The Auditor-General's office has been examining how well public entities manage the recovery of money owed to the Crown. In this context, this report looks at aspects of the social welfare benefits system administered by the Ministry of Social Development (the Ministry). Benefits are a major form of expenditure, and we wanted assurance that the Ministry was effectively managing the recovery of loans and other kinds of debt.
People might owe money to the Ministry because they have received a recoverable assistance loan. Recoverable assistance loans help fulfil the Ministry's role of providing financial assistance to people in need. These interest-free loans help beneficiaries and low-income earners to meet immediate and essential needs. The Ministry and loan recipients agree the repayment arrangements when the loans are approved, with the Ministry balancing the need to recover the money owed while avoiding placing people in further hardship. At the end of June 2010, the Ministry was owed $410 million from recoverable assistance loans.
A debt might also arise when benefits are overpaid for some reason. These benefit overpayments occur when people receive more money from benefit payments than they are entitled to. The Ministry seeks to avoid or minimise overpayments and to recover the money owed. Most overpayments occur when beneficiaries do not promptly notify the Ministry about changes in their circumstances that affect their benefit entitlements. Only a small proportion of overpayment debt results from fraud. In the year to 30 June 2010, the Ministry made benefit payments of more than $15 billion, while at the end of that year benefit overpayment debts totalled $501 million.
Overall, we have concluded that the Ministry is using well-established and appropriate systems to effectively recover the loans and the overpayment debts. It has a clear understanding of the main causes of benefit overpayments, and uses sensible strategies to try to prevent overpaying and to identify overpayments when they occur.
We have suggested some changes that could improve the Ministry's practices. In many instances, the Ministry already has work under way or has planned to make improvements.
The total value of overpayment debt remains substantial and has grown in recent years as the number of beneficiaries has increased. We understand that the Ministry will be focusing on ways to further reduce the incidence and amount of benefit overpayments, which we commend.
I thank Ministry staff for their co-operation during this audit.
Phillippa Smith
Deputy Controller and Auditor-General
29 March 2011
Purpose
We carried out a performance audit to assess how well the Ministry of Social Development (the Ministry) manages the recovery of money owed to the Ministry.