The Management of Social Security Debt Collection

The Assembly's independent auditor, Mr John Dowdall, published a report today on the performance of the Social Security Agency in recovering debts due to the overpayment of social security benefits. The debts were due to either claimant error or fraud. The report finds that the management of outstanding benefit debts continues to be a significant problem for the Agency :

• At the end of 1999-2000, outstanding social security debt amounted to over £22 million having risen by about 80 per cent in real terms since 1994-95. Over the same period £16.3 billion was paid out in benefits.
• The Agency estimates that, because of an ongoing backlog in the processing of potential overpayment cases, there is approximately another £7 million of debt outstanding.
• Over the six year period from 1994-95 to 1999-2000 the Agency have also written-off almost £30 million in benefit overpayments. However, in the last two years the Agency has become more adept at identifying fraud and error because of greater emphasis in this area. Success on this front has been a significant cause of the increase in identified debt.

In view of these findings, the report concludes that the action taken by the Agency to address the concerns raised by the Committee of Public Accounts in 1993 have had fairly limited success in improving the effectiveness of the debt management process.

The Agency is also legislatively required to make deductions from benefits and pay these directly to other public sector bodies to whom a claimant is known to owe money. However, the report notes:

• Although Northern Ireland Electricity ceased to be a public sector organisation when it was privatised in 1993, it continues to receive a free debt collection service from the Agency. The Agency told us that the arrangements mirror those in Great Britain. In 1999-2000 the Agency paid over £3.7 million to Northern Ireland Electricity on a non-chargeable basis. The report recommends that the Agency considers the introduction of an agreement with NIE that reflects the full cost of the service provided.

In general, the report finds that there was substantial scope for improvement in the performance of the Agency's Debt Management Unit and it identifies opportunities for more timely, efficient and effective recovery of outstanding debt. These include the following:

Debt Collection Procedures (paragraphs 1.3 to 1.16 of the Report)

The Agency normally seeks repayment of debt either by deductions from benefits or through voluntary repayment agreements. While the collection of debts has to be seen in the context of individuals who are often among the poorest members of society, the report highlights the types of scenario that can occur in attempting to recover overpayments:

Case example

A total of £6,942.34 in Income Support benefits was overpaid to a female claimant who failed to declare that she had been employed as a home-help. Initially she agreed to pay £5 per week. In spite of this agreement the payment has now deteriorated to £5 per month. Under the new rate of repayment this debt will not be cleared until 2072. At that time the customer would be 127 years old.

The report concludes that the following improvements to the recovery process would enhance the ability of the Agency to make inroads into the level of outstanding debt:

• the consistent application of rates of deductions laid down in regulations;
• avoiding the reduction of repayment rates by claimants; and
• the active encouragement of debtors to increase rates of repayment where possible.

The Cost of Debt Collection (paragraphs 1.19 to 1.23 of the Report)

The report notes that the Agency's management information systems do not record the costs of debt collection. Such cost information is critical to decisions regarding when debts are uneconomical to pursue and for selecting the most cost-effective recovery methods.

Identifying Overpayments (paragraphs 3.1 to 3.9 of the Report)

Given the problems identified in connection with the proper and timely identification of potential debts, the report recommends that the Agency needs to consider developing its systems to improve the identification of suspected overpayments; to ensure that its procedures give priority to the task; and that staff receive appropriate training.

Management Information Systems (paragraphs 4.5 to 4.19)

The report concludes that, since 1994-95, the use of information technology to combat benefit debt has done little to halt its increase. In 1998, the Agency's own Internal Audit Unit showed that management had not implemented adequate controls to ensure the accuracy and completeness of data related to the recovery of benefit debt. The report acknowledges that, as it uses the same systems as the Benefits Agency in Great Britain, the Agency is dependent on developments there before it can enhance its own management information. In the short term, the report acknowledges that the Agency is currently developing a set of debt collection performance indicators to monitor the overall performance of the debt recovery process: these include the age of debts, the percentage of debts written-off and the cost of various debt collection services.