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Other services

Integrity Services

Benefit fraud and abuse investigations

The Fraud Investigation29 Unit and the Integrity Intervention Centre provide services to assure the integrity of the benefit system.

How is fraud and abuse minimised and investigated?

These units use an intelligence-led approach to respond to risks of benefit fraud and abuse. This approach involves:

This approach allows the efficient and effective targeting of clients who are most likely to commit benefit fraud or to abuse the benefit system.

The Ministry is focused on ensuring clients receive their correct entitlements to benefits. There is a multifaceted approach that responds to suspected fraud and uses our detection capabilities in the most efficient manner.

MSD does not tolerate any form of benefit fraud. In every case, the Ministry will seek to:

How we define fraud

The Ministry defines fraud as those cases where a client has been prosecuted. In the majority of cases, the investigation results in the benefit being adjusted or cancelled, and an overpayment established. The client may also receive a monetary penalty or a warning.

Cases investigated and overpayments identified

Benefit fraud is ever changing

The risk of benefit fraud is dynamic and tackling it is an ongoing priority. The Ministry constantly reviews its practices, processes and procedures to ensure the best deployment of resources to make the most gains. We have a centralised process, which means all fraud allegations from the public and suspicions from case managers are assessed for risk by the Integrity Intervention Centre (IIC).

If the risk is assessed as low or medium, the suspected fraud case is managed through the Integrity Intervention Centre. If the risk is assessed as high, it is forwarded to the National Fraud Investigation Unit (NFIU) for a full investigation and for prosecution when appropriate.

The number of cases has continued to trend downward since 2006/2007, but the value of overpayments is increasing

Although the volume of cases reviewed reduced between 2007/2008 and 2011/2012 (see table IS.1), the dollar value of overpayments in 2011/2012 exceeded the levels reached in 2007/2008.

Overpayments increased from $39.8 million in 2010/2011 to $41.8 million in 2011/2012, an increase of $2 million (5%). This brought overpayments back to the levels established in 2006/2007.

These results are attributed to:

– allegations from members of the public
– fraud suspicions received from case managers.

Allegations and suspicions of benefit fraud are allocated to either a desk-based review at the Integrity Intervention or a full investigation at the appropriate National Fraud Investigation Unit. Cases assessed as at high risk of benefit fraud and investigated through the National Fraud Investigation Unit have high value overpayments, as the fraud is more likely to have been committed over a longer period of time.

In 2011/2012, just over 43% of the investigations were related to a relationship fraud and 27% of the investigations were related to people who were working but continuing to claim a full benefit.

table IS.1: Fraud and abuse investigations and reviews completed, and overpayments identified1

Financial year2 Number of investigations and reviews completed Number of overpayments established Value of overpayments ($)
2007/2008 26,736 4,407 33,702,275
2008/2009 26,400 3,327 33,780,453
2009/2010 19,935 2,996 39,336,133
2010/2011 16,266 2,424 39,838,760
2011/2012 10,735 2,139 41,824,781

Notes

  1. The figures include all the activities undertaken by the Fraud Investigation Unit, and include benefit, Student Allowance and Student Loan cases.
  2. Financial years ended 30 June.
Fraud prosecutions

The number of prosecutions completed increased in 2011/2012

Following a decrease in 2010/2011, completed prosecutions increased from 690 to 742 in 2011/2012, an increase of 52 (8%). The prosecution success rate is at 96%.

Patterns in the number of prosecutions completed may reflect the patterns in both the volume of cases investigated and the serious nature of benefit fraud cases referred for a full investigation.

The fraud debt established in 2011/2012 was $23.4 million30.
Note – prosecutions do not relate to fraud debts established in the same year

There can be a lag between when a fraud debt is established and when the associated prosecution is completed. This means comparisons cannot readily be made between fraud prosecutions completed in a year and the fraud debt established in the same year.

table IS.2: Fraud prosecutions completed

Financial year1 Number of prosecution cases of benefit fraud completed
2007/2008 1,028
2008/2009 735
2009/2010 789
2010/2011 690
2011/2012 742

Note

  1. Financial years ended 30 June.

Data-matching programmes

The Integrity Intervention (which encompasses the National Data Match Centre) provides services to minimise errors and fraud in, and abuse of, the benefit system. This is done in part by matching information about Work and Income clients with information held by the following agencies:

Data-matching cases investigated and overpayments identified

Cases completed decreased between 2010/2011 and 2011/2012, while overpayments established increased

This result largely reflected significant changes made to enhance the Inland Revenue (IR) match.

Although the number of IR investigations decreased by 50% in 2011/2012, the quality of the information exchanged improved. This led to efficiency gains and improved productivity.

In addition to the improvements to the match, work-related allegations are now diverted through the IR match, making use of a process that is streamlined and more efficient than contacting employers directly.

The other matches are each performing well, with an increased focus on the New Zealand Customs Service match leading to more timely responses and reduced overpayments.

Overall between 2010/2011 and 2011/2012, there was a 33% decrease in the number of cases completed (from 106,408 to 71,629), but a 35% increase in the overpayments established (from $34 million to $46 million).

table IS.3: Data-matching cases completed, and overpayments identified

Financial year1 Number of cases completed Overpayments established – amount ($)
2007/2008 67,838 31,316,452
2008/2009 54,582 20,007,833
2009/2010 74,030 27,870,841
2010/2011 106,408 34,293,370
2011/2012 71,629 46,018,298

Note

  1. Financial years ended 30 June.

Balances owed to the Crown by MSD clientsTop

How do people come to owe money to MSD?

The Ministry manages three main categories of money owed by clients:

Activities to prevent clients owing balances to MSD

Most clients with balances owing owed small amounts

At 30 June 2012, 58% of clients with balances due owed less than $1,000.

The Ministry works hard to minimise overpayments, by focusing on preventing overpayments in the first place. These prevention activities involve:

How balances owed are repaid to the Ministry

A high proportion of MSD clients with balances owed are making repayments

At the end of the 2011/2012 year:

Repayment guidelines are in place to help clients repay their balances owed in appropriate timeframes. Repayments are accepted at a level the client can afford without causing financial hardship. To ensure repayment, a range of activities is undertaken, including:

Recoverable assistance loans

Recoverable assistance loan expenditure in 2011/2012 declined compared to the previous year

In 2011/2012, recoverable assistance loan expenditure was $146.7 million (see table IS.4), a decrease of 10% ($16 million) compared with the previous year.

The decline in expenditure reduced the amount recovered in the 2011/2012 year. The amount recovered in 2011/2012 was $147.0 million, a decrease of 7% ($11.8 million) compared to the previous year.

table IS.4: Recoverable assistance loans established and recovered

Financial year1 Recoverable assistance loans established and recovered ($m)
Opening Establishment Recovery Write-off Adjustment Closing
2007/2008 340.5 119.5 -106.8 -0.6 0.5 353.1
2008/2009 353.1 157.5 -132.3 -1.3 1.6 378.6
2009/2010 378.6 176.8 -145.7 -1.2 2.0 410.5
2010/2011 410.5 162.7 -158.7 -1.7 -1.5 411.3
2011/2012 411.3 146.7 -147.0 -2.7 -0.9 407.5

Note

  1. Financial years ended 30 June.

Overpayments

Overpayments include balances established through data-matching activities, fraud investigations, fraud prosecutions, and from clients changing their circumstances.

The value of overpayments established in 2011/2012 increased compared to the previous year

The value of all overpayments established in 2011/2012 was $231.8 million (see table IS.5), an increase of 6.5% ($14.2 million) compared with the previous year. The increase was a result of increased overpayments detected by fraud investigations and data matching. Overpayments established other than by data matching or fraud investigations fell by $2.0 million.

The value of overpayments recovered in 2011/2012 was $142.4 million, an increase of 0.4% ($0.6 million) compared with the previous year.

table IS.5: Overpayments established and recovered

Financial year1 Overpayments established and recovered ($m)
Opening Establishment Recovery Write-off Adjustment Closing
2007/2008 429.6 176.4 -134.3 -11.8 -13.4 446.5
2008/2009 446.5 172.7 -121.0 -6.7 -13.2 478.2
2009/2010 478.2 207.5 -145.6 -8.5 -12.0 519.6
2010/2011 519.6 217.6 -141.8 -6.7 -2.8 585.9
2011/2012 585.9 231.8 -142.4 -6.0 -7.8 661.5

Note

  1. Financial years ended 30 June.

Other balances owed

Other balances (see table IS.6) are those not associated with overpayments or recoverable assistance loans, such as Liable Parent Contribution, Maintenance and Major Repairs Advances. These programmes are no longer current and MSD is responsible for recovering the remaining balances owed.

Balances owed at the end of each year continue to decrease.

table IS.6: Other balances owed and recovered

Financial year1 Other balances owed and recovered ($m)
Opening Establishment Recovery Write-off Adjustment Closing
2007/2008 41.3 0.0 -7.3 -1.2 4.4 37.2
2008/2009 37.2 0.0 -7.3 -1.0 4.2 33.2
2009/2010 33.2 0.0 -7.4 -0.2 4.3 30.0
2010/2011 30.0 0.0 -2.8 -0.5 -2.6 24.1
2011/2012 24.1 0.0 -2.3 -0.3 -0.4 21.1

Note

  1. Financial years ended 30 June.

Clients with balances owed

The number of clients with balances owed increased from 2007/2008

The number of clients with a balance owed has increased since 2007/2008. This is a result of increased recoverable assistance loans established (between 2007/08 and 2009/10) and overpayments established (since 2008/09).

The number of clients owing Liable Parent Contribution or Maintenance declines each year as these programmes are no longer current.

table IS.7: Numbers of clients with balances owed, by category

Financial year1 Number of clients with balances owed (000s)
Current clients2 Former clients3 Student4 Liable Parent Contribution5 Maintenance6 Other7 Total8
2007/2008 182 119 11 5 2 0.2 318
2008/2009 219 111 11 4 2 0.2 348
2009/2010 252 122 12 4 1 0.2 393
2010/2011 255 145 14 4 1 0.5 420
2011/2012 247 156 15 3 1 0.5 423

Notes

  1. Financial years ended 30 June.
  2. Clients currently receiving financial assistance from MSD’s Work and Income or Senior Services service lines who have balances owed.
  3. Clients no longer receiving financial assistance from MSD’s Work and Income or Senior Services service lines who have balances owed.
  4. Clients with balances owed as a result of an overpayment of a Student Allowance or Student Loan that was not transferred to Inland Revenue for collection.
  5. The Liable Parent Contribution Scheme ended in 1992. This number represents liable parents with arrears of payments.
  6. The administration of Maintenance Orders and registered agreements ended in 1992. This number represents Crown Maintenance clients with arrears of payments.
  7. ‘Other’ includes clients with balances owed for Major Repairs Advances and overpayments of Employment Training and Assistance. Major Repairs Advances ended in 1996. Employment Training and Assistance are programmes and services to help clients to move towards independence and range from work experience to wage subsidies, allowances and grants.
  8. The total number of clients with balances owed may be overstated because of double-counting where a client has a balance owed in more than one category.

Composition of balances owed

Half of the balances were owed by current clients

Fifty-one percent of balances owed were owed by current clients and 44% by former clients (see figure IS.1).

Of the balances owed by current and former clients, 39% were due to recoverable assistance and 61% were due to overpayments (including fraud).

figure IS.1: Composition of all balances owed at 30 June 2012

figure IS.1 Composition of all balances owed at 30 June 2012.

29Previously ‘Benefit Control’.
30Source: Legacy Audit Trail.