I welcome the Comptroller and Auditor General's report on control activity in the Department which is responsible for delivering in the current year €11.3 billion in income supports to approximately 1.5 million people. Control of fraud, abuse and error is an essential part of the work of the Department to ensure social welfare funds only go to those entitled to them.
The evaluation by the Comptroller and Auditor General was undertaken at an opportune time for the Department. It came as it was undertaking a review of control activity and preparing a revised control strategy. A key objective of the control strategy is to ensure we pay the right person the right money at the right time. A four pronged approach has been adopted by the Department to meet this objective: prevention of fraud and error at initial claim stage, early detection through effective review of claims in payment, measures to deter fraud and abuse and the pursuit and recovery of overpayments.
One of the key recommendations in the report is that the Department should introduce a formal risk management approach in its control and review activity. The Department has always had a wide ranging control programme, including controls at the point of claim, a programme of investigation and reviews of entitlement and pursuit of overpayments. However, while its programme has hitherto focused attention on areas where experience has shown that there is greater exposure, this has not been done in a systematic way or by using a risk management approach as recommended by the Comptroller and Auditor General.
Systematic risk analysis will in the future be a key element of control strategy. Scheme managers will be required to identify the areas of high risk in the schemes for which they are responsible and take appropriate action to address them in a systematic way. We have begun this process with nine major expenditure areas included in the first phase. The Department is also undertaking a number of specific control initiatives in the ten regions, the outcomes of which will be evaluated with a view to expanding successful initiatives to other areas. These initiatives will also feed into the process of refocusing control activity to those areas and types of cases which present the highest risk of fraud and error.
The benefit of a risk management approach will be that review activity can be targeted more effectively. The report also recommends that this approach be combined with the more effective use of the information already held in existing databases. There is already extensive matching of data with that held by agencies such as the Revenue Commissioners under powers given in legislation and the quality and timeliness of this information exchange are improving. More integration of systems within the Department will also improve the ability to cross-reference information from different sources for control purposes.
The review points out that the Department has no reliable estimate of the level of fraud and error occurring. In the context of the review, a survey was undertaken of the unemployment and lone parents schemes for this purpose. The results indicated a significant proportion of cases where people were being paid incorrect amounts. In the bulk of these cases, this was due to increases in the earnings of the people concerned and the fact that the cases had not been recently reviewed. A project has been put in place, using information on previous earnings, to review similar cases. Arrangements will be made for more frequent reviews of such cases in the future.
The Department will include surveys of the levels of fraud and error as an integral part of the control strategy. During 2004 the Department plans to undertake three such surveys, the first of which is to commence shortly. The outcomes of these surveys will feed into the development of the Department's control approach in the future and be used to identify the types of claims which should be prioritised for review purposes.
The report highlights the need for an effective system of identifying and recovering overpayments and using information from the analysis of overpayments to identify where procedures need to be changed or where higher levels of review activity may be required. The Department is developing a new overpayment and debt management system which will provide better information on overpayments and overpayment recovery and better linkages between different schemes in that regard. In the short term the Department has initiated a project at regional level to analyse overpayments which will feed into a claims risk profiling process.
As regards deterrents, another major component of control strategy, the prosecution of cases where fraud has occurred is an important aspect. During 2003 the Department issued revised prosecution guidelines which have had the effect of increasing the numbers of cases being submitted for prosecution. In 2003, 405 cases were referred to the Chief State Solicitor's office with 88 being forwarded by the end of February this year. To complement prosecution policy, the Department is examining the issue, also raised in the report, regarding the possible imposition of administrative sanctions as an alternative to prosecution in appropriate cases.
The Comptroller and Auditor General's report has provided a valuable commentary on the Department's control effort and an input into the Department's ongoing efforts to tackle fraud, abuse and error. It has already had a significant impact on the direction the Department will take in this area. The essential elements in the strategic approach to control which the report recommends and on which the Department is following up are regular surveys to establish baseline levels of fraud and error in different schemes; a better analysis of the causes and emerging patterns of fraud and irregular payments; a risk management approach to direct the Department's review activities more effectively; better use of information and IT systems for the identification of control priorities; more comprehensive systems of debt recording and management and greater analysis of the underlying factors giving rise to overpayments; a wider array of sanctions for fraudulent claiming; and a wider and improved set of performance indicators to measure the ongoing effectiveness of our control systems.
Any system which involves the transfer of funds of the magnitude involved in social welfare payments is likely to be subject to abuse. The majority only get their legal entitlements but we must ensure the extent to which they do not is minimised. Implementation of the findings of the report and the development of a new control strategy will help to keep our control systems up to date and effective. This will have implications for our management systems, IT systems, staff training programmes and the level of resources we apply to control and their deployment. I acknowledge the value of the report to the Department and assure the committee that the findings of the review will be taken on board and given effect in the context of moving forward the programme of modernisation of the social welfare system.