Special Report 45 - Evaluation of Control Activity

Published on 25 November 2003

Summary of Findings

The Department of Social and Family Affairs operates 34 welfare payment schemes. In 2002, one and a half million people benefited from these payments at a total cost of €10.2 billion.

The Department carries out reviews of payments on an ongoing basis in an effort to detect overpayments and to recover the money involved. In 2002, 39,000 cases of overpayment were detected with a total value of €29 million. The estimated cost of this control activity in 2002 was €18.1 million.

In the period 1998-2002, almost half of the overpayments detected arose as a result of fraudulent claiming. A further one fifth came to light when the schedule of assets of deceased claimants revealed a financial situation which would have affected the validity of a claim. The balance of overpayments were due to client or Departmental error.

Historically, the Department has had limited success in recovering overpayments. By April 2003, about one third of the €139 million overpayments recorded in the period 1998-2002 had been recovered.

The examination considered

  • whether review and control activity is informed by an assessment of the risk of fraud and error attaching to the different types of welfare payment
  • the effectiveness, in practice, of the Department’s reviews in recovering and deterring overpayments and how it evaluated its performance in that regard.

Targeting Reviews

The Department’s review activity focuses on some schemes but not on others. Broadly, it concentrates on those schemes which are considered to give rise to the greatest risk of fraud and error. The Department has carried out good work on identifying potential gaps in procedures which could lead to exposure to fraud and is building on that work. It has also carried out a variety of targeted data matching exercises which have resulted in significant savings. However, the Department does not formally assess scheme risks nor analyse the lessons to be learned from a review of overpayments detected. This militates against the most effective deployment of the resources used in control activity.

In its 2003 Control Strategy, the Department has recognised these shortcomings and its revised procedures will culminate in a risk rating for each scheme. It is intended that review activity will then concentrate on those schemes assessed as having the highest risk of overpayment.

Improving Effectiveness

In regard to the effectiveness of review activity the Department’s main measure of achievement, at present, is an estimate of savings which it put at €283 million for 2002. This estimate of savings is based on assumptions about how long a claimant will refrain from further recourse to the system and relates entirely to cases detected. Consequently, it does not give any indication of whether and to what extent reviews are effective in reducing overpayments in the first place. Internationally, it has been recognised that the best indicator of effectiveness in this area is the movement in the levels of overpayment occurring.

Deterring Fraud

In the period 1998-2002, under 2% of overpayment cases classified as fraud were subsequently prosecuted. While slightly higher proportions of high value cases were prosecuted, 88% of cases where the overpayment was in excess of €5,000 were not prosecuted.

Where cases had been prosecuted and the case was finalised, a high proportion (87%) had some form of penalty imposed. The average fine imposed in 2002 was €455.

In view of the practicalities of increasing prosecution activity, it may be worth considering a greater array of sanctions such as administrative penalties and formal cautions.

The examination established that 12% of individuals who committed fraud had later re-offended. Improved recovery performance combined with new sanctions might send out a message to would–be fraudsters that crime doesn’t pay and increase the deterrent effect of the Department’s control activities.