Encouraging departmental collaboration to prevent fraud will not only help catch criminals, but also cut public expenditure. Joshua Chambers hears the opportunities and challenges discussed at a CSW round table

The most recent estimates put annual revenue losses due to fraud and error in the welfare system at £5.2bn, according to October’s government fraud and error strategy. With billions at stake, the coalition has identified a need to tighten up its systems.

Currently, departments have varying systems, but in order to reap the benefits of collaboration, HMRC and the Department of Work and Pensions are creating a single, integrated fraud-investigation service. The hope is that this will merge seamlessly with the efforts of local government.

CSWrecently hosted a round table, sponsored by business analytics and intelligence provider SAS, to determine how government departments can tackle fraud and reduce errors. This took place before the publication of the government’s fraud strategy, so the need for departments to collaborate has since been recognised. The discussion, though, was valuable in pointing out not only why departments should collaborate, but how they can best do so in order to reduce the costs of fraud and error.

Public perceptions
If government is to effectively tackle fraud, it needs to have the citizen onside. Currently, it doesn’t, according to Steven Julians, a fraud investigator with Jobcentre Plus in Hackney. In his experience on the front line, he said, he’s encountered “a perception that it’s a victimless crime. A lot of people who we deal with in Hackney [think that] if somebody can fiddle a few hundred quid out of the social, nobody would say anything but: ‘Good luck to them’.”

These perceptions can be changed by showing that fraud – particularly identity theft – creates victims, according to Ian West, deputy chief investigation officer at the Department for Business, Innovation and Skills. He said that “there is a big reservoir of victims” whose experiences could be highlighted in order to put a more human face to the targets of such crimes. However, he added that it’s difficult to persuade those charged with putting out government messages of the need to act. “Our publicity side aren’t interested. All they’re interested in is driving the ministerial message,” he said. This problem may have been exacerbated by the government freeze on advertising.

Yet there are examples of successful efforts to change perceptions. Many people at the round table highlighted the DWP’s efforts to alter perceptions at a national level. The department’s campaign hasn’t focused on the victims, but instead aims to make people more wary of attempting to defraud the system. Nick Davies, of the benefits and credits strategy team at HMRC, wants to see his department approach fraud in the same way. “I always think that DWP’s use of the ‘We’re closing in’ [slogan] is a brilliant programme,” he said. “That really hits home and we don’t do that in HMRC.”

Dhana Abel, also at HMRC as the head of forensic accounts, said that HMRC has started to try to use the same strategy but is struggling to change perceptions of the department. The major problem is “the fear that people won’t think we’re fair”, she said. Given the high-profile problems at HMRC with tax coding in the last few months, citizens are unlikely to side with the department and are likely to assume that there has been an error in the system, she suggested.
As well as enforcing compliance with their systems, some participants argued, departments need to change their systems to make it easier for service users to co-operate. David Rennie from Directgov highlighted a private sector example of where this has already happened.

“There’s been a lot of positive feedback to the banks for efforts that might have been [seen as] negative,” he said. For instance, when a payment is made in a foreign country, a bank may call a customer to check that their card hasn’t been stolen. This could irritate customers, Rennie said, but it is seen as a positive because it is done transparently.

However, said Abel, perhaps people are more likely to be amenable to being contacted by their banks than by HMRC. After two discs containing hundreds of thousands of people’s personal details went missing in the internal post in 2008, the population’s level of trust in the government’s ability to secure data underwent a marked decline.

There is also the emotive issue of civil liberties – one that was highlighted by both coalition partners as a campaign issue in the general election. “Some individuals have reacted to our [efforts to gather data in order to reduce fraud] by worrying,” Davies said, because “there’s a Big Brother feeling out there.” As Rennie noted, any attempt by government to gather data and store it in new databases would be seen as most intrusive.

Simplifying systems
Rather than relying on big, new databases, Rennie believes that front-end systems need to be simplified to reduce the risk of error and encourage people to interact with government. “Most citizens would like to engage in a convenient and trusted manner,” Rennie said, “and we should work on the presumption that people want to be honest and are honest. What we do at the moment is deter them by putting up barriers and making them jump through hoops because we know that one in 20 will be dishonest, and that means we punish the 19 out of 20. We need to turn it around and make it easy for the 19 who are honest and enable them to work with us on a trusted basis.”

Currently, Abel said, the government has some “staggeringly poor systems” in place that make life difficult for the user. Gordon Jackson, the head of information delivery at the Department for Work and Pensions, went further, pointing to excessive complexity in the policies that the systems are trying to deliver. “It’s not just the systems,” he said, “it’s what those systems are delivering as well. We [at DWP] deliver incapacity benefit, the most complex thing I’ve ever seen in my life, with rules changing every two years. For me to identify fraud and error is practically impossible.”

Jackson added that this complexity is creating errors as well as making it difficult to spot inconsistencies. “It is an absolute nightmare to administer,” he said. “I still believe that there is fraud and an awful lot of error in our systems because staff don’t really understand the systems and neither do customers.” The problem isn’t just found in DWP, as Davies noted: “We found the same with tax credits; it is phenomenally complicated.”

One problem with identifying fraud is that government tries to do too much with digital systems, Julians believes, rather than allowing for more face-to-face interaction between users and administrators. “The biggest challenge I’ve seen in working for DWP is that in the old days, everybody who made a claim for a benefit was given an office interview and had to come in with virtually [all their documentation],”he said. “Once that claim was put into payment, within three months they got a home visit. Now we only visit people if we suspect there’s something a bit amiss.”

There is also too much pressure on administrators to meet targets, and this can mean that less fraud is spotted, Julians thinks. “The people processing the benefit claims are given clearance targets and they’re under pressure to clear the claims. That often means that something they’re not sure of [will go through], rather than being held back,” he said.

In order to tackle this, more discretion needs to be given to frontline staff, West thinks: “They know where the fraud’s coming from, they can see it quite frequently.” Turning to Julians, he said: “I’m sure that in your job people know where the fraudsters are.” Julians responded enthusiastically and emphatically: “Absolutely,” he said. West concluded that Julians “hasn’t got the discretion to tackle [fraudsters], block them and make them jump through the hoops.” The targets and restrictions for frontline staff should be loosened, West believes.

Time is money
With fraud prevention, it may be the case that more haste in service delivery means fewer convictions. Robert Lonnon is the assistant director of the automotive assistance programme at the Department for Business, Innovation and Skills, and believes that rushed policy development is part of the problem. “We need time to look at the risk and make an appropriate case back to ministers,” he said. “We need to be able to say to a minister that if we do it in this timescale, these are the losses that you can expect to the public purse; but if you give us more time and we can put the appropriate assurances in place, the losses are going to be of a significantly smaller magnitude.”

The time that ministers give to officials is not the only variable that must be determined. Davies argued that ministers need to decide how much is spent on fraud prevention, and at what point government should decide that work to prevent fraud is more expensive than the money saved. “A crucial point is that there will be a degree of unstoppable fraud,” he says. “We have to ask: at what point does a cost-benefit analysis of fraud prevention reach a curve of unsustainability [in pursuing a prosecution]?” Davies said that commercial organisations have already made that calculation, and only prevent the types of fraud that they can economically tackle.

Doubled over
Resources are wasted by departments duplicating each others’ work, Davies argued. There’s a “very clear business case”, he said, to be made for addressing the problem of departments spending money on similar, parallel schemes rather than sharing information and systems. Rennie agrees: “We need to kick the repeated processes out of each department, because at the moment everybody is checking the same types of information in slightly different ways,” he said.

Duplication also means that there are different standards across departments, so some systems are weak links. “The fraudsters navigate their way in to the system and into a weak part of government. We need to have cross-government standards and systems,” Rennie said.

As well as reducing the duplication of work such as fact checking, Rennie argued, departments need to reorganise to tap into the information and assets of other departments. He highlighted the National Insurance number as an example of something administered by one department (HMRC) in isolation from other departments’ activities. Jackson agreed that there is plenty of room for better collaboration. For example, “at the moment we look for multiple payments around an address, but we’re only looking within DWP,” he said. “We could expand across government and do the same with HMRC; with others, potentially. We could even have one application process across government that verifies identity and uses private sector data as well. Currently, we are still working in silos.”

Conclusion
Throughout the round table, the need to collaborate better was a recurring theme. For the citizen, fraud is an issue that diverts money from public services. So some participants argued that government needs to do more to bring people on board in order to tackle the issue – not only by campaigning, but also by simplifying systems to ensure that people can engage with the public sector more closely.

Within government itself, there is a need for closer collaboration in tackling fraud and ensuring that departments aren’t duplicating activities. Partly, this problem may be addressed by the single investigation service – but that will need time and investment to get results. Gaining investment from the Treasury to make longer-term collaborative savings may be more difficult, given the strained position of the government’s finances and the Treasury’s renowned scepticism of ‘spend to save’ projects. But in the short term, simplifying standards and reducing departmental duplication is eminently achievable.

Conclusions: final comments from around the table
Dhana Abel, head of the forensic accountants, HM Revenue & Customs
“In terms of how we make cost savings without firing anybody else, it all comes down to joining up and sharing information and making sure that the information we’re getting in is the same across the board.”

Nick Davies, benefits and credits strategy team, HM Revenue & Customs
“We have a great opportunity here, with the cuts, with the banking crisis, and we need the Cabinet Office to engage with the banks to set up the machine which will underpin universal credits. There is also a window of opportunity for there to be a concerted piece of work around persuading the Treasury and ministers that there is some real saving to be done [by tackling fraud].”

Simon Dennis, client manager, public sector, SAS UK
“We have found in the public and private sector that where people join up, they do better at getting through the minefield of legislation – which is often an inconvenient hurdle.”

Keith Duncan, senior manager, governance and renewables compliance, Ofgem
“We need to agree a common standard of best practice for [verifying] identity. With new systems coming in for feed-in tariffs where households generate their own heat, there is the potential for fraud, so we want to see a common standard in how to establish a person’s identity, rather than each department having to try to reinvent the wheel.”

Graham Hughes, sector development manager, central government and health, Ordnance Survey
“We’re attempting to bring together national addressing information from Royal Mail and local government, which by next year will give us a single, definitive addressing register for the UK which we will also geo-reference. This means we should be able to give information that can be used on a national scale by next year.”

Gordon Jackson, head of information delivery, Department of Work and Pensions
“This round table has highlighted the challenge we all face with 20 per cent cuts. We need to focus on fraud across government and campaign [for a single anti-fraud unit] to be jointly funded from our reduced individual departmental allocations.”

Steven Julians, fraud investigator, Jobcentre Plus
“It’s good to know that DWP’s not the only place where people at the top of the food chain have different agendas to those of us at the plankton end. When you’re thinking about collaboration, do get people from the frontline involved. I would also say that legislation is currently too complicated on tax credits and benefits.”

Graham Kemp, head of public sector team, SAS UK
“It would be splendid to have a similar organisation to the Payments Council [the membership organisation with common rules for UK payments] that could enable an integrated approach to tackling fraud and error.”

Robert Lonnon, assistant director, Automotive Assistance Programme, Department for Business, Innovation and Skills
“There’s an issue around what is the real cost of fraud, because we’re
only talking about the figures that we know. There’s a big chunk that
we don’t know about because there just isn’t the resource to look at it. What we do know in the digital age is that cybercrime is a huge threat,  and we need to look to futureproof our systems and resources and persuade ministers that this is a necessary investment. If you can’t do it through the front door, you can do it through universities and get them to research the crime figures to provide evidence in order to make a case for investment.”

David Rennie, DirectGov
“We’re looking for pro bono spending from private sector organisations to develop the standards that enable fraud and error to be addressed, for the benefit of both the private and public sector.”

Ian West, deputy chief investigation officer, Department for Business, Innovation and Skills
“We need to knock out the obstacles to tackling the problems, [which are] partly the fiefdoms that people have where they’re not looking at the greater good. Within the law enforcement agencies, there’s the will and the ability to tackle it if you let them get on and do it.”

Written by Joshua Chambers, CSW