'Donoghue
We have some 90 staff, out of 600 working on control, working on fraud. That is a core Department of Social Protection activity and, in addition, we have staff within the community welfare service and the employment services contributing to control activity.
Is the Department of Social Protection saying there are 90 people, nationally, looking specifically at inspection and fraud?
Ms Niamh O'Donoghue
These people deal with serious fraud within our serious investigations unit.
Where are they based?
Ms Niamh O'Donoghue
It is a national unit.
What are the 600 staff?
Ms Niamh O'Donoghue
They include inspectors in our local office network and staff within the centralised scheme areas and staff within the control division, who are data matching. A myriad of staff are involved in this.
How many social welfare offices does the Department have nationally?
Ms Niamh O'Donoghue
There are 60 local offices, 60 employment offices and 60 branch offices.
Where are the 90 people in the special investigations unit based?
Ms Niamh O'Donoghue
They are attached to regions. It is a national unit headed by a principal officer.
How many regions are there?
Ms Niamh O'Donoghue
There are 13 divisions on a regional basis.
There are seven or eight people per region.
Ms Niamh O'Donoghue
They are working on serious fraud and working in following up the targeting by inspectors and control staff in serious fraud investigations. They also work with other agencies like the Revenue Commissioners and NERA with regard to employer inspections.
If the number is 90 at the end of 2012 and this year, how does that compare with what was in place in 2011 and 2012?
Ms Niamh O'Donoghue
It is broadly consistent, it is the same.
Why have extra people not been assigned to the area? The topic arises every time departmental representatives come before the Committee of Public Accounts. I have not been a member of the Committee of Public Accounts for very long but it has come up every time. I imagine the transcript of the debate from last year is similar. This is not personal because our job in the PAC is to get value for the taxpayer. Less than 0.5% of spending is being captured as abuse of the system. It is important to distinguish between genuine inadvertent overpayments and fraud. The Comptroller and Auditor General made reference to distinguishing these cases. There are genuine cases but, with the large increase in social welfare payments and the additional 1,000 community welfare officers arriving in October 2011, the opportunity existed to increase the complement of 90 and to set up a targeted area of fraud. The public looks at this point. We are conscious of it every day of the week.
Ms Niamh O'Donoghue
Our job is to provide a range of services. Control of fraud is one of those and the control and investigation of serious fraud is a smaller dimension of that.
The Department is spending taxpayers' money.
Ms Niamh O'Donoghue
Absolutely, we are spending taxpayers' money. I am in no doubt about our responsibilities in this space. I also have a responsibility to deliver income support services and activation services. I must balance the three in the context of an overall employment control framework, which is Government policy on reducing the numbers in the public service. We have been the beneficiaries of redeployed employees into vacancies in the Department. We must try to balance a number of resources by delivering the full range of services we always had to deliver, including the full range of community welfare officer services, in the context of a declining number of staff. We have maintained the numbers involved in serious fraud investigation and we have worked to ensure the support and targeting of serious fraud investigations becomes much more refined so that we get a better effect. I would like to put more people into the area but that means taking them out of another area.
Of the 90 people involved in the special investigations unit, how many came from the community welfare officers who were transferred to the Department?
Ms Niamh O'Donoghue
I do not have the figure to hand.
Does the Secretary General have an idea? Have any been transferred into the area?
Ms Niamh O'Donoghue
Yes.
Ms O'Donoghue thinks some have.
Ms Niamh O'Donoghue
Yes.
We are on the same page. It is very difficult when we are cutting back on spending on a range of services and people see fraud occurring. I ask Ms O'Donoghue to take on board the point made by the Comptroller and Auditor General that this is an area the Department can examine so that the level of detection is higher when the Department's representatives appear here next year.
Ms Niamh O'Donoghue
I hope we will be in that situation because everything we are doing is to improve the value from the effort we put into this place. As we move to more integrated activity and as we rationalise some of the services the community welfare officers provide, it will free up resources for us to deploy. More welfare officers will become more fully involved in control activity. Every committee welfare officer has a control responsibility as well as basic responsibilities. Control activity begins at the point of claim. Every deciding officer in the Department has a control dimension and we have been reinforcing this point heavily over the past year.
Looking at the profile of payments, the one payment that is increasing consistently every year is State pensions. Over the past four years, State pensions have risen by 17%. We have an ageing population and exposure in terms of the Social Insurance Fund. Has the Department carried out analytical activity in terms of projecting how to address the area?
There are clearly shortfalls. I am looking through it. A lot of payments are various and a lot of them are very consistent over the last four years, but the one area where there are increases every year is State pensions.
Ms Niamh O'Donoghue
A number of analyses have been carried out of pensions. The most recent referenced in the report of the Comptroller and Auditor General was the actuarial review of the Social Insurance Fund. It highlighted the problems that exist. Government has taken policy decisions and changes have been made to the pensions regime, including changes to the age at which a person can qualify for a pension, the future of the State transition pension and in terms of the type of benefits people can receive. New rates relative to contributions have been introduced.
My question to Ms O'Donoghue as Secretary General of the Department is not on a policy issue. Does she have an observation on demographics of her own as distinct from setting out a Government policy?
Ms Niamh O'Donoghue
Given the demographic profile of the population, the cost of State pensions under the current structure will continue to increase. The findings of the actuarial review last summer were consistent with those in the review carried out five years ago. There is a difficulty there which is what influenced the changes that were introduced to the structure of pensions. Further changes may be required. There are a number of different elements being considered. The OECD is considering pensions policy at the behest of the Minister and it is expected that it will report very shortly. The report should help influence future policy determination on pensions. It is specifically aimed to take account of the fact that there is an imbalance there. We have a population that is ageing. The dependency ratio between those in work and those who will be dependent on pensions will change. Life expectancy issues and birth rates highlight the fact that there is a problem for the future unless something is done.
To correct Deputy O'Donnell on an earlier matter, it has been clarified to me that while a number of community welfare officers have moved into different roles in the Department, there is no community welfare officer in the special investigations unit, or SIU, as of yet. Obviously, there are community welfare officers working in control. The Department is currently running a competition. Work in SIU attracts an allowance and the competition is open to community welfare officers.
To reiterate my observation, it is a grave mistake that community welfare officers are not involved in that area.
Ms Niamh O'Donoghue
It is a competitive process.
Ms O'Donoghue is missing my point. There have been 90 staff in SIU for the last number of years. Clearly, it is not having the necessary impact if the levels of fraud detection are at 0.44% of overall spend. I am on the public record on this point. Given the set of skills they have, there was an opportunity to adopt a strategic direction when community welfare officers transferred as a group. They were the group which was administering rent supplement, which is a social welfare payment. They were on the ground. They know the people. I am amazed that no community welfare officer is involved in the area. I understand the point that there is an open competition, but this is surely an issue of the Department using the skills that are at its disposal.
Ms Niamh O'Donoghue
It is absolutely about using the skills to inform what we do on fraud. That is happening in terms of integrated control teams on the ground and in relation to joint operations between inspectors and community welfare officers. It is happening in relation to the feeding of intelligence that helps inform the targeting of SIU activity. While there are currently no community welfare officers in SIU, I am confident that will change on the basis of the current competition. It is a question of balancing resources across the full range of activity of the Department, including serious fraud investigation.
This is not personal. I make my point purely on the basis that ordinary people, including genuine social welfare recipients who are the majority of all recipients, and the general public consider the fraud detection rate of 0.44% to be too low.
Ms Niamh O'Donoghue
There are approximately 90 staff members in serious fraud control and over 600 staff engaged full time in control activity. That represents 10% of the staff of the Department. In addition, every officer involved in processing and deciding claims has a control dimension to his or her work. I assure Deputy O'Donnell that just as we take very seriously our obligation to process and deliver payments as quickly as possible to people who are eligible, we also take seriously our responsibility to ensure that people who are not entitled to payments are stopped at point of claim or detected very quickly.
Ms O'Donoghue will appreciate that when one sees a figure of €51 million out of a budget of over €20 billion, one must ask questions.
Ms Niamh O'Donoghue
I must operate on the basis of evidence. Where the evidence indicates on foot of an investigation that a fraud has occurred, action will be taken.
Equally, I must act on evidence. The evidence suggests to me that the cold, hard fact is that 0.44% of the overall social welfare budget was collected in respect of overpayments and fraud. We do not even make a distinction.
Ms Niamh O'Donoghue
The statistic of 0.44% refers to overpayment attributed to fraud as a proportion of the budget.
Does that equate to €51 million?
Ms Niamh O'Donoghue
It was €34.9 million in 2011.
That is roughly two thirds of the overpayments.
Ms Niamh O'Donoghue
Sorry. I may have given the Deputy the wrong figure or misunderstood what he was asking. Overpayments in their totality, which amounted to €92 million, equated to 0.44% of expenditure. The fraudulent element of that was 0.2% of expenditure.
That is half. That means one third of overpayments related to fraud and only 0.2% of overall overpayments in the social welfare budget was attributed to fraud.
Ms Niamh O'Donoghue
Yes.
It is just too low. I ask the Department to look at it again in line with the report of the Comptroller and Auditor General.
Ms Niamh O'Donoghue
I assure Deputy O'Donnell that we are continually looking at ways to improve detection. We must base our decisions on the evidence presented.
I accept that.
I thank the witnesses for attending and for their preparation for the meeting. I acknowledge that the staff of the Department are doing very difficult work in trying circumstances. In particular, the community welfare officers do great work in trying times, which we must acknowledge.
I will discuss the fraud issue but shift first to an issue that was mentioned in the Department's opening statement, which is Pathways to Work and the Department's work on activation. Deputy Deasy referred earlier to the number of people who failed to turn up for interviews with the relevant officials. It appears that one in four people did not attend an interview with an inspector or official in the relevant office. Can Ms O'Donoghue confirm if the figure is still valid or if there is more up-to-date information available?
Ms Niamh O'Donoghue
When people are contacted and an interview is arranged, a proportion do not attend at the first time of asking. In many cases, that is for very good reason. We issue a second invitation to those who do not attend and at the second time of asking, the level of engagement increases greatly.
If Ms O'Donoghue has the figures for both times of asking, that would be very helpful.
Ms Niamh O'Donoghue
We have a situation where people leave the live register and find work, or they may commence training or education courses.
I understand.
Ms Niamh O'Donoghue
There are valid reasons people do not attend when they are asked to do so. Since the introduction of operational instructions in this regard, in the middle of 2012, 15,807 customers were referred to activation and 5,338 initially failed to attend.
Can Ms O'Donoghue give us those figures again?
Ms Niamh O'Donoghue
Yes, it was 15,807.
To clarify, these were people who were invited in for an interview.
Ms Niamh O'Donoghue
Yes, during a particular period.
What was that period?
Ms Niamh O'Donoghue
June and July. It was a two month period following the introduction of new arrangements.
I wish to clarify this. As regards the new arrangements, I assume Ms O'Donoghue is referring to the idea that if people do not turn up on a number of occasions, there is a sanction involved.
Ms Niamh O'Donoghue
Absolutely.
Therefore, this request was put out there and it was made clear to people that if they did not engage in the process, they could lose part of their payment.
Ms Niamh O'Donoghue
Yes.
The 15,807 people were asked to turn up.
Ms Niamh O'Donoghue
Yes.
How many did not do so?
Ms Niamh O'Donoghue
For the initial engagement, 5,338 failed to attend. Following a further invitation and a warning about the consequences of non-engagement, of the 5,338 just 308 failed to attend the second scheduled appointment. When those cases were examined by deciding officers, penalty rates were imposed on 52 of those 308.
So there was an improvement of nearly 5,000 cases between rounds one and two. What was the difference between both rounds in terms of the message that went out to people?
Ms Niamh O'Donoghue
It would have been a sterner warning about the consequences of non-engagement. People are invited to come for an appointment but it may not suit their family circumstances for a whole range of situations.
I understand.
Ms Niamh O'Donoghue
They may not necessarily understand that there is a consequence to non-engagement. Therefore, we revised the kind of communications we have with members of the public so that they are much clearer about what we expect of them and the consequences of non-engagement.
That is quite a remarkable change in performance. Prior to this system being introduced, the information I have seen indicates that a quarter of people did not turn up. Ms O'Donoghue is saying that after the introduction of the system, of the 15,807 that were required to come in, only about 500 did not come in the end.
Ms Niamh O'Donoghue
Previously, before the new systems were put in place, there was a process of referral under the national employment action plan, NEAP, which meant that somebody who was on the live register for three months or more was referred to an interview with FÁS employment services, as it was then. The kind of figures the Deputy is mentioning would have come from an analysis of the level of engagement under that particular programme.
Since the responsibility for FÁS employment services was transferred to the Department, we have been considerably ratcheting up the level of engagement we have with people joining the live register. The introduction of the penalty regime has influenced circumstances also, but the expectation of engagement has also changed. Previously, somebody entering the live register would not have expected - and there would have been no particular reason - to be called for an interview, other than a signing-on process, whereas now, somebody who comes into a new Intreo office is immediately profiled. They are also scheduled for a group engagement session, depending on the profile that emerges from the profiling data that have been taken. That group engagement session can happen within a matter of days or weeks. Following on from that, there are one-to-one interviews, so it is a much more intensive engagement.
Can Ms O'Donoghue give me that second round figure again, involving the number of people who failed to attend?
Ms Niamh O'Donoghue
During this two month period, of the 5,338 who failed to attend the initial interview, when they were given the warning just 308 failed to attend.
Of the 308, how many penalties were imposed?
Ms Niamh O'Donoghue
Penalty rates were imposed in 52 cases.
What happened to the other 256 people?
Ms Niamh O'Donoghue
I do not have detailed information but it could very well be, as I said, that people found work, started training or took up places on other schemes.
That was in June and July 2012.
Ms Niamh O'Donoghue
Yes.
Has that process been repeated since then?
Ms Niamh O'Donoghue
I do not have figures for it, but that is on a continuous basis. At the moment, we are examining the use of penalty rates to see if there is any way in which that mechanism can be enhanced even further, particularly in the context of people who are engaged in various other activation schemes or supports. For example, if somebody is referred for participation in a Tús scheme or a community employment scheme, a penalty regime can be attached to their non-engagement in that process. I understand it will require legislation for us to extend it, but we are examining that at the moment.
The process that took place in June and July is ongoing.
Ms Niamh O'Donoghue
Yes.
Given that was eight or nine months ago, can Ms O'Donoghue supply more recent figures for us, so that we can gain an understanding of how this is developing?
Ms Niamh O'Donoghue
We can.
One of the major conclusions from the Comptroller and Auditor General and the Garda Síochána in examining fraud is that a big part of preventing a recurrence is an intensive engagement with people who are receiving benefits. Ms O'Donoghue is saying that across this period, after the new system was put in place, there was a big difference in the results compared with what happened beforehand.
Ms Niamh O'Donoghue
That works two ways. There is absolutely a control dimension to it, but it is equally about trying to assist people to get back on their feet. It is about trying to assist them with progression plans, places or activation.
We all know - and Deputy O'Donnell mentioned it - that people who receive these payments in many cases do not want to receive them. They would rather be at work and leading a different life. The overwhelming majority are receiving such payments honestly and for good reason.
On page two of her opening statement, Ms O'Donoghue talked about the Pathways to Work scheme. She said that scheme was rolled out to ten offices last year with a target of another 33 this year, and full completion by the end of 2014. Roughly how many people have been affected by the new scheme that we have been discussing here?
Ms Niamh O'Donoghue
Does the Deputy mean in terms of the customers of those offices?
The customers, yes.
Ms Niamh O'Donoghue
I do not have that figure to hand, but apparently it is about a 13% coverage of the live register within those ten offices.
To date.
Ms Niamh O'Donoghue
Yes. For example, two of the offices would be very significant - Tallaght and King's Inns.
I know King's Inns. The design and layout of it has fundamentally changed.
Ms Niamh O'Donoghue
Yes. Obviously that will ramp up considerably by the end of this year with the additional 33 offices. That will give us at least 50% coverage by the end of this year.
Earlier, we talked about the figure of 15,807 and Ms O'Donoghue said she would get more recent figures. How are those people picked?
Ms Niamh O'Donoghue
These would have been people who had attended to make a claim in the first instance and would have been invited to an interview.
I am conscious that the live register is composed of various figures. Some people are on and off it for short periods while others are on it for quite some time. That figure of 15,807, are the individuals selected so they broadly represent the composition of the live register or are these people who have just come on to the live register?
Ms Niamh O'Donoghue
It is not a random sample but I have no doubt there are people representing each of the different cohorts on the live register because we have not got Intreo services rolled out as yet. When someone initially comes to make a claim, we profile them based on a model developed with the ESRI several years ago to establish their probability of exit from the live register. There are some who sign on who we would expect to be short-term customers of ours who will move on to other employment on their own steam. For others, they are more vulnerable and for others again, there are underlying issues which may have to be dealt with in order to allow them move into a different employment sector. The profiling scores them and gives them a probability of exit score.
Our focus in the Intreo service will be on those who have a low probability of exit, in other words those in most need of support, and then there are those in medium need of support and then those of a low need of support. We will only actively engage with the latter category if they stay on our books longer than we would have otherwise expected them to.
Obviously we have another dimension in the significant number of customers who are long-term unemployed for whom we do not have this profile information. We are hoping to address this matter this year. It will give us the data to be able engage with the current stock of long-term unemployed. I know that description sounds awful but it is about the people who have been on the live register for some considerable time and how can we assist them in labour activation and to progress off the live register.
The Department’s Fraud Initiative 2011 to 2013, Progress Report 2012 refers to enhanced legislation and additional powers introduced under the Social Welfare and Pensions Act 2012. One of those additional powers was the ability of social welfare inspectors to exercise certain functions at ports and airports to deal with what is known as welfare tourism. What impact has this initiative had to date?
Ms Niamh O'Donoghue
It has been significant by giving us a whole new dimension and tool. We have concentrated much of our activity at particular airports, particularly Cork, simply to get some understanding how this process would work and how effective it can be. The powers involved allow inspectors to attend an airport if he or she has reasonable grounds to suspect somebody engaged in social welfare fraud is leaving or attending the country to perpetuate a fraud and to question such individuals.
Since this came into place in June 2012, we have had 50 detections using these powers at Dublin, Cork and Shannon airports. It has predominantly been Cork but that is because much of the initial work was done there. There are also 36 cases under investigation as well. It is a substantial piece of activity for our colleagues in the special investigation unit, SIU.
Has it been rolled out fully then? As Ms O’Donoghue stated, it started off initially in Cork to see how it could work. Is it operational now across all our major airports? Has it been rolled out at ports?
Ms Niamh O'Donoghue
We have not engaged in the ports to the same extent. We conducted one check at a port this year. The powers are prescribed so the inspector has to have a suspicion concerning the people coming and going.
Have the additional powers of inquiry into landlords by social welfare inspectors been successful?
Ms Niamh O'Donoghue
Again, they have in some instances. As I stated to Deputy Dowds on the top-up in rents, I do not have a figure to hand but I will certainly find out for the Deputy.
I would be grateful if that figure could be supplied.
On overall fraud detection, the Department supplied the committee with a report, after an extensive investigation of a large sample, on child benefit which showed the levels of fraud in this payment are next to nil. From the Comptroller and Auditor General’s report, the one point that caught my eye is the value of reinstated or transferred claims. For example, 2.1% of all disability allowance claims were assessed as being fraudulent, as opposed to an irregular welfare payment. Out of that, 0.9% were reinstated or transferred. If they were fraudulent and we have evidence of the recipients intentionally defrauding the State, why would it be reinstated or transferred?
Ms Niamh O'Donoghue
Most of the schemes the Department operates are based on statute which prescribes the eligibility for them. Someone may become not eligible for one particular payment but become eligible for a different one. Where the fraud kicks in is if there was an overpayment raised against the person, then that overpayment would be received from the new payment they would be on.
The easiest example would be of someone in receipt of one-parent family payment who is found to be no longer eligible for it due to an investigation. They then may become eligible for jobseeker’s benefit or become a dependant of a partner in receipt of jobseeker’s benefit. Regardless of the circumstances around the initial claim which was found to be fraudulent, if they satisfy the conditions in law that entitles them to a different payment, then they are entitled to it. Where the fraud piece comes in is with the recovery of the overpayment rather than diminishing their entitlement to the new payment.
On the figures for one-parent payment, 6.7% of claims were found to be fraudulent. However, two thirds of that figure then received the equivalent of that payment in another way.
Ms Niamh O'Donoghue
It may not necessarily be the same payment. The other piece that is important in this space, particularly in the context of disability allowance, is that persons may make a further claim and produce more evidence to show their circumstances have changed since the investigation took place.
That would not be fraud.
Ms Niamh O'Donoghue
They may have fraudulently claimed at a point of time, but they may make a different claim at a different point and be reinstated because they are able to produce different evidence. They may also appeal the decision to cut them off or which determined that they had been fraudulently claiming and the appeals officer may make a different decision. There is this safeguard under social welfare law.
That brings us back to the discussion on deterrents, on which I understand and accept the Secretary General's point. I am encouraged to note, for example, that the reinstatement rate is high in cases in which the issue is one of medical ineligibility because I often deal with such cases. Generally, these involve an appeals officer making a different decision based on somebody supplying additional information or a person's condition unfortunately deteriorating. This is how the system should work. Reinstatement also makes sense where an error has been made. However, it is striking that nearly half of those who seek to defraud the State by falsely claiming disability allowance receive a payment from the State, despite the authorities being aware that the individuals in question have sought to defraud the State. Does Ms O'Donoghue see where I am coming from?
Ms Niamh O'Donoghue
Yes. The Deputy must bear in mind that the table does not capture the fact that where the fraud is serious, the person in question is at risk of being prosecuted, although only a small proportion of cases are ultimately prosecuted. Regardless of the person's eligibility for a different social welfare payment, he or she will be at risk of being prosecuted. Their eligibility is distinct and different.
The second point is that if, through a person's efforts - whether fraud or error - an overpayment is raised against him or her, he or she is liable to have this overpayment recovered. It is not as if a person in this position starts from a clean sheet.
This is reporting on the fraud and error surveys and I suppose I should refer to it as suspected fraud. This is where the deciding officer or inspector has made a judgment on the basis of the evidence available to him or her that this is suspected fraud or a suspected error. Sometimes there can be a fine line between the two in terms of whether somebody has deliberately withheld information from us or simply forgotten to give us the information. Two judgments could be made in that respect.
On the issue of reinstatement, if a person's claim is terminated or reduced, he or she will have an opportunity to appeal. The appeals officer who rehears all of the evidence presented may make a different determination from the deciding officer, one that may lead to the case being reinstated. Whereas the deciding officer might have come to a view that there was fraud in a case, this view may not be echoed by the appeals officer. I cannot give the Deputy a value for the proportion of cases where this occurs.
One aspect of the social welfare system is that it is designed to provide income where an income need has been established. This is done based on particular contingencies or situations. Somebody may not fit a particular scheme and may be defrauding that scheme, but his or her circumstances may dictate that he or she has an entitlement in a different part of the social welfare code. This is separately legislated and provided for and we must respect this.
Will the Secretary General provide an update on the roll-out of the public service card?
Ms Niamh O'Donoghue
We went into full production after a very intense period of organising ourselves, for example, dealing with logistics, equipping our offices and so forth. We have somewhere in the order of 80 to 90 stations where we can capture images for face to face issuance of public service cards. We also have two dedicated public service card centres in Dublin, one in Gandon House and other on North Cumberland Street. To date, we have issued approximately 160,000 public service cards and our target is to issue 600,000 in 2013 and 900,000 in 2014. There are two methods of registering somebody to safe level 2, the level at which a public service card is generated. The first is the face to face method, while the second is a reduced process in which we use information currently held by the State, for example, the Passport Office and prospectively the National Transport Authority in the context of driving licences. If somebody has satisfied the safe protocols by having verified his or her identity and provided an image to the accepted safe level of security required, we will accept this data and, subject to some security questions and so forth, issue a public service card on the back of this. As I stated, the target for this year is 600,000 cards and 900,000 next year. At that stage, we expect to be working on other issues in terms of other uses of the public service card to generate demand for it, for want of a better description. Obviously, the card has a particular use in the context of somebody being a customer of the Department, but it has significant potential to be of use to customers of other agencies and in accessing services provided by other agencies.
One of the regular themes of our hearings is the need to integrate the information held by agencies. The roll-out of the public service card would be a massive and welcome potential driver of improvements in that regard. I thank Ms O'Donoghue for her presentation and the work done by her Department.
Mr. Seamus McCarthy
To return to the table on which Deputy Paschal Donohoe asked a question, the results of the three surveys came through in June 2012 and we have not yet had an opportunity to examine them in detail or look behind them. We want to do work on this. Another survey has been completed since. I envisage returning to this issue and perhaps reporting again on the detail and the new concept of reinstatement or transferred claims and the implications of this.
Has Mr. McCarthy noticed that the statement is unaudited?
Mr. Seamus McCarthy
That is exactly what I was referring to. We will report again.
How will that work? Will we have another table-----
Mr. Seamus McCarthy
Unfortunately, that is the case.
I like tables.
Mr. Seamus McCarthy
As Deputy Kieran O'Donnell stated, he has been listening to this for as long as he has been a Member of the Oireachtas. We write about this issue every year.
The table is at the core of everything.
Mr. Seamus McCarthy
Yes.
Does the Department have a risk officer and a financial officer?
Ms Niamh O'Donoghue
We have a risk management process in our corporate management-public services division. Mr. Conlon who heads our finance division also has responsibility for that area of corporate services. We have an integrated risk management system.
Mr. Conlon is the risk-----
Ms Niamh O'Donoghue
He is newly appointed, having just recently joined the Department.
He is responsible for risk management.
Ms Niamh O'Donoghue
He is responsible for the oversight and roll-out of the risk management system in the Department.
Does the Department have a financial officer?
Ms Niamh O'Donoghue
Mr. Conlon is also the head of the finance unit.
How many use the free travel scheme?
Ms Niamh O'Donoghue
Approximately 1.1 million customers have eligibility for some free travel, of whom approximately 745,000 have direct eligibility. As the Chairman will be aware-----
How many use the scheme? How does the Department monitor its use?
Ms Niamh O'Donoghue
Usage in respect of the predominant element of the scheme is not monitored. The public service card will facilitate usage monitoring-----
The free travel scheme has never been monitored.
Ms Niamh O'Donoghue
It has been monitored previously in so far as the funding provided for the scheme was originally based on ridership surveys.
The last such survey on the predominant beneficiary of the scheme, CIE, took place in October 1973. It has been quite some time since a ridership survey has been conducted there. Since then, there have been many changes to the scheme in terms of extending the benefits, including in 2006 where there had been restrictions on when people could avail of free travel.
The Department paid €61 million to CIE in 2011.
Ms Niamh O'Donoghue
Yes.
On what was it based?
Ms Niamh O'Donoghue
It was based on an estimate of passenger numbers. Certainly for the past three years it has been based on a budgetary cap that has been imposed by Government.
Was it based on a guesstimate or an estimate of passenger numbers?
Ms Niamh O'Donoghue
It was an estimate.
That estimate or that survey was last conducted in 1973.
Ms Niamh O'Donoghue
Yes. That is in relation to CIE, but I would say that in relation to-----
I am not going away from the issue yet. I want to stay with CIE for a moment. Based on what happened in 1973, with some work in between times but not much, the Department pays CIE €61 million.
Ms Niamh O'Donoghue
Yes.
Is the Secretary General satisfied with that? Is that getting value for money?
Ms Niamh O'Donoghue
I would think that we are getting value for money because the actual scale of benefits and the number of beneficiaries has increased dramatically since that ridership survey was conducted in 1973.
But the Secretary General does not know how many people go on that.
Ms Niamh O'Donoghue
No. At the moment we do not-----
How then can the Secretary General be satisfied that it is value for money?
Ms Niamh O'Donoghue
Because the level of payment has been capped for the past three years when the actual benefits under the scheme have been increased.
But nobody knows. The level of payment can be capped and there can be a rolling figure each year but the witness does not know how many use it.
Ms Niamh O'Donoghue
Not at the moment.
How then does the witness know the Department is getting value for money, even though the level is capped?
Ms Niamh O'Donoghue
As I say, it is on our judgment that the benefits available under the scheme have increased very substantially, at no particular additional cost, and the number of beneficiaries has increased substantially.
But the witness does not know, even though the benefits have increased and the number of beneficiaries has increased, what percentage of that number actually use the various services.
Ms Niamh O'Donoghue
Currently, we do not.
How then can the witness deduce that the Department is getting value for money?
Ms Niamh O'Donoghue
What I am saying is that based on what we did know-----
In 1973.
Ms Niamh O'Donoghue
-----based on the extension of passenger numbers and the services available, based on our interactions with CIE, which for some time has contended that it is underpaid, and based on its assessment of the use of services-----
One would not expect CIE to say anything else.
Ms Niamh O'Donoghue
Probably not, but what will make a difference is the public services card.
I understand that.
Ms Niamh O'Donoghue
Based on the roll-out of the public services card, we will have absolute information.
That is in the future.
Ms Niamh O'Donoghue
Indeed.
I am concerned about the fact that these figures are based on a usage survey conducted in 1973 and even though numbers have been added, no usage survey was carried out-----
Ms Niamh O'Donoghue
Not on a joint basis. CIE carries out-----
Why?
Ms Niamh O'Donoghue
I cannot answer that question. I do not know.
The witness is the Secretary General of the Department.
Ms Niamh O'Donoghue
I cannot answer why there have not been surveys.
But the Department is paying CIE €61 million of taxpayers' money.
Ms Niamh O'Donoghue
Indeed.
Is the Secretary General concerned that she does not know?
Ms Niamh O'Donoghue
Yes, which is the reason we are rolling out the public services card in order to get valid information.
No, that is in the future. I am asking when this concern dawned upon the Secretary General and the Department. That amount has been paid for years. Did nobody suggest that the number using the service be counted to ascertain if we are getting value for money, or are we relying on the discomfort expressed by CIE, or the companies involved, that they are not getting enough to show the Department is getting value for money?
Ms Niamh O'Donoghue
The assurances we get come from the fact that the number of beneficiaries has increased very substantially. Whether people choose to avail of the services is an added dimension on which I wish absolutely that we had better information. The facility is there for people to avail of it. The type of service has improved enormously in terms of the extension to eradicate the peak travel restrictions and the extension to bring in other modes of transport. Those would all provide some assurance, albeit not to the level about which I am being asked.
I am shocked that the Secretary General would continue to pay those companies that level of money without knowing the numbers involved, and that somebody within the Department who is responsible for this area would continue to allow the issue go unchecked to a degree. If checked, one might find one is paying too little or too much. That is a difficulty one might have. However, the Secretary General said she does not know.
Ms Niamh O'Donoghue
In relation to CIE, I do not have passenger journey numbers. I have an estimate from CIE of what it has.
The witness should have the numbers.
Ms Niamh O'Donoghue
I agree, but until such time as we have the infrastructure in place to record the passenger survey numbers, I will not have an exact figure in that regard. However, I know how many people are eligible to benefit under the scheme and I know the services that CIE is required to deliver to those people.
I am quoting the amounts paid directly to CIE in 2011 of €61 million, but in fact the scheme cost €76 million in 2011. I presume private operators would take up the balance of the €61 million versus €76 million.
Ms Niamh O'Donoghue
Private operators, including Luas.
How does one account for those numbers?
Ms Niamh O'Donoghue
They are done on the basis of ridership surveys.
When was the last ridership survey done?
Ms Niamh O'Donoghue
They are conducted on an ongoing basis.
Why are they not conducted on an ongoing basis with CIE?
Ms Niamh O'Donoghue
I think it is because of the scale and I think it has always been an issue as to how we measure the numbers.
The Department does not measure it. It is relying on figures dating back to 1973. I am sorry for labouring the point but I would have thought there would be a very clear audit in terms of the numbers using the services and that it could be related to the amount being paid. The company is being paid €61 million without any real figures.
Ms Niamh O'Donoghue
I accept the Chairman's point in terms of us not understanding and not having detailed figures on the usage, but what we do have is an absolute figure in relation to the number of beneficiaries and the extent of the service that is to be provided. I know exactly what the Chairman is saying. A dimension is missing.
A substantial dimension is missing, and an important one.
Ms Niamh O'Donoghue
The critical thing is being able to provide the service and the numbers of people who are accessing it. We have very clear information on that.
The critical issue here at the Committee of Public Accounts is how the Department spends taxpayers' money and how it is accounted for. That is the critical issue about which I have to be concerned. I would like to rely on the fact that Departments in general count what they are doing and have a return and a proper audit trail and proper figures to substantiate the payments that are being made. I do not see that here. In terms of the extension to the free scheme regarding eligibility, I note that the Department bought out at a negotiated amount. Will the Secretary General please explain that to me?
Ms Niamh O'Donoghue
As I understand it, before 2006 there were parameters within which people with a free travel pass could access public transport for free. In other words, it was off-peak travel. In 2006, when that limit was lifted, there was a negotiation with CIE.
What was the amount paid to CIE?
Ms Niamh O'Donoghue
I do not have that figure to hand but I can find it.
Can some of the officials with the witness provide that figure?
Ms Niamh O'Donoghue
As it is for 2006, I would have to look back and see.
Was it a substantial figure?
Ms Niamh O'Donoghue
I do not think so. In the scheme of things I think it was a modest adjustment, but that is as much as I know. Rather than give an incorrect figure I can provide an exact figure in terms of the negotiation.
When is the public services card likely to deliver the type of information the Department requires to understand the payment that is being made?
Ms Niamh O'Donoghue
The delivery of the free travel variant of the card, in other words, the card that will have the chip allowing people to access integrated transport, will be issued before the end of this year. It will take some time to deliver them to the entire free travel population but we should at least be getting user data based on a sample basis before the end of the year.
Has CIE indicated what it believes the Department should be paying for the scheme?
Ms Niamh O'Donoghue
My information is that it has been looking for considerably more money but I am not privy to the details. I can find that out and revert to the committee.
If we can find out what CIE counts we can compare the figures.
Ms Niamh O'Donoghue
I do not have a briefing note on those discussions or the basis of the argument except to note that it believes it is being underpaid for the services it delivers, particularly in light of the cap that was imposed.
Has the Department's internal audit team done any work on the issue?
Ms Niamh O'Donoghue
They certainly have not done so in the recent past but I would have to ask my head of internal audit when this area was audited most recently.
Can we get information on that?
Ms Niamh O'Donoghue
Yes.
Is there fraud in that scheme?
Ms Niamh O'Donoghue
It is suggested by some of the operators, including CIE, that fraud is taking place. The public service card is considered to be one of the main deterrents against fraud because it contains a picture of the person availing of the relevant service.
According to the figures an average of ten to 20 passes are confiscated per day by Irish Rail and Bus Éireann confiscates approximately 50 passes per month. Dublin Bus issued 488 penalties for misuse. I am trying to factor this into the figure we are paying to the companies for the service. What is the level of fraud and what figure does the Department put on it? Ms O'Donoghue cannot give me that figure either.
Ms Niamh O'Donoghue
No, because the companies delivering the services can assess what they perceive to be the level of fraud.
Can we find out the cost to the company? What cost do they put on fraud in these schemes?
Ms Niamh O'Donoghue
We do not have that information to hand but we can ask the companies to establish the figure.
What does the Department's risk manager say about this?
Ms Niamh O'Donoghue
In the overall scheme of the €20.1 billion, obviously there is a risk attached to it given that we do not have complete information, but other areas in the Department pose a higher risk for us.
This brings me to another point. I am shocked by the lack of information being provided. In regard to the questions on the management of schemes, which were reasonable, I ask that we get the information requested, including information from CIE, at the earliest opportunity. This needs to be resolved and some sort of audit will have to be conducted into the expenditure of €76 million of taxpayers' money on that scheme.
Ms O'Donoghue related this €76 million, the €5 million what was written off and the other fraud and errors in the Department to the overall spend of €20.7 billion and represented it as a low percentage. I do not see it that way. I see it in the context of a huge amount of money going to waste in the Department. By and large that money is poorly accounted for. I do not relate it to overall expenditure. I made the presumption that the Department has sufficient checks and balances to minimise the problem. I do not minimise the amount by relating it to the greater figure because it is taxpayers' money and we should be concerned about every red cent. That does not seem to be the case, however. I find the level of fraud to be too high and the debts to the Department in the more than five years category amount to a substantial sum. There should be a greater level management of these sums because it was the same story last year.
The Department put some sort of spin on these figures as if they are not bankable figures and it can save in excess of €700 million in fraud and money which would have gone to benefits recipients had the Department not found the fraud. I prefer to investigate the bankable sum of what they took from the State, which was illegal, or the errors which should not have happened in the first place. They should be minimised but there is not sufficient concentration on them.
Ms Niamh O'Donoghue
I have explained the work we have done over the six months since the report was published in respect of reissuing guidelines, taking legal powers on recovery and training our staff in recovery of overpayments. While there are extreme difficulties in recouping some of that debt I expect to make significant progress given our new basis for action. We are also hopeful of finding other ways of pursuing debt through attachment orders.
Deputy Fleming asked for a significant amount of information on the debts and other aspects of the Department's spend. I suggest that most of the information requested should be at the ready. I would like to see it within the next week to ten days. In regard to the services procured by the Department, at what level does it go out to tender?
Ms Niamh O'Donoghue
For the vast majority of services, it is over €25,000.
If the tender is awarded for an ongoing rolling service transacted by the Department each year, how often is it revisited?
Ms Niamh O'Donoghue
It depends on the service. There is a variety of services. Given the size and scale of the Department, services like cleaning and waste management are significant and we might put in place a contract lasting three or five years. Other services are specifically project based, in other words, we are contracting for the development of particular software or consultancy. We have extensive arrangements for contracting out to the value of approximately €120 million per annum. They range from contracts with branch officers to provide claim taking and processing services in 60 locations to the contract with An Post to provide payment services. We are currently evaluating responses to a tender in that regard. The tender, which will be very valuable, is for an initial period of two years with the possibility of extending it for a further two years.
Is Ms O'Donoghue satisfied that all those tenders have been reviewed at the end of the appropriate period, be it one year or three years?
Ms Niamh O'Donoghue
It would be wrong of me to suggest there have not been instances in which we found ourselves up against the wire in terms of contract deadlines but we have put structures in place to ensure that does not happen and that all contracts are properly based and grounded.
To take, for example, the distribution of leaflets, is a contract in place if somebody asks for a particular leaflet on benefits and it is sent out from a call centre?
Ms Niamh O'Donoghue
I am not familiar with that precise contract, if we have such a contract because a lot of forms and leaflets would be given out either through the Citizens Information Centres or through our local office network. We would send a lot of information through the postal services and we have altered the way we do that in order to get best value in terms of using the most efficient services, including metered post and so forth. Where we have files or large volumes of correspondence moving between offices, we have moved to a different form of delivery so that we get better value and a more secure service.
There is a call-centre operated by Rehab on behalf of the Department. Is that correct?
Ms Niamh O'Donoghue
I must confess I do not know about that. I would have to find that out.
I ask Ms O'Donoghue to do that and to let us know her findings. That is an example of a contract and we need to know the value of it, when it was last put out to tender and so forth.
Ms Niamh O'Donoghue
Certainly. I will furnish the committee with that information at the earliest opportunity.
Would that be part of the duties of the financial officer?
Ms Niamh O'Donoghue
We have a project office, of which finance is part, which monitors all of the contracts and tendering arrangements.
I am asking about the risk officer and the financial officer because other Departments do not have such officers. In fact, when we were reviewing spending with one particular Department, officials acknowledged that the absence of a risk officer to deal with risk management was a weakness within the Department. Separate to that, a further weakness was the absence of someone to deal with overall financial management because such qualifications were not generally found within the Department. It surprises me that there is not a risk manager, separate to the financial manager, given that the Department is dealing with a budget of €27 billion. The absence of such expertise is worrying, given the systems in place or rather, the lack of systems in place within the Department.
Ms Niamh O'Donoghue
We have a very heavily integrated risk management system which is managed centrally and which reports to the management board, of which I am Chair. Risk management is integrated with business plans. Our principal officers are required to identify risks and to monitor and report on them on a regular basis. We have a project governance committee which specifically oversees the awarding of contracts and defines what projects the Department will undertake at any particular time. The project office that supports the project governance committee liaises very closely with the national procurement services and with the legal services with regard to templates and form of contract and also with the Departments of Finance and Public Expenditure and Reform with regard to any restrictions. We try to monitor the request for tender, notification and award processes, in line with best practice.
The risk management system we have in place means that we have a very constant highlighting of risk right across all scheme areas, whether that risk be operational, reputational or financial. It is quite a sophisticated system.
I ask Mr. Moloney to comment on the CIE figures.
Mr. David Moloney
Sorry, did the Chairman say the CIE figures?
What does Mr. Moloney think of the payments under the free travel scheme and the lack of serious data on same?
Mr. David Moloney
The data that will become available will be very welcome. Usage data is probably the firmest way of building up a picture of what one pays for something and it is one approach to take. The approach taken since 1973 has been to negotiate the figure and the Government imposed a cap on that three years ago. Looking at the broad facts, the numbers eligible to avail of that scheme have increased quite dramatically and what the scheme users are eligible for has also increased dramatically over the years. The balance of probability may well be that a per-unit charge would cost more than the current overall provision but as the Chairman has said, in the absence of the full facts, which will become available, we do not know for sure.
Is Mr. Moloney surprised by the lack of analysis in this area, going back over the last number of years? Payment seems to have been made without any proper calculation of the numbers using the scheme, as opposed to the numbers simply eligible for free travel.
Mr. David Moloney
The approach that has been taken has been to contract for the service for the number of eligible people rather than on the basis of a per-usage fee. It may well be that the per-usage approach would give us firmer data. It has always been a negotiated fee and we were aware of that.
It is my understanding that, as it is set up at the moment, the cost of the free travel scheme is the same, regardless of usage.
Ms Niamh O'Donoghue
Yes, it has been the same for the last three years, since the Government imposed a cap.
When somebody gets an entitlement to free travel and receives a card, regardless of how often the card is used, the cost to the taxpayer is unchanged at the moment. Is that correct?
Ms Niamh O'Donoghue
Yes.
The information we have on the numbers eligible for free travel is the basis for the cost of the scheme.
Ms Niamh O'Donoghue
Effectively, yes. That is dimension on which we have information.
Thank you. I wanted to clarify that.
That brings us to the end of our hearing. I thank the witnesses for attending. Is it agreed that the Committee disposes of Vote 38 and Chapters 21, 22 and 23 and the Social Insurance Fund? Agreed.
The witnesses withdrew.