Is it agreed that we dispose of chapter 11? Agreed.
Paragraph 36 of the Comptroller and Auditor Generals Report reads:
Irregularity at Branch Office
Unemployment payments are administered through a network consisting of 58 Social Welfare Local Offices and 69 Branch Offices. The Branch Offices are under the control of Branch Managers who are employed under contract to the Department. In accordance with the conditions of their appointment they are required to provide suitable premises and such clerical assistance as may be necessary for the satisfactory performance of the work of the Department.
Up to the end of 2000 the Department required Branch Managers to provide a fidelity bond with an insurance company requiring the company to reimburse the Minister up to an agreed amount for losses arising from fraud, dishonesty or negligence on the part of the Branch Manager. This requirement has since been dropped due to the fact that no cash is held or dispensed in Branch Offices and also because some Branch Managers encountered serious difficulties in obtaining the necessary insurance cover.
An apparent irregularity came to light after a social welfare client of a Branch Office, who had recently returned to employment and was receiving a payment under the Back-to-Work scheme, had his case reviewed by the Social Welfare Local Office to which the Branch Office in question reported. On the face of it, the recipient had been substantially overpaid Unemployment Assistance and, when notified of this, contacted the Local Office. On 6 May 1999 he made a statement to Department officials that the records of the Branch Office showed a payment as having been made to him whereas in fact no such payment had been made. Department staff identified three payments made on the same date as the payment to that recipient which they regarded as being potentially suspect.
The Department established a team to investigate the Branch Office. The investigation concentrated on cash Unemployment Assistance payments made in the period up to the introduction of the computerised Integrated Short Term Schemes (ISTS) system to the Branch Office on 23 February 1999. The introduction of the system abolished cash payments in the Branch Office. The team undertook a partial audit as a full audit of all cash payments was beyond its capacity because of resource implications. The team was hampered in its work because a fire in the Branch Office on 25 April 1999 destroyed what was purported to be practically all local documentation supporting payments and a significant number of lapsed files.
The team's report revealed that
- The average payment per recipient before ISTS was introduced to the Branch Office was 15% higher per week compared to an average payment per recipient after the introduction of ISTS. It was estimated that this highlighted a difference of approximately £99,000 in the preceding twelve-month period.
- A comparison of Unemployment Assistance cash payments in the 14 weeks before ISTS was introduced with two similar sized Branch Offices in the region showed that payments at the Branch Office under investigation were 25% and 18% higher than the other two.
- Forty six recipients were prepared to give evidence that of £66,538 recorded as having been paid to them only £9,622 had in fact been paid
- The team identified several irregularity patterns including the addition of days to casual claimants, once off payments to clients in receipt of normal payments, non-refund of Supplementary Welfare Allowance to the Health Board after an Unemployment Assistance claim was awarded, apparent forging of signatures and closing claims late after a client had signed off.
- Irregularities went back to the earliest month that the team examined after the Branch Manager's appointment and that there was evidence that there were some questionable payments made during his period as Deputy Branch Manager.
- The full extent of the apparent fraud could not be established from the limited investigation but based on the work to date it was estimated that the full figure could be in excess of £200,000.
In response to my enquiries the Accounting Officer informed me that
- the payments in question were made in a pre-computerisation or "cash" environment and did not come to light until after the Branch Office went live on the ISTS system at the end of February 1999. Cash payments are no longer made in the Department's offices and unemployed persons generally receive their payments at post offices on foot of information provided electronically by the Department.
At the conclusion of the investigations in the Branch Office, details of 50 cases including full supporting documentation were given to the Gardaí to pursue the summary/criminal aspects of the alleged fraud. The sum involved in those cases was just over £80,000. Following completion of the Garda investigation, the cases were sent to the Director of Public Prosecutions for instruction. The matter is now before the courts. The Department is currently awaiting legal advice on the options available to pursue recovery of the moneys. Any amounts due under the fidelity bond will be pursued.
The Accounting Officer pointed out that the team which carried out the investigation comprised Department staff from the Regional office under the leadership of the local Area Manager and was not an Internal Audit team as such. The team carried out some exercises to try to get a feel for the level of irregularity which might have been involved but acknowledged the difficulty of doing so. The estimate they did come up with was very tentative and was acknowledged by them to be so and any conclusions based on it can only be regarded as speculative. The Department does not consider it practical to carry out further investigations of cash payments because of
- Non-availability of certain records which would have been destroyed,
- Use prior to the introduction of ISTS of Qualification Certificate numbers as against PRSI/PPS numbers, making it more difficult to link Unemployment Assistance payments to customers,
- Problems of recall given the passage of time bearing in mind that it would be necessary to interview claimants for their recollection of events.
The Accounting Officer stated that revised procedures for local office staff who conduct inspections at Branch Offices were issued in October 1997 and strengthened existing control procedures. Control practices and procedures are regularly monitored and in this regard the inspection format is, at present, being revised to keep pace with the changing environment in Branch Offices. It is considered that the type of irregularity arising in this case could not now occur and that it was of such a nature that it was extremely difficult to detect. Previous internal audits in the period 1996-1998 found nothing amiss.
The Accounting Officer also stated that the conversion to ISTS exercise afforded a proofing of claimload and a very good base for the present data regime. The features of the new computer system and the considerable range of activation, control and inspection measures in place provide a better control environment than previously.
