Guidance

Housing Benefit subsidy claims good practice guide

Updated 2 December 2021

Applies to England, Scotland and Wales

Introduction

1. The Department for Work and Pensions (DWP) has committed to supporting local authorities (LAs) in the statutory requirement to administer and deliver Housing Benefit (HB) in accordance with Social Security Contributions and Benefits Act 1992.

2. DWP currently supports this commitment through the provision of a number of consultative and informational engagements.

3. This HB subsidy claims good practice guide was first published in 2015 to support circular HB S4/2014 which contains details of the department’s actions aimed, in collaboration with LAs, to address the high level of qualification letters issued on LA HB subsidy claims.

4. This updated Subsidy claims good practice guide includes contributions from a number of primary information sources, including input from:

• LA staff gathered during HB subsidy workshops.
• external audit firms
• DWPs HB Assurance Team
• DWPs Payments and Subsidy Team
• external HB software suppliers

5. This good practice guide is not a technical resolution document. The content addresses recognised weaknesses in the control frameworks and governance that supports the quality process within LAs. It is envisaged that by highlighting good practices in these areas the outcomes, if implemented, can positively affect the levels of HB subsidy exceptions (previously Qualifications) that are identified by Reporting Accountants during the relevant audit reporting period.

6. Within this document the change to terminology following introduction of the HB Assurance Process (HBAP) has been used. Reference to ‘Exceptions’ should be read as including ‘Qualifications’ reported under HBCOUNT, and reference to ‘Reporting Accountants’ should be read as including ‘Auditors’.

7. At the time of issue, DWP has still to process the final audited HB subsidy claims in respect of financial year ending (FYE) March 2021, therefore for the purposes of this guide DWP references data included in respect of the FYE March 2020 subsidy year.

8. DWP will review this guide on an annual basis, gathering information from the LA subsidy workshops which take place in January and February each year. It will also gather information from DWPs Payments Subsidy Team and continued engagement with our audit firm stakeholders.

Background

9. It is clear from the submission of the Reporting Accountants HB Assurance Reports for FYE March 2020, that in order to complete correctly stated subsidy claims in accordance with the relevant terms and conditions and help reduce subsidy loss, effective management and checking arrangements should be in place. This is to ensure that errors leading to reported exceptions can be minimised and, when they do occur, that overpayments are correctly classified and calculated.

10. To date auditors reported 230 qualified claims in FYE March 2020 in respect of the 344 LAs that have submitted claims compared to 269 in FYE March 2019 in respect of all LAs. The two main reasons for exceptions were overpaid and underpaid HB. The top seven areas (filtered down to top four in FYE March 2016 to FYE March 2018) where most errors were identified are shown in the tables below.

Top seven reported exceptions

11. Top seven reported exceptions for FYE March 2020 and FYE March 2019:

2020

34 LA HB subsidy claims to be cleared (including 19 not yet received)

Exception issue	Percentage of exceptions
Assessment error - Resulting in overpaid/underpaid benefit	74.04%
Overpayment classification	22.79%
Reconciliation	1.58%
Modified schemes	0.79%
Document retention	0.52%
System error	0.26%
Total	100%

Total subsidy adjustment = £2,080,934

2019

3 LA HB subsidy claims to be cleared (including two not yet received)

Exception issue	Percentage of exceptions
Overpaid benefit	45.38%
Underpaid benefit	35.17%
Overpayment classification	14.54%
Reconciliation	3.54%
Modified schemes	0.98%
Disproportionate Rent Increase	0.20%
Local Housing Allowance	0.20%
Total	100%

Total subsidy adjustment = £ 3,463,359

Top four reported exceptions

12. Top four reported exceptions for financial years ending March 2016, 2017 and 2018:

FYE March 2016

Exception issue	Percentage of exceptions
Overpaid benefit	38.01%
Underpaid benefit	27.85%
Overpayment classification	13.01%
Reconciliation	11.38%
Total	90.25%

FYE March 2017

Exception issue	Percentage of exceptions
Overpaid benefit	33.80%
Underpaid benefit	32.39%
Overpayment classification	14.49%
Reconciliation	11.27%
Total	91.95%

FYE March 2018

Exception issue	Percentage of exceptions
Overpaid benefit	45.55%
Underpaid benefit	34.71%
Overpayment classification	10.74%
Reconciliation	4.75%
Total	95.75%

Analysis of reported exceptions

13. Reported exceptions in FYE March 2020 can, to a large extent, be aligned and compared to the FYE March 2019 subsidy period as there was no significant change in the overall number of reported exceptions. The main cause of exception in both years was overpaid and underpaid benefit. In FYE March 2019 these errors types caused 80.55% of the exceptions and recorded as of October 2021 74.04% in FYE March 2020. Overpayment classification and reconciliation exceptions reduced. However, as yet, we have no data to identify any cause correlation.

14. The other identified exceptions are statistically low. However, the fact they are inherent in both years indicate a possible financial impact that could be avoided without a large investment of costs or resources, such as, training and quality control.

15. It is clear from the statistical table that the majority of errors identified in the two sample years (FYE March 2019 and FYE March 2020) are:

• assessment error leading to overpaid benefit
• assessment error leading to underpaid benefit
• overpayment classification
• reconciliation

16. These errors account for 98.41% of the total errors in FYE March 2020 and 98.63% in FYE March 2019. Further analysis of previous years relating to these error categories show the following management information from 2015 onwards and, included in this guide, show that the same top errors that are responsible for the majority of exceptions being reported, remaining relatively static, creating an average over the six-year period of 94.99%.

17. DWP, working alongside LAs and other external stakeholders, intend to focus on the causes of the highlighted errors and intend to update the HB subsidy good practice guide with suggested process improvements.

18. DWP will engage with LA staff through the 2022 LA subsidy workshops to establish any process control weaknesses or any other contributing circumstances that might foster the re-occurrence of these error types.

19. During these engagements, LA staff will be encouraged to evaluate the internal controls within their LA and determine if these controls are sufficient to mitigate the causes of error and, if sufficient, to bring forward good practices. These practices will be discussed and, if viable, added to this guide as a reference point for other LAs to benchmark their own individual controls.

Good practice - individual exception types

20. Overpaid/underpaid benefits:

• when making decisions which include the calculation of pivotal elements of the assessment such as income, rent or capital, these calculations and supporting considerations should be clearly recorded on the processing system or on manual records providing the Reporting Accountant with a clear trail which informs the decision

• design and make available electronic instructional desk aids and checklists to ensure all elements of the calculation have been given consideration

• calculating pivotal elements of the assessment such as income, rent or capital has been identified as an area in which there is a high risk of user error, therefore it is suggested that a robust quality and training regime is implemented to mitigate this risk

• move to suspend claims quickly/triage changes to suspend as they come in

• undertake a second tier checking control to provide a limited assurance check

• targeted monitoring and quality assurance checking is beneficial. Experience has shown that LAs which have a continuing focus on quality assurance checking of primary calculations have less reported exceptions due to overpaid or underpaid benefit

• within resource constraints the LA should put in place a responsible quality team to oversee a hierarchical checking structure that will sample check the quality of relevant calculations and analyse the findings, targeting further testing of specific risk areas that have been identified

• the calculation of earnings can sometimes be carried out numerous times during the life of a claim, due to system generated alerts, each time earnings are re-assessed the risk of error increases. LAs should ensure that practical interactive workshops be made available to assessors to obtain direction but also to exchange working views and good practice

• holding subsidy awareness training and briefings for benefit staff, to include error extrapolation impact on the HB subsidy claim

Overpayment misclassification

• automating the overpayment classification process helps to avoid misclassification but is dependent on an appropriate system specification

• LAs should have in place a clerical control that identifies areas where the internal software has incorrectly misclassified any overpayments enabling corrective action to be taken

• interpreting and classification of overpayments have been identified as an area in which there is a high risk of user error, therefore it is suggested a robust quality and training regime is implemented to mitigate this risk

• targeted monitoring and quality assurance checking is beneficial. Experience has shown that LAs which have a continuing focus on quality assurance checking of overpayments have less reported exceptions due to overpayment misclassification

• as part of ongoing staff development LAs should ensure caseworkers are engaged in discussions relating to misclassification errors and improvement plans are put in place to prevent error re-occurrence

• make use of existing internal system checking tools which will provide scans of all overpayments, this allows analysis of the classifications providing the LA the opportunity to correct any classification errors prior to the compilation of the subsidy claim and avoiding a reported exception

• design and make available electronic instructional desk aids and checklists to ensure classification process elements have been completed

• undertake a second tier checking control to provide a limited assurance check

• complete a post assurance process review to identify overpayment misclassification reported exceptions, ensuring lessons learned are publicised to LA caseworkers

• consider the inclusion into the internal assurance regime of targeted checks in areas of high risk such as staff new to HB or checks on all overpayments over £500

• include further additional quality testing by sampling daily reports which identify the previous day’s generated overpayments

Reconciliation

• LAs undertaking manual adjustments should retain supporting information for assurance purposes to explain non-reconciling items and avoid a reported exception

• LAs should undertake cumulative periodic reconciliation of benefit granted to benefit paid to identify and resolve issues as they arise, thus making the full year reconciliation more straightforward and reducing the likelihood of a reported exception

• refer to the comprehensive documentation we have available via customer portals including subsidy user guides and key tips and information on balancing subsidy. LAs should be reviewing subsidy throughout the year, instead of leaving it until April to balance the whole financial year. This process will enable LAs to uncover and address any discrepancies immediately before the subsidy submission date closes

Good practice - Reporting Accountant exceptions

21. LAs are advised to familiarise themselves with Module 1 and Module 6 of HBAP which clarifies the role expectations of DWP, reporting accountants and LAs, within that process. These modules are available on www.gov.uk and on Glasscubes.

22. Module 1 sets out the standard engagement terms for the HBAP, including standard checks on the subsidy claim.

23. Module 6 sets out the detailed testing requirements and instructions required by DWP:

• the Reporting Accountant and the LA should have a planning meeting in advance of the implementation of HBAP to set up the detailed testing arrangement

• the LA and the Reporting Accountant should agree the timetable for the work from the initial testing to the issue of the HBAP report, and the level of testing to be completed by each party

• where the LA is undertaking the completion of Module 3 workbooks as part of the testing, the standards for completion of the workbooks should be discussed and agreed with the Reporting Accountant. This ensures that the Reporting Accountant will be in a position to rely on the completed workbooks when undertaking re-performance testing and compiling the HBAP report

• LA and the Reporting Accountant should agree a timetable for re-performance testing by the Reporting Accountant for any initial testing completed by the LA, cumulative audit knowledge and experience (CAKE), additional testing that will be completed by the LA

• LA should ensure they have confirmed the key assurance lead and has access to that lead when required

• LA should ensure regular updates are provided by the Reporting Accountant to allow sufficient time to address any issues that are arising.

• LA should ensure the Reporting Accountant can easily and quickly obtain audit trails from the LAs systems and select samples and have access to the information derived from benefits system and the Customer Information System.

• LA should ensure the agreed timetable includes a date on which the LA would expect to have sight of the final report and that date provides enough time for the LA to analyse the findings and challenge if required

• LA reservations regarding the HBAP report should, in the first instance, be raised with the Reporting Accountant. Then, if necessary, with the external audit organisation and then, if necessary, with DWP.

• LA should themselves make an assessment of the subsidy implications of any exceptions, so they are fully aware at the outset of the amount of overpaid subsidy and any impact on LA error subsidy

Good practice - LA checking, training and targeting of error

24. Good practice in this area refers to the following:

• quality checking regime
• capacity of staff
• resource allocation
• issue identification, reaction and planning to those issues
• lessons learned review

• LA collaboration and benchmarking

  • within resource constraints the LA should put in place a responsible quality team to oversee a hierarchical checking structure. The team would sample check the quality of HB assessments being completed and analyse the findings, targeting further testing of specific risk areas that have been identified

  • assess the group capacity of the case assessors, identifying levels of experience, weaknesses, levels of training and other issues that could affect the assessor’s performance. From this assessment the quality team should recommend either additional training, instructional desk aids and highlight the risk areas on which additional checks should be completed.

  • within resource constraints ensure either the quality or checking team has the required resources to complete sample checks on the caseload to an acceptable level in line with their internal quality plan

  • the HB subsidy quality team should have access to training resources within the LA to ensure that mitigating action to address risk areas can be addressed resulting in an error rate reduction

  • introduce an informal set of bite-size training using quizzes and questionnaires to test the post training level of assessor knowledge

  • quality assurance checkers should be rotated from the pool of experienced HB assessors to keep up to date with relevant changes

  • quality assurance checkers should work through random checks with the HB assessor from start to finish

  • lessons learned is an iterative process and each time an area of risk is identified and acted on a ‘lessons learned’ report could be considered. If this is too resource intensive, an example of good practice would be to detail errors identified and the cause of those errors in a lessons learned (issues) log

  • the LA should review the overall performance of the assurance process to capture all elements of the engagement. The document should be revisited prior to the initial engagement with the Reporting Accountant to address any engagement issues and any areas of risk highlighted in the review

  • LAs could consider a collaborative approach to quality, which would entail the identification of a similar sized LA that services a similar demographic region with low levels of HBAP exceptions (qualifications). This LA can then be used to benchmark structure and quality assurance frameworks

• during the 2020 HB Subsidy workshops this issue received positive feedback and some LAs have already participated in established forum groups to exchange good practice. A number of LAs across the country agreed to establish new forums where good practice could be shared.

Other

• seek guidance from DWP internal and/or external audit regarding proposed individual LA procedural changes which they believe may lead to a reported exception and retain the associated documentation

• in order to expedite settlement of final subsidy claims, it was suggested if there was no intention to submit mitigation, DWP should be informed at the time the HBAP report is issued and advised to move to recovery decision at the earliest opportunity without requesting mitigation.

Good practice - identified by external audit organisations

25. Control the environment:

• to help reduce subsidy loss, ensure effective management arrangements are in place to help minimise processing errors, overpayments and administrative delays and, where overpayments have occurred, they are correctly classified and calculated

• ensure effective, risk-based accuracy checking processes and appropriate training are in place to help minimise errors in the accurate calculation of benefit, including overpayments, and to ensure expenditure is correctly recorded for subsidy. Results of accuracy checking should be analysed and relevant actions taken to address areas of weakness.

• the annual subsidy claim should be reviewed prior to submission to DWP and Reporting Accountants for consideration within HBAP.

• ensure DWP guidance on the completion of subsidy claim forms is reviewed annually and action taken to ensure subsidy claims are completed in accordance with the guidance

• subsidy claims should be supported by adequate working papers including, where applicable, non-financial records, which:

  • satisfy the statutory requirement on the responsible finance officer of an LA to maintain adequate records in relation to claims.
  • document the basis of the claim or return and the derivation of the information it contains, and
  • are kept in a form that will help the Reporting Accountant and, keep assurance time and, therefore, the cost to the authority to a minimum.

• where these responsibilities are fully discharged it is more likely that the auditor will be able to conclude that reliance can be placed on the control environment and so be able to limit the time required

• ensure there is detailed guidance on the application of regulations and use of the computer system, and:

  • integrate and consolidate this guidance into desk manuals or other guidance.
  • have clear responsibilities for updating instructions when legislation changes or the computer system is altered.
  • issue appropriate guidance when checking reveals problems and errors.
  • link guidance to job descriptions and training.

Uprating

• ensure that parameters within the HB system are accurate and agree to all uprating information provided by the DWP in its circulars. When parameters are updated, independent checks should be carried out to ensure the update is accurate

Overpayments

• ensure arrangements are in place to monitor overpayment levels on an on-going basis to avoid subsidy loss where possible

• check benefit records and ensure that large sums of overpaid benefit are not held ‘in suspense’, awaiting classification for subsidy or recovery purposes

Reconciliations

• ensure regular reconciliations are completed according to the software suppliers’ guidance and ensure any issues identified are investigated and rectified

Audit collaboration

• collaborative working between internal and external audit ensures that verification of HB claims is done in a timely, easy, and efficient fashion. An example of this collaborative working arrangement is where one LA’s internal audit section worked collaboratively with its external auditor over an initial two-year period undertaking the verification of HB claims.

• benefits of the collaborative audit arrangements produced quantifiable benefits such as providing assurance to both bodies whilst reducing the burden to the Housing Benefit Section of having dual audit interfaces undertaking similar testing or asking very similar questions, reduced time needed for assurance, testing (and a reduction in the external audit fee), financial savings and greater convenience for staff in the Housing Benefit Section.

• if other issues arise during the year, internal audit would plan to undertake further independent work in this area.

Backdating

• ensure there is clear guidance on the definition of ‘good cause’ and monitor the number and value of backdated awards.

Rent officer arrangements

• monitor the number and value of payments based on eligible rents above the rent officer figure

• examine training and procedures if the eligible rent is never above the Rent Officer figure

• train staff so that they can correctly identify protected groups and apply the relevant HB Regulations (Regulations 11 and 12) properly

• regularly collect information on local rent levels and make this available to assessors

LA subsidy workshops 2022

26. DWP publishes invitations to LA subsidy workshops through the LA Welfare Direct Bulletin. The next series of workshops are scheduled for January to February 2022. As part of the ‘experienced’ workshops DWP intends to focus on the impact of COVID-19 easements on the assurance process and review good practice; specifically targeting the four main error types that have been identified within this good practice guide. LA staff are encouraged to keep up to date with the LA Welfare Direct bulletin. Frequently asked questions raised at previously held subsidy workshops can be found at Annex A.

 

Annex A - Frequently asked questions raised at LA subsidy workshops

Q1. Can there be a minimum tolerance level for errors?

A1. It should be noted that even immaterial errors can have a material impact on subsidy via LA error subsidy thresholds, with an impact on public funds. Applying a minimum tolerance level approach would be consistent with a full audit and would require a greater volume of testing to be applied. HM Treasury and the National Audit Office did not support the application of a minimum tolerance approach within HBAP.

Q2. Could the submission deadline for pre-audit and final claims have a level of tolerance applied to them, to assist in the accurate compilation of subsidy claims?

A2. In normal circumstances the submission dates that are applied to HB subsidy claims are set at a statutory level and, therefore, DWP cannot apply any tolerance. However, extensions requests to the statutory deadline can be considered in exceptional circumstances.

Q3. Do external audit organisations quality review HB assurance reports to ensure consistency with guidance?

A3. It is expected each audit firm will have in place a sufficient internal quality assurance process relating to the application of the HBAP. As part of its commitment to supporting the assurance process, DWP has made provision with the audit firms regulatory body to deliver a quality assurance framework which, in normal circumstances, will include site visits to local audit firms and a proportionate sampling exercise to ensure that the local audit firms have sufficient quality controls in place and that they are delivering the assurance process in line with the DWP Assurance guidelines.

Q4. What will the benchmark be for further work requests and at what point would we be notified if we have to do extra further work requests? Will there be extra time given for this?

A4. DWP has received a number of requests from LAs for further work to be completed in respect of the previous assurance reporting periods. Each request has been considered by DWP on a case by case basis, having reference to the correctness of the HBAP application and interpretation.

Q5. Will there be changes under the HBAP that affect the level of testing applied to initial and CAKE testing?

A5. Initial testing volumes will remain unchanged for example 20 cases. CAKE testing volumes will also remain unchanged at 40 cases. However, if CAKE testing provides no further errors, then DWP will take assurance from this that the issue has been resolved and the CAKE issue will be closed.

Q6. Does DWP review and update the HBAP guidance on a regular basis and from where can this updated guidance be accessed?

A6. DWP has updated the assurance guidance to facilitate the transference of the assurance process from HB count to the HBAP, these include the following

• Module 1 - the standard engagement terms for the HBAP.
• Module 6 - the detailed testing requirements and instructions required by DWP.
• Module X - DWP Reporting Framework Instruction for Further Work.

All modules including 2, 3 and 5 are reviewed by DWP on an annual basis and can be found at www.gov.uk and on Glasscubes.

Q7. How will HBAP be applied to LAs that have, or are planning to, merge with other LAs?

A7. The new entity will be tested in line with the new framework on the assumption that the merger occurs at the beginning of the new audit reporting year and the new entity will forward a final Reporting Accountant assured claim by the statutory deadline.

CAKE issues from the previous entities will be carried forward into the new entity, this is because the merger will not necessarily ensure that errors no longer exist in the new entity, following testing if no errors are found then they will be closed. During the first year of the merger Reporting Accountants can have reference to individual LA populations if it can be shown that these LA’s still work in ring-fenced processing teams.

Q8. Where a case was part of CAKE testing and identified as an underpaid error and always would be an underpaid error, would the auditors identify this error as requiring additional CAKE testing in the next financial year?

A9. Errors that will always result in an underpayment do not require additional testing and will be recorded within the HBAP report as observations. These errors will not be subject to any CAKE testing as the results will always have zero impact on subsidy, however if the error could result in an overpayment then additional testing will be required in accordance with the HBAP.

Q9. Does DWP allow the LA additional time to procure a Reporting Accountant to complete further work in accordance with Module X.

A9. If DWP agree to further testing, the LA will be formally advised of the testing volumes and expected outcomes, the notification will include instruction to both the LA and the reporting accountant. DWP have recommended a standard 12-week period from the issue of this formal notification to provide DWP with the completed reporting accountant report, however timings will be considered on a case by case basis.

Q10. How does the extrapolation of a relatively small error result in a much larger subsidy impact?

A10. DWP have provided examples within Module 6 of the HBAP, these show how an extrapolation is finalised including the elements for example error value, sample value and how the error percentage is applied to the cell population.

Q11. Can Verify Earnings and Pensions notifications be automated?

A11. This is an option currently under consideration by DWP resulting from the proposed Verify Earnings and Pension (VEP) responsibility transferring to LA Partnership, Engagement and Delivery (LA-PED) division in November 2021. However, a full cost benefit analysis needs to be conducted prior to any decision to establish if it is affordable and will provide the required return on investment. Previous discovery work looking at integration of the VEP service into the HB systems has shown that any additional efficiencies would be marginal. It was considered that the strength of the business would not be sufficient or robust enough to secure funding. Q12. Can DWP increase the LA Admin Error thresholds?

A12. DWP has received a number of requests to increase the LA admin error thresholds. These requests have been considered as part of a recent DWP evaluation and analysis exercise. The results of the exercise support the current levels in respect of the LA admin error thresholds; however, this will be kept under review.