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Employment Schemes: Fraud

Work and Pensions written question – answered on 27th June 2012.

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Photo of Grahame Morris Grahame Morris Labour, Easington

To ask the Secretary of State for Work and Pensions what (a) correspondence and (b) representations his Department has received since May 2010 regarding possible fraud by private companies running welfare to work programmes for the Government in (i) the North East and (ii) England; and if he will make a statement.

Photo of Chris Grayling Chris Grayling The Minister of State, Department for Work and Pensions

The Department treats any allegation of fraud by contractors very seriously. Any fraud is completely unacceptable. Where we identify, or are notified of, allegations of contractor fraud, these cases are investigated thoroughly by DWP's professionally trained and experienced investigations to a standard required to support reference to the police whenever evidence of criminal offences is discovered.

When an allegation of fraud against a provider is received, we assess whether further inquiries are appropriate. Cases are accepted for investigation if allegations refer to potential fraud by a prime or sub contractor and there is evidence of a potentially serious, or criminal, matter in the allegations made.

Between 1 May 2010 and 1 June 2012, there have been 46 investigations into allegations of potential fraud by Welfare to Work providers, five of which are on-going. The subject of the allegations in these cases is of a similar nature, that false representations have been made to claim fees, for example falsifying documentation in relation to client signatures, employers' verification or details of the service provided.

In the course of the investigation, the investigator will gather evidence to establish the facts and determine whether there is a case to answer by:

recovering and analysing data and documentation; interviewing DWP and contractor employees, including any suspects; approaching other DWP and contractor employees, customers and other individuals for written witness statements; examining available system and written records.

Internal investigation reports set out the findings, outcomes and conclusion of an investigation undertaken in light of the allegations received.

Where the allegations are unproven (or unfounded), no further action is taken.

Where the investigation identifies evidence of procedural non-compliance, but not evidence of prima facie fraud, these enable the contract management team to seek appropriate remedies (e.g. repayment; control improvement, etc.).

If sufficient evidence of criminal offences is identified, investigators will refer the matter to the police. Each investigation case is unique and must be considered on its own merits. In determining whether it is appropriate to involve the police, consideration is given to a number of factors, including the strength of evidence available, whether evidence can be attributed to the actions of an individual(s), whether and how they benefited from their actions, and any intelligence on similar previous investigations involving the contractor. Where there is evidence of an individual falsifying documentation to support false payment claims or where additional factors are evident, such as collusion, we will always refer the case to the police.

The City of London Police are recognised as the national lead force, and a centre of excellence, for fraud investigation across the UK. They have confirmed that the criteria DWP applies in determining whether to refer cases to regional police forces are both reasonable and appropriate. They have also confirmed that the considerations made are aligned to the general principles applied by the police when deciding whether to investigate cases and allocate resources.

In addition to referral of cases to regional police where appropriate, in line with measures taken by City of London Police to increase intelligence gathering on fraud related matters, DWP reports all cases where there are grounds to suspect criminal offences to the National Fraud Intelligence Bureau database maintained by City of London Police. This enables the police to be sighted on cases being investigated in a centralised and co-ordinated way. It also enables them to build intelligence on individuals and organisations, provides an efficient protocol and interface for disclosing information on fraud at a national level and enables patterns in fraud-related crime to be identified.

Of these 46 investigations between 1 May 2010 and 1 June 2012, 13 resulted in a case to answer, of which six had evidence of procedural non-compliance and seven had evidence of false representation. Two of these cases have been referred to the police and their investigations are ongoing.

Internal Investigation reports contain specimen evidence and the results of analysis of provider claims that typically include customer details and other confidential information. In addition reports may contain details of any witness interviews undertaken and what they have said. The Department has a general duty of care and obligations under the Human Rights Act and Data Protection Act to safeguard individuals and to handle personal data securely. In respect of witness statements, witnesses are not ordinarily protected under the provisions of whistleblowing legislation and may be vulnerable to reprisals by their employer as well as retribution by people implicated in witness statements. In addition to the impact on individuals, full disclosure of reports would be likely to put at risk the co-operation of individuals on whom an investigation can depend. Furthermore, disclosure of both investigative practice and any vulnerabilities exploited by individuals may increase the vulnerability of the system overall.

It is also not ordinarily appropriate to publicise the details of specific investigation cases (e.g. provider details, nature of allegation, and outcomes of investigation):

Disclosure of unproven (or unfounded) allegations could result in litigation against the Department and damage a provider's commercial standing.

Disclosure of specific cases where the investigation identifies evidence of procedural non-compliance, but not evidence of prima facie fraud, could impact on the willingness of providers or whistleblowers to bring matters or concerns to our attention in the first place and/or damage contractual relationships. The Department's contractual relationship with providers is built on partnership and joint working.

Premature disclosure of cases where there is evidence of prima facie fraud may potentially prejudice or damage future DWP or police investigations. The police have been clear when conducting investigations that publishing any details of an investigation may carry a serious risk of prejudice to any further action by the police and/or the courts. The police may pursue investigations where patterns in suspected offences (e.g. highlighting links between people, organisations, location and events) become evident from such intelligence collected over time. Intelligence of this nature remains relevant and must be held for a minimum of six years in line with guidance produced by the National Policing Improvement Agency.

The Department will, however, publicise critical cases once proceedings have begun, and publicise any subsequent sentencing.

When asked, such as in response to parliamentary questions and Freedom of Information (FOI) requests, the Department has disclosed statistical information on investigations, including as an example, the number of investigations undertaken; the number of cases where there are suspicions of criminality; and the number of cases where payments had been claimed that were not due under the contract and the amounts were repaid.

The Department now intends to publish said information (annually). The information in respect of contracted employment practice for 2006-07 to 2011-12 is shown as follows.

Contracted employment investigation cases at 31 March 2012
  2006-07 2007-08 2008-09 2009-10 2010-11 2011-12 Total
Accepted Cases 25 34 14 14 23 16 126
On-Going Cases 5 5
Closed Cases 8 27 29 16 25 16 121
No Case to Answer 6 15 16 11 18 9 75
Case to Answer 2 12 13 5 7 7 46
Non-Compliance 2 7 6 1 3 3 22
False Representations 5 7 4 4 4 24
Referrals to Police(1) 1 2 4 1 1 9
Prosecutions 1 1
(1) Closed cases only. Data is reflected in the year cases closed, not necessarily the year the matter was referred to the police or prosecuted. In 2011-12 two cases have been referred to the police. One case has been concluded by the Department. The .other is ongoing and is included in the ongoing case figure.

The Department will also disclose information on the number and value of contractor investigations where a loss was identified within its Losses and Special Payments Note in the Annual Report and Accounts.

When asked to disclose details of specific investigation cases, the Department will use the policy set out above to assess what if any information can be released into the public domain. The expectation is that the Department will commonly decline to provide such details, and will apply recognised FOI exemptions from disclosure, where appropriate: this will principally be Section 30 (investigations and proceedings conducted by public authorities), with consideration of the public interest factors for and against disclosure being made on a case by case basis.

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