The Ministry of Social Development has adopted an "early intervention" approach to benefit fraud and it has had dramatic effects. Photo / Bevan Conley
The Ministry of Social Development has adopted an "early intervention" approach to benefit fraud and it has had dramatic effects. Photo / Bevan Conley
The number of people prosecuted for benefit fraud has plummeted since Labour came into government while overpayments dropped from nearly $50 million to just $3.5m.
The Ministry of Social Development says the dramatic reductions are because of its "early intervention" approach, which beneficiary advocates say is also encouraging more peopleto come forward without fear of repercussions when they have been overpaid.
Data over the past few years has also been influenced by a Privacy Commissioner investigation and the pandemic, which not only reduced face-to-face meetings but repurposed resources to investigate wage subsidy fraud instead.
The Act Party, however, says the numbers do not stack up, and with overall benefit numbers increasing it accuses the Government of not doing enough to ensure the system is not abused.
The focus on wage subsidy investigations has also led to the backlog of benefit fraud cases more than doubling in less than a year to 2427.
In 2016/17, 450 people were prosecuted for benefit fraud. This was down to 60 by 2020/21, and 2021/22 is set to be even lower with just 30 recorded so far.
The amount of money recouped from prosecutions had also plummeted, from $24.1m in 2016/17 to $3.7m in 2019/20 and $3.8m in 2020/21.
The total number of cases investigated has remained relatively stable, from 4854 in 2016/17 to 4899 in 2020/21.
Act Party social development spokeswoman Karen Chhour. Photo / Mark Mitchell
Despite plummeting prosecution rates, spending on investigations has increased from about $2.9m per quarter in 2016/17 to $4.2m per quarter in 2021/22.
Overall about 70,000 more people are on a main benefit as of March 2022 than in March 2017.
Act social development spokeswoman Karen Chhour said MSD had "all but given up on prosecuting people for benefit fraud".
"It simply isn't realistic to believe that there are 10 times less people committing fraud when there are 70,000 more on a benefit.
"Taxpayers are being ripped off. The Social Development minister must give New Zealanders an assurance that she is doing everything she can to tackle fraud in the welfare system."
MSD's George van Ooyen said the change in prosecution numbers was largely because of the new model introduced in 2018 for handling allegations.
"A greater proportion is now responded to with early intervention and facilitation," he said.
Of the 4899 cases completed in 2020/21, 2454 were resolved with "early intervention" and 1230 with "facilitation". Just 654 ended up being investigated, and of those 60 ended up with prosecutions.
"Our approach is now to intervene early in lower-risk cases when concerns are raised, making it easier for clients to do the right thing and avoid unnecessary overpayments and debt," van Ooyen said.
"This, in turn, avoids the need for these cases to proceed to investigation or prosecution."
The approach had also led to a dramatic drop in the value of overpayments from $48.5m in 2016/17 to $3.5m in 2020/21.
Investigations were reserved for the most serious allegations, van Ooyen said.
This approach was in line with recommendations from the Welfare Expert Advisory Group as more "preventative".
Over the 2019/20 and 2020/21 financial years, investigations and prosecutions were affected by MSD's response to the Privacy Commissioner's inquiry into its fraud investigation tactics.
Beneficiary advocate Kay Brereton said from her experiences the decline was a combination of the change in approach but there had also been much less focus on benefit fraud with investigators diverted to the wage subsidy.
"Overall though I think that aim at early intervention has been a positive. A lot of those being investigated, it is much more complicated, and really look into the space of human relationships."
Brereton said the less-punitive approach meant more people were coming forward if there had been a mistake.
"Someone I helped a while ago had a possible overpayment. We got in touch with the investigator and got her on the right rates.
"For some, the longer it is the harder it is to come forward. Previously there was a real fear of prosecution or having their benefits cut. Now people are more willing to come forward if there are issues."
Minister for Social Development and Employment Carmel Sepuloni. Photo / Alex Burton
The extra workload around the wage subsidy was also behind the extra spending, van Ooyen said.
In 2017/18 there were 98.87 full-time equivalent employees and as of May 2022, there were 111.
The subsidy scheme paid out close to $14 billion to businesses that could prove a loss in income because of the pandemic and related restrictions.
MSD's fraud investigators have completed 14,836 pre-payment and post-payment checks on wage subsidy applications, resolved 5553 allegations of wage subsidy misuse, completed 533 wage subsidy-related investigations, and to date recouped $797.9 million in wage subsidy repayments.
MSD has filed criminal charges in 14 cases involving close to $630,000 of public money and also referred 10 cases involving larger sums of money and complex investigation to the Serious Fraud Office.
