Department for Work and Pensions Annual Report and Accounts 2020-21

The Department’s response to the impact of the COVID-19 pandemic has ensured that those in need received prompt support. However, delivering this support without face-to-face engagement and with control easements led to a signifcant increase in the level of fraud and error. In recovering from the pandemic and taking forward its efforts to reduce fraud and error the Department should: • identify all cases where fraud could have occurred while controls were relaxed - including 433,000 claims that ended during the pandemic - and take action to review these unless there is clear evidence that it would not be cost-effective to do so;

Ref Page 8, paragraph 15, first bullet point

Continue to employ Test and Learn, and iterate its approach to tackling fraud and error. This should enable the Department to collate evidence about what is and is not cost-effective to implement at the level of each control and fraud and error risk.

Ref Page 30, Figure 7, recommendation 2

Ensure that its benefit strategies set out an appropriate balance between deter, prevent and detect controls and the plans for improving each.

Ref Page 30, Figure 7, recommendation 3 · Implemented Q4 2022-23

Gather evidence on and analyse the cost-effectiveness of each fraud and error control.

Ref Page 30, Figure 7, recommendation 4

Set annual targets for the gross levels of fraud and error and amounts detected over a three-year time horizon. These should be based on the individual strategies and the expected successful delivery of its plans to control fraud and error, so that it can be held to account. Targets should be publicly reported, revised annually and provided with a commentary of progress against expectation.

Ref Page 31, Figure 7, recommendation 5

Produce fraud and error impact statements for any significant policy changes. Where changes require the approval of Parliament, the Department should set out in the public business case and any explanatory memorandum the fraud and error consequences of any new benefit policies or regulations. Where changes do not require the approval of Parliament there should be a systematic assessment of the impact on fraud and error that is signed off by the Fraud and Error senior responsible owner and tabled to the relevant internal decision-making body or other government department where appropriate. These fraud and error impact assessments should make the cost-benefit analysis transparent and explicit, and set out the evidence basis for the decision.

Ref Page 31, Figure 7, recommendation 6 · Implemented Q2 2024-25

Introduce a rolling programme to review all its products and services to assess whether their regulations could be altered to help better address fraud and error. Potential barriers created by legislation should also be considered.

Ref Page 31, Figure 7, recommendation 7 · Implemented Q2 2024-25

Perform an assessment of the fraud and error costs of using its legacy systems. The Department needs to understand the impact of not being able to make improvements to its control environment due to the inflexibility of its legacy IT and operational systems. This needs to be more explicitly costed into investment decisions and digital refresh plans.

Ref Page 31, Figure 7, recommendation 8 · Implemented 2022-23

Ensure that behavioural insights are used extensively in the design of controls to drive claimants towards more compliant behaviours. The Department should seek to understand how claimants respond to the interactions that they have with the Department and tweak controls and communications where there is a clear evidence base that shows a change will drive more compliant behaviour.

Ref Page 32, Figure 7, recommendation 9 · Implemented Q2 2024-25

Factor in fraud and error in its resourcing decisions. The Department should consider the fraud and error impacts in its supply and demand modelling for staffng levels, so that it can demonstrate that it has achieved the value-for-money level of staffing. It should also ensure that it identifes and reacts to developing backlogs or process degradation as a result of short staffing.

Ref Page 32, Figure 7, recommendation 10 · Implemented Q4 2024-25

Ensure that tackling fraud and error is part of claimant-facing staff job design. This should be built into job descriptions, with the right supporting tools andincentives, so that front-line staff recognise that tackling fraud and error is an integral part of their interactions with claimants. Where possible staff should be given information about the impact of their role in the fraud and error control environment, and how issues they raise are followed up.

Ref Page 32, Figure 7, recommendation 11

• ensure that where overpayments have been identifed, including from retrospective review or criminal attack, there is clear and prompt communication with claimants about the resulting debt they owe;

Ref Page 8, paragraph 15, second bullet point · Implemented 31/03/2026

Put in place a measurement for detected underpayments across all benefits.

Ref Page 32, Figure 7, recommendation 12 · Implemented Q4 2022-23

Supplement MVFE estimates with estimates of the fraud and error that is not included. Types of fraud and error not included (e.g. Universal Credit advances, hidden economy earnings) should be listed and, wherever possible, estimated.

Ref Page 32, Figure 7, recommendation 13

• assess the level of fraud and error in advances payments made during the pandemic, to ensure appropriate action can be taken against those who have sought to fraudulently obtain benefts;

Ref Page 8, paragraph 15, third bullet point

• report the level of fraud identified in all cases subject to eased controls and retrospectively reviewed, to ensure transparency of the fraud and error costs of COVID-19; and

Ref Page 8, paragraph 15, fourth bullet point

• conduct a full lessons-learned exercise from its approach to fraud and error during COVID-19 and consider wider lessons from the pandemic for its processes and controls, balance of detection and prevention controls and future emergency planning.

Ref Page 8, paragraph 15, fifth bullet point

I will report further on the systemic underpayment of State Pension later in 2021. As the Department progresses its work on this it should: • ensure clear communications and prompt redress for those affected;

Ref Page 8, paragraph 16, first bullet point · Implemented Q4 2024-25

• undertake a full lessons-learned exercise and make appropriate amendments to processes and controls to ensure such underpayments do not occur in future; and

Ref Page 8, paragraph 16, second bullet point

• improve the way it uses information from quality checks and explore how it can better use claimant and pensioner contact to identify systemic issues affecting payment accuracy.

Ref Page 8, paragraph 16, third bullet point

Set as its ultimate goal having and demonstrating it has a cost-effective control environment to counter-fraud and error. This will help to engage Parliament on the issue of regularity. At present, the recorded levels of fraud and error are at record highs and have been increasing steadily since 2014-15.

Ref Page 30, Figure 7, recommendation 1