PAC Meeting | May 28, 2015
Department of Social Protection called and examined
Deputy John Deasy:
Regarding rent supplement and fraud, I will refer to the different schemes and payments. Every now and then there is a news story about the Department tackling fraud and saving hundreds of millions of euro.
I believe that gives people an impression that there is a massive amount of fraud taking place but, to be clear, when we compare some of our schemes to the fraud levels in the United Kingdom rent supplement schemes it seems they are higher, not by much but they are higher.
Those are the figures I have seen. How does Ms O'Donoghue respond generally to the notion that there is rampant fraud in the social welfare system? She knows the corresponding figures for different jurisdictions.
Is it a fair statement to say there is rampant fraud in the social welfare schemes? There will always be a certain percentage of it but is the fraud in some schemes worse than others?
Ms Niamh O'Donoghue [Secretary General, Department of Social Protection]: I would absolutely disagree with any suggestion that there is rampant fraud in the social welfare system.
It varies from scheme to scheme depending on the nature and type of schemes involved. One of the things we do in the Department is categorise schemes into high, low and medium risk, and the high risk schemes are the ones on which we wish to spend most attention.
But in terms of international comparisons, there is no evidence to suggest that the level of fraud in Ireland is out of kilter with the level of fraud anywhere else.
I refer back to my opening statement. The evidence points to the fact that the vast majority of social welfare claimants are receiving the payments to which they are entitled, so fraud is not an issue. What we are looking at is a very small number of people who are engaged in activity, and it is our job to try to minimise the opportunity for that.
Deputy John Deasy: With regard to rent supplement, the figure I have for estimated fraud is 2.9%. The rent supplement survey established that cases paid directly to the client had an 18% rate of fraud and error while those paid to a nominated person, in other words, the landlord, had a 10% rate of fraud and error.
Has the Department considered making that payment directly to the landlord to minimise that differential as a condition of the scheme?
Niamh O'Donoghue: This is something that has surfaced on many occasions and the view of the Department always has been that the contract for rent supplement is with the claimant.
The rent agreement is between the claimant and the landlord, and it is only at the request of the claimant that we would directly make the payment to the landlord.
The real issue is a control issue for us in terms of following people through, getting communication in terms of change of circumstances or change of address, and tracking whether people are in particular locations or not.
Rent supplement was never intended to be a long-term scheme. The intention is that, over time, people who have a long-term housing need will move, in the first instance, into the housing assistance payment, HAP system, which is now up and running, and then, prospectively, into other social housing if that is a better option for them.
That is an entirely different contractual arrangement and method of payment, which probably offers better security to the State.
John Deasy: I think all Deputies got this literature in their pigeon holes this morning.
Niamh O'Donoghue: Yes.
Deputy John Deasy: What motivated Ms O'Donoghue to print this?
Niamh O'Donoghue: It is to make people aware that there is such a protocol in place and that if there is a danger of homelessness, there are arrangements in place to deal with that. It seemed, certainly from recent publicity, that this may not be as widely known or understood as we would wish it to have been.
Deputy John Deasy: Is the Department coming across that? Obviously, there was a tangible reason within the Department for this-----
Niamh O'Donoghue: We now have almost 2,000 people who are in rent supplement arrangements under this tenancy sustainment protocol, which allows for particular circumstances to be taken into account in determining the rent to be paid.
That has been a hugely effective operation in working with the local authorities and Threshold. Obviously, however, there is still publicity concerning people at risk of homelessness and calls for rent supplement ceilings to be improved or increased.
We really just wanted to make people aware that this facility, this flexibility, does exist where those circumstances prevail, and 2,000 families have already availed of that.
John Deasy: I have one final question, on the Department's definitions with regard to customer error and fraud. I read the definitions. The specific difference, I suppose, is that where somebody provides information, it is deemed fraud if there is in the opinion of the Department an intention to provide false information.
Consider the customer error rates in the various categories. With regard to the jobseeker’s payment, customer error was identified in 119 of the cases assessed. That is quite a large figure. Fraud was suspected in 21 of the 987 cases assessed.
When it comes to rent supplement, that figure is down to 55. Someone might play devil’s advocate with regard to the Department's definitions and its interpretation of those definitions when it comes to the question of fraud versus customer error.
It is a fine line, in many respects, and the interpretation involves a judgment call by the actual social welfare officer. Are there increases across the board in customer errors based on the Department’s assessments? Does the figure remain the same? Are the ratios stagnant?
"Has the rate of customer error gone up? It is subjective. One man's customer error is another man's fraud."
Niamh O'Donoghue: The trend in recent years is that the proportion of overpayments raised due to suspected fraud has been increasing rather than customer error. Thankfully, the proportion attributable to departmental error has been decreasing, which is also welcome. Obviously, it is not something we can be complacent about.
The Deputy is absolutely right that it is a subjective judgment, but it is a judgment made by a deciding officer having regard to the entire set of circumstances by which something arises. The level of previous engagement with or the case history of the individual concerned is also taken into account before the judgment is made.
Deputy John Deasy: Has the rate of customer error gone up? It is subjective. One man's customer error is another man's fraud.
Niamh O'Donoghue: Yes.
John Deasy: Across the board, has the rate of customer error in the various schemes increased?
Niamh O'Donoghue: Perhaps I could give the Deputy some figures. In 2013, of the overpayments raised, 34% were considered to be attributable to customer error. In 2014, it was 40%. So far this year — this is very preliminary stuff to the end of April 2015 — it is 38%.
We have significantly improved our investment in the training of deciding officers, and we have also put in place a fairly sophisticated new system of debt recovery and assessment, which means we are raising overpayments in a much more timely way.
Decisions are being made much closer to an event occurring rather than at some time prospectively. That probably improves the consistency with which things are defined.
John Deasy: We have invested and are proposing to invest an awful lot more money, €17 million or €18 million, in the public services card. Has that made an appreciable difference with regard to fraud, as Ms O'Donoghue sees it?
Niamh O'Donoghue: Absolutely. There is a fixed cost associated with the public service card. We are in a contract, the value of which is €24 million. That is based on a presumption that we will issue 3 million cards by the end of 2016. To date, we have 1.4 million cards issued.
Obviously, this has been a progression in terms of ramping up our capacity to issue public service cards. What has happened is that somewhere in the order of 62 cases of fraud have actually been identified through the face-matching software that is associated with the public service card.
Equally, the public service card has contributed very significantly by virtue of us engaging with customers and inviting them to come in to be registered-----
John Deasy: Is Ms O'Donoghue saying that those 62 cases would not have been uncovered had the technology not been introduced?
Niamh O'Donoghue: I cannot say definitively that they would never have been uncovered, but let us say that the technology allowed us to uncover them very quickly. Very serious cases were identified that have gone through the courts, and custodial sentences have been handed down.
It also has a secondary effect. We have been inviting people to come in, and we now have the legislative power to suspend or stop a payment if somebody does not engage with us. On foot of that, somewhere over 200 payments have been stopped by virtue of people not attending, having gone through a whole range of natural justice processes to enable them to attend to be registered.
We really feel that it has contributed enormously on the fraud side, as well as the customer service side. Close to 400,000 people now have a public service card with the free travel badge on it, which provides much greater security to transport providers in relation to providing a service to people who are actually entitled to it.
John Deasy: With regard to the money we have invested and are proposing to invest, I believe Ms O’Donoghue said 3 million cards are to be issued by the end of 2016.
Niamh O'Donoghue: Yes.
John Deasy: Is this going to save an appreciable amount of money?
Niamh O'Donoghue: I would think so. I could not quantify precisely the fraud impact but the evidence to date is significant. The figure is certainly in the millions. Obviously, it has an ongoing effect and a huge preventative role.
Since people have to go through the registration process, they may be less inclined to try to perpetuate identity fraud. They may be less inclined to try to make multiple claims when they know we now have the infrastructure to check who they are.
Obviously, the card also has the potential to be of far greater use in a public service context. We are working with a range of Government Departments and organisations to make sure that becomes a reality, too, particularly in terms of online services. This is because we have the infrastructure to allow identity to be authenticated through the card.
John Deasy: I thank Ms O’Donoghue.
PAC Meeting | May 28, 2015
Dept of Social Protection called and examined
Deputy John Deasy: I turn to a broad issue within the Department which is the turnaround time from application to payment. I know from my own office that it is taking a great deal of time.
The one we point to most is the invalidity payment. These are people who have made contributions and worked and we estimate that in some cases it takes approximately 18 months from the time an application is made to payment. It is too long.
Obviously, there are a range of waiting times for the different payments that the Department has figures on. It knows the averages. It is not getting much better in our opinion from our anecdotal experience in the office with regard to the people we deal with when it comes to applications, assessments and the wait to final payment. It is something I have raised before but we have not seen any improvement.
Ms Niamh O'Donoghue [Secretary General, Dept of Social Protection]: I am sorry to hear that. It does not accord with what the data are telling us in the Department. I would be very happy to explore the particular issues with the Deputy or to give him more detailed information on this rather than to take too much time on it.
I accept entirely that the figures here are average processing times, but on invalidity pension the average processing time currently is 10.7 weeks.
We should bear in mind that invalidity, in common with a number of other schemes where there is a medical component, has an additional processing time. As the Deputy has correctly stated, invalidity is an insurance-based scheme and is based on a person having a contribution history but who also must meet the medical criteria.
Currently, 10.7 weeks is the average from application to what we call a "clean award". What I mean by that is the first decision to award. There is no doubt in relation to quite a number of medical schemes that initial decisions might be negative and reviews or appeals might then be looked at through which in most instances additional information is provided which, in turn, often allows for a positive decision to be reached.
There are many instances of that. The experience of the Deputy seems to out-lie what the national figures are telling us and I would be very happy to look at it for him.
John Deasy: It is fair enough that those are the Department's data. I am just saying it is not our experience. I will collate the instances I have and give them to the Secretary General. I understand what she is saying, which is that outside of the appeals process, it is two and a half months, whereas my estimate is a great deal longer.
Niamh O'Donoghue: There are a number of things we have done. In the last two and a half years, we have placed a huge focus on dealing with backlogs, which were very significant in a number of different scheme areas, including carer's allowance, disability allowance, invalidity pension and FIS.
We put a great deal of effort into trying to improve those processing times and made huge inroads. Very significant inroads were made such that the level of service has improved dramatically from what I will be the first to admit was an unacceptable level.
If the Deputy's experience or the experience of the people he is hearing about constitute significant outliers to the figures I have mentioned, it means there is some issue at play. It may be in relation to the information being provided, but I would be very happy to have a look at it and come back to the Deputy.
John Deasy: As far as the different payments and schemes are concerned, where are the largest backlogs and the worst delays from the time someone makes an application to payment?
Niamh O'Donoghue: I can let the Deputy know that in one moment. In terms of average times, the latest processing figures we have indicate that some of the most significant areas are widow's contributory pension and child benefit where the child benefit is being claimed under EU regulations.
John Deasy: How long is it for widows?
Niamh O'Donoghue: That is showing at 28 weeks currently. There can be issues in regard to that, ranging from people not completing forms correctly, not responding to requests for further information, not providing all the detail we ask for and, particularly in the context of the illness payment, not giving us sufficient medical information that allows for a decision.
John Deasy: A person has to wait six or seven months for widow's contributory-----
Niamh O'Donoghue: Yes, but as I said, that is an outlier. It can be as much to do with the circumstances of the particular scheme.
John Deasy: Fair enough. Every application has its own peculiarities in many respects. Looking for financial or medical records can get very complicated. Has the Department had any success in improving the wait times when it comes to widows? Is it getting worse or better?
Niamh O'Donoghue: That is one that is currently flagging as a problem area, so we will be looking at that. In all the other scheme areas where we have problems we have made significant improvements. That has been the trend over the past number of years.
Mr. Seamus McCarthy: Can I make a comment on that, and it might be something the committee could look at? There is a notification for people. It is a widow's contributory pension, so it occurs after an event when somebody becomes a widow.
Niamh O'Donoghue: Yes.
Seamus McCarthy [Comptroller and Auditor General]: There is not any conversion from other schemes, or does that arise in many of those cases?
Niamh O'Donoghue: It can arise. Obviously, if the person who died was a recipient of a primary social welfare payment, once we are aware that the person has died we would then initiate contact with the spouse for application, but I can have a look at that specifically and furnish information showing the reason for that.
It is flagging as a problem at the moment. It would not previously have flagged as a problem so there is obviously a particular difficulty at the moment for us there.
PAC Meeting | May 28, 2015
Dept of Social Protection called and examined
Deputy John Deasy: Ms O'Donoghue and her officials are welcome. I will start with the post office network and the Department's interactions and relationship with it.
This has received some media attention recently, specifically because the Department has begun writing to recipients of social welfare inviting them to consider a transfer directly to their bank accounts.
As Ms O'Donoghue is aware, there is a current political issue with regard to the post office network and the estimate of how many post offices will be shut down within the coming years. As more social welfare payments are made electronically, the throughput reduces for post offices as does the associated financial bottom line.
Those of us on the committee are in a funny position. I am asking Ms O'Donoghue about this, but it is really a balance. Those of us on the committee are in a situation where we must ask and expect Departments to find cost cutting or savings within their budgets and value for money for all citizens.
At the same time, there is considerable political rhetoric when it comes to saving post offices, particularly in rural Ireland. On the one hand, we are constantly trying to save money in an environment where there is not as much money going around as there was five or six years ago, but, at the same time, there is a constant campaign to preserve post offices throughout the country.
Having said all that, I have looked at the figures when it comes to cash payment versus the electronic payment. The ratio is approximately 10:1. I can understand why the Department would go down that route if it was simply based on finances alone and the cost savings involved.
Is there not a balance to be met, however, when it comes to Government, on the one hand, looking for those savings but, at the same time, having a responsibility to ensure that post offices are maintained and the network is maintained as much as possible, for obvious reasons? I will start with that.
Ms Niamh O'Donoghue [Secretary General, Department of Social Protection]: There is a balance to be struck. The balance is to be struck in looking at the interests of all participants in the transaction. This includes customer preference, the agencies through which we provide the service and the service delivery itself. The Department has a long-standing relationship with An Post and the post office network. It is a valued relationship and works remarkably well.
We signed a new contract with An Post at the beginning of 2014. However, that contract had been tendered for and was advertised in the context of a Government and departmental payment strategy that very much reflected the tendency in customer preference and the need for greater efficiency in the economy of moving towards electronic payments.
In fact, the contract we have with An Post is predicated on envisaging a move towards electronic service delivery. However, in a context where that also meets customer preference it has been our experience that, certainly for new entrants to schemes right across the board, where the customer has an option in respect of how to be paid, that option is predominantly exercised in favour of electronic payments rather than payments through An Post.
Of the payments we make, a sizeable proportion are made to a group of people who actually do not have an option. In other words, for other purposes we demand that they exercise their payments receipt through the post office. That is to do with control reasons as much as anything else.
That relates to a decision we made in 2009. There was a windfall benefit to the post office system in terms of delivering that level of service on a mandatory basis. However, in respect of any other payments we make it is very much on the basis of customer preference.
It is in a context where Government has recognised that there is security aspect, a safety aspect and a customer trend moving towards electronic payments, and we have to recognise that as well.
Deputy John Deasy: All that makes sense. Again, it is logical from the cost savings. However, someone from a post office or the Irish Postmasters Union might make the case that we all believe in choice but that an active campaign or system is under way within the Department to contact people on these schemes to remind them that there is this option.
The postmasters are asking whether we can slow it down until they can work something out with a new system they have proposed, because it is having quite an effect on the bottom line of post offices.
I understand where the Department is coming from as far as choice is concerned, but there is an active system within the Department to contact people. I have before me a news report from March stating that 7,000 letters were sent out reminding people or pointing out that this new system of payment was available to them. The spokesman said the Department would send out hundreds more letters. This is going to continue.
Ms O'Donoghue has outlined the policy but I am unsure whether it deals with the public interest balance that we are trying to meet. There is political rhetoric about saving a post office network while, understandably, at the same time there is a cost savings imperative on the part of the Department and the question of giving people a choice. At the same time, it is concerning when it comes to the post office network.
Niamh O'Donoghue: There are two points I can make on the matter. The letters Deputy Deasy referred to were part of a small pilot. Actually, only 2,800 letters were issued.
Deputy John Deasy: Okay.
Niamh O'Donoghue: The pilot was to try to establish what might be a better communication system with our customers. Different forms of letters were used to see how customers would engage or would not engage with us.
It was very much about trying to inform our approach in a context where, as Deputy Deasy has said, An Post has gone to the market for a different type of payment solution. That will be coming on-stream later in the year.
That, coupled with other measures we are taking, potentially gives us an opportunity to look again at offering options to people to whom, historically, we have not offered options. It was very much to inform our communication strategy with our customer base and it was very limited. There were 2,800 letters. The actual response was low enough, in fairness.
Deputy John Deasy: That is interesting. Of the 2,800 letters, what was the take-up?
Niamh O'Donoghue: I can give the committee the actual figures. The response to the trial was low, 14% responded to us. Of the 14%, a total of 31% indicated a preference to migrate to electronic funds transfer.
We are talking about small numbers. It was more to see what kind of communication would generate a response. The critical aspect of this exercise is that nothing would happen to anyone who did not respond. In other words, it was an entirely voluntary engagement with us.
John Deasy: That is fine. A total of 14% responded and of that figure 31% opted for the electronic payment system.
Niamh O'Donoghue: Yes. The second point I would make is that even in a context of Government having a payment strategy which rather looked at moving into the digital economy the Department went to the market for cash-based service delivery in 2013. We contracted with An Post, recognising that there is an issue around retaining services of that type and meeting customer preference in that area.
John Deasy: The Department has done the modelling exercise with 2,800 people. Are there plans within the Department to expand on that at present?
Niamh O'Donoghue: Not at the moment. It is in a context of when we have a look again at the service offerings available to us post the An Post developments. I would say it is part of the An Post contract that we are moving in that direction and An Post is working with us to do that.
John Deasy: Fair enough. Is there any other area in which the Department could potentially work with An Post in the future to give it more business? The Department is the big spend. An Post was relying on those transfers. Is the Department talking to An Post about anything else that is potentially coming out of the Department or is that it?
Niamh O'Donoghue: We talk to An Post all the time about a whole range of different things, but, obviously, if we have a service offering on which we want a face-to-face engagement, which is what An Post could potentially deliver for us, we would have to go to the market and go through a tender process to offer that.
Deputy John Deasy: If not, the Department would have the Comptroller and Auditor General down its back.
Niamh O'Donoghue: Indeed.
Seamus McCarthy: Or worse, the Department could have a claim against it.