My comments today address the expenditure incurred and accountable under Vote 38 and the account of the social insurance fund. In addressing the committee, I would like to remind the committee of the extraordinary environment which evolved in 2009, before commenting on the Department's financial accounts and the chapters included in the Comptroller and Auditor General's annual report. I trust the committee has received the updated information on the recommendations made in these chapters and I will not repeat that information here.
By any standards, 2009 was an extraordinary year for the State's income support systems. The Government's programme of social welfare expenditure increased to almost €20.5 billion, an increase of more than 15.3% over the previous year. The levels of business activity during 2009 tell their own story in reflecting the very significant challenges posed for the Department. In particular, almost 1.4 million people were in receipt of a weekly social welfare payment which was paid in respect of just under 2.1 million beneficiaries.
During the course of 2009, some 626,000 new claims were registered for jobseekers' payments, and a further 493,000 people signed off from these payments, meaning that the churn in the live register was of the order of 1.12 million cases which had to be dealt with, a figure that is unsurpassed in the history of the Department. Despite the valiant efforts of staff, the number of claims pending in this area rose to an all time high of 78,500, or some 19% of the claim load, which at that stage stood at 467,000. To put this in context, as a result of the ongoing introduction of efficiencies and significant evidence of increased productivity since 2009, the number of jobseekers with claims pending has dropped to 35,000 or 7% of the claim load, which is still at an extraordinary high level of 526,000 as at end of August this year. While these average figures portray a reasonable story at macro level, I am very aware that for many individuals and families who were affected by unemployment, many of whom had never signed on before in their lives, the speed of response of the Department was considered to be less than satisfactory.
Some public commentary during that time focused on delays in processing payments for customers and the abilities of the Department in respect of the utilisation of modern technology. The Department's primary responsibility is to ensure that we deliver income support services on a weekly and monthly basis to our customers across a wide variety of schemes with varying eligibility requirements. The Department processes approximately 85 million payment transactions per year. Many of the schemes operated by the Department are supported by legacy stand-alone systems. The modernisation of systems must be developed with appropriate management of risk to the continuity of this core business.
Equally, in our development efforts, we are also charged with the objective of integrating our systems so that we can achieve a total customer view of our clients, with the objective of providing better service and ensuring better controls. This means that, of necessity, we must always balance the pace of our drive for modernisation with the need to ensure continued delivery of core services. I am happy to say that because of a significant intensification of effort in this area, very significant progress has been made in this regard over the past two years.
We have built on a new technical infrastructure which has already provided significant value to both clients and the Department in our pensions and child benefits area, and has considerably enhanced our control efforts. We have also introduced significant technology assisted improvements in our local offices. Within the coming months an additional number of our major schemes, including disability allowance and carers allowance, will be operated on this new IT platform and over the course of the next 12 months we will be rolling out significant advances in our local offices in support of linking jobseekers' payments and the activation agenda in a meaningful fashion. As this occurs, our clients and indeed committee members will see significant progress.
Since the current crisis arose, the staff of the Department have been making extraordinary efforts to cope with a diverse and increasing claim load, while also trying to deal sensitively with the customers presenting in our local offices or contacting us in other ways. They are deserving of great commendation for the work which has been done, while at the same time recognising that considerable improvement is still required.
I am aware that there is much public concern and media comment about potential for fraud in regard to social welfare expenditure. This concern is reflected in the very significant increase in the levels of suspected fraud reported to the Department in the past three years. During 2008 and 2009, in the face of the huge number of claims being received, we had no option but to devote significant resources at inspector level to the examination of claim entitlement at application stage. Preventing fraudulent or erroneous claims from going into payment in the first instance is a significant part of our overall control strategy. This meant, of necessity, that there was a reduction in focus on claim review during this period.
Having made significant progress in enhancing claim processing, we started to re-balance our activity in the claims review area in 2010 and 2011, with good results from the perspective of review activity and savings achieved. We are firmly of the view that effective customer service by the Department requires both speedy delivery of entitlements to eligible customers and a firm programme of tackling those who seek to claim payments to which they are not entitled. A programme of control seminars has recently been rolled out to staff involved in investigative and control activities in the Department, with a view to reinforcing the need for a robust control environment and the opportunities that now arise with the integration of the community welfare service and FÁS employment and community employment staff. Following a programme for Government commitment in this area, the Minister announced a new fraud initiative last Monday and I understand that copies have been sent to committee members.
I will turn now to address specifically the Chapters 32 to 35 of the Comptroller and Auditor General's annual report. In the main, the recommendations made have been accepted and progress has been made in implementation. I would point out, however, that the report also contains detailed comments on my views about the purpose and intent of fraud and error surveys, and these are germane to the evidence base used to inform the Comptroller and Auditor General's conclusions on the regularity of social welfare payments. The fundamental functions of the fraud and error surveys undertaken are to identify risk in specific schemes, target resources towards the collation of evidence of fraud and inform improvements in the internal and external controls to be applied to welfare schemes. These objectives serve to mitigate exposure to incorrect payments and receipt of irregular payments. I am of the view, as set out in comments included in the relevant chapter, that the application of levels of fraud and error found in surveys concluded as far back as 2004 cannot reasonably be applied to current expenditure to measure welfare payment irregularity.
The Department's view is that payments can only be considered to be irregular when it can be shown - indeed proven - that a payment was received fraudulently or is conclusively shown to be paid in error by reason of customer or departmental error. Welfare payments must be made in accordance with social welfare legislation. This includes the requirement of the deciding officer to decide to stop a payment from a current date when evidence is not available to set up an overpayment in respect of a prior period.
The customer has the right to appeal an adverse decision. The Department must also recognise, process and support an underlying entitlement to any other scheme despite being disallowed for the one in question. To date, fraud and error surveys do not recognise these additional factors, which all contribute to determine the regularity or not of a welfare payment that is paid for the purpose for which the Oireachtas intended.
I must stress that the results of these fraud and error surveys are historic. They are findings which reflect the Department's control strategy and economic climate of the time. The Department has developed and progressed in the use of technology to match and share information where appropriate. Process improvements have been applied to remove the risk of error, which may arise through incorrect calculation in its simplest form, or automating checks through systematic practices. As a consequence, the levels of risk highlighted in fraud and error surveys that were estimated a number of years ago cannot be assumed to remain valid today in reflecting current levels of risk. Having said all that, however, I reiterate that the Department agrees with the Comptroller and Auditor General's comments on the usefulness of the fraud and error survey programme and has broadly accepted his recommendations on having a programme approach to the conduct of such surveys. The Department plans to consult further with his office in this regard, as outlined in the update.
Finally, I would like to make a brief reference to the very significant work programme currently being implemented by the Department, one in which I am sure the members of the committee will be interested. The objective is to develop a radically new approach to supporting people at risk of long-term unemployment into sustainable jobs and training. As part of this, the structure and operations of the Department are being reconfigured to integrate the employment and community employment services of FÁS and the community welfare service of the HSE. These two groups add an additional 2,000 staff to the Department.
The establishment of the national employment and entitlement service and the reconfiguration and integration of employment and benefits services is a key commitment under the terms of the memorandum of understanding with the EU-IMF-ECB. Its establishment was provided for in the programme for Government and builds on previous decisions by the Government. This transformation programme is bigger than any of our previous change programmes. We are moving into a more proactive model of income support and activation, which is clearly focused on progressing people to social and economic participation.
Progress has been good. The rural social scheme and community services programme transferred into the Department in mid-2010. Responsibility for the redundancy and insolvency scheme transferred to the Department at the start of the year and a new claim processing system for these claims will go live at the end of the month. The transfer of the community welfare service in October 2011 and the FÁS functions on 1 January 2011 is at an advanced stage.
These are difficult times for clients, staff and taxpayers. I would like to reassure the committee that every effort is being made to ensure best use of moneys provided by the Government and taxpayers to deliver good services promptly to legitimate beneficiaries, which means efficient payments, activation services and control of abuse.
