Covid-19 Omicron: Benefit fraud lawsuits drop, overpayments drop from $50m to $3.5m in work
The Department of Social Development has taken an ‘early intervention’ approach to combating benefit fraud and it has had dramatic effects. Photo / Bevan Conley
The number of people prosecuted for benefit fraud has fallen since Labor took office, while overpayments have fallen from nearly $50 million to just $3.5 million.
The Department of Social Development says the dramatic reductions are
because of its “early intervention” approach, which beneficiary advocates say also encourages more people to come forward without fear of repercussions when they have been overpaid.
Data in recent years has also been influenced by a Privacy Commissioner investigation and the pandemic, which not only reduced face-to-face meetings, but instead redirected resources to investigate grant fraud. wages.
The Act party, however, says the numbers are not adding up and, with the overall number of benefits increasing, they accuse the government of not doing enough to ensure the system is not abused.
The focus on wage subsidy investigations has also resulted in the backlog of benefit fraud cases more than doubling in less than a year to 2,427.
In 2016/17, 450 people were prosecuted for benefits fraud. This figure had fallen to 60 in 2020/21, and 2021/22 is expected to be even lower with just 30 recorded so far.
The amount of money recovered from lawsuits had also dropped, from $24.1 million in 2016/17 to $3.7 million in 2019/20 and $3.8 million in 2020/21.
The total number of cases investigated remained relatively stable, increasing from 4854 in 2016/17 to 4899 in 2020/21.
Despite falling prosecution rates, spending on investigations has increased from approximately $2.9 million per quarter in 2016/17 to $4.2 million per quarter in 2021/22.
Overall, about 70,000 more people are receiving a primary benefit in March 2022 than in March 2017.
Social Development Act spokeswoman Karen Chhour said MSD had “almost given up pursuing people for benefits fraud.”
“It is simply not realistic to believe that there are 10 times fewer people committing fraud when there are 70,000 more on a service.
“Taxpayers are being ripped off. The Minister for Social Development must assure New Zealanders that she is doing all she can to tackle fraud in the welfare system.”
MSD’s George van Ooyen said the change in the number of lawsuits was largely due to the new model introduced in 2018 for handling allegations.
“A greater proportion are now treated with early intervention and facilitation,” he said.
Of the 4,899 cases resolved in 2020/21, 2,454 were resolved with “early intervention” and 1,230 with “facilitation”. Only 654 ended up being investigated, and of those 60, prosecutions were initiated.
“Our approach is now to intervene early in low-risk cases when concerns are raised, making it easier for clients to do the right thing and avoid unnecessary overpayments and debt,” said van Ooyen.
“This, in turn, obviates the need for these cases to be investigated or prosecuted.”
This approach has also resulted in a dramatic drop in the value of overpayments, from $48.5 million in 2016/17 to $3.5 million in 2020/21.
Investigations were reserved for the most serious allegations, van Ooyen said.
This approach was in line with the recommendations of the Wellbeing Expert Advisory Group as being more “preventive”.
In fiscal years 2019/20 and 2020/21, investigations and prosecutions were impacted by MSD’s response to the Privacy Commissioner’s investigation into its fraud investigation tactics.
Beneficiaries’ lawyer Kay Brereton said in her experiences the decline was a combination of the change in approach, but there had also been much less focus on benefits fraud with investigators diverted to the wage subsidy.
“Overall, I think the focus of early intervention has been positive. A lot of those who are surveyed, it’s a lot more complicated, and really looking at the space of human relationships .”
Brereton said the less punitive approach meant more people would come forward if something went wrong.
“Someone I helped a while ago had a possible overpayment. We contacted the investigator and got him the right rates.
“For some, the longer it takes, the harder it is to come forward. Previously, there was a real fear of lawsuits or having their benefits reduced. Now people are more willing to come forward if there is has problems.”
The extra workload from the wage subsidy was also driving the extra expense, van Ooyen said.
In 2017/18 there were 98.87 full-time equivalent employees and in May 2022 there were 111.
The grant program has paid nearly $14 billion to companies that could prove loss of revenue due to the pandemic and related restrictions.
MSD fraud investigators have conducted 14,836 pre- and post-payment checks on wage subsidy applications, resolved 5,553 allegations of wage subsidy misuse, completed 533 wage subsidy investigations, and to date, recovered $797.9 million in wage subsidy repayments.
MSD filed criminal charges in 14 cases involving nearly $630,000 in public money and also referred 10 cases involving larger sums of money and a complex investigation to the Serious Fraud Office.