The Department for Work and Pensions is losing money on its anti-fraud detection systems, with those systems costing more to run than the amount of fraud detected, reports the National Audit Office (NAO).
In 2006-07, the NAO estimated that specific systems cost the department £154m to operate, but they only identified an estimated £106m of benefits which had been overpaid as a result of fraud.
The NAO said management information at the department needs improving to enable it to assess the cost effectiveness of different anti-fraud approaches. The department is still unable to assess fully the costs and benefits of its different counter-fraud initiatives, said the NAO.
The NAO said the department's data-matching system was more cost-effective in catching fraudsters and detecting overpayments than the snitching hotline set up for the public to use, and which is heavily advertised on TV.
The department hopes to improve case management with its new IT system, Fraims, but this has been delayed and full roll out is now not expected until March 2008, said the NAO.
Preventing fraud from entering the benefits system in the first place is a key element of the department's counter-fraud strategy. It is piloting new technologies such as voice-risk analysis, in addition to data-matching techniques.
Sir John Bourn, head of the National Audit Office, said, "The department's specific counter-fraud activities cost £154m during 2006-07 and identified £106m of overpaid benefits.
"Although some of the Department's initiatives lead to earlier interception of overpayments and may deter potential fraudsters, I believe the Department could do more to determine whether its activities are cost effective."