Mr. John McKeon:

I thank the Chairman and the committee for inviting me here today.

If I may, I would like to start by drawing the members' attention to the fact that 2017 marks the 75th anniversary of the publication of the seminal Beveridge report in the United Kingdom and the 70th anniversary of the establishment of the Department of Social Welfare in 1947. These developments marked a shift in the attitude to the provision of welfare – from seeing welfare as being restricted to the relief of extreme destitution to seeing it as an essential component needed to sustain modern society; a recognition that market economies only attribute value to those who can contribute to production and that a mechanism is required to share the gains from economic activity with those who cannot contribute, either due to infirmity or illness, because they do not have an opportunity to contribute due to the vagaries of the economic cycle and, as the welfare system developed, to recognise the value of non-market activity such as caring and home making.

In the years that followed, the remit of welfare was extended beyond the provision of limited pensions and what was then called "outdoor relief" to encompass invalidity and disability payments, payments to carers and lone parents, payments to new mothers on maternity leave, payments to people with families in low-wage occupations and payments to support people take up education, as well as payments to encourage employers to recruit disadvantaged jobseekers, including people with disabilities. In total, the Department now provides more than 70 separate schemes supporting over 2 million of our citizens. There is no one in the State who at some time or other will not be a recipient of the Department's services. The inherent linkage between the welfare system and the labour market is also reflected in the scope of the Department being widened, as in other countries, to encompass the provision of employment services and the development of employment legislation.

In addition, the real value of welfare payments has also increased dramatically over the years. It may interest members to note that in the late 1940s, unemployed male workers could receive 22s 6d per week, while the weekly rate of pension was 17s 6d. If these are adjusted for inflation, the equivalent rate of payment for unemployed males today would be about €40 and for pensioners about €33. Today's payment rates far exceed these values at €198 and €238, respectively, and the Irish welfare system, when called upon during the recession years, performed much better in reducing poverty and inequality than welfare systems in other countries. Arguably, although this will be a question for future generations of economists, the welfare system played the key role in not just stabilising the economy but in positioning it to recover more quickly than might otherwise have been expected.

Whatever about the macroeconomic impact of our welfare system, staff of the Department are acutely aware, through their everyday work, of the impact of welfare at the micro level – the level of individual citizen and families. They know that the services we provide enable our clients to sustain some level of dignity, often during very difficult periods in their lives. Therefore, while our staff are conscious that they are distributing funds provided by taxpayers and social insurance contributors and that they have a duty to protect these funds from fraud and error, they are equally, if not more, mindful of the vulnerability of the people who rely on our services. They strive, therefore, to deliver these services in a manner that removes any sense of stigma that may have been formerly associated with seeking welfare payments. No one should be embarrassed to enter any of our offices nor should they fear what they may find there or be concerned that they will be treated with undue suspicion. We work to treat every person with dignity and respect and to make our offices bright and welcoming. I am pleased to say that research into customer experience of our services indicates that while there will always be individual examples of failure, customers overall are highly satisfied with the service they receive – scoring our service at an average of over four on a scale of zero to five.

I mention all of this because in designing and managing large-scale service processes, a balance has to be struck between building a service that is reliable, efficient and effective for the overwhelming majority of our customers who are open and honest in their dealings with the Department and imposing controls and checks that are intended to reduce fraud and error when the evidence is that levels of fraud and error are relatively low. We cannot and will not pursue the elimination of error or fraud at the cost of denying entitlement to service or frustrating access to that entitlement. It is this balance that is at the heart of the three chapters selected for discussion today.

The first chapter, Chapter 16, summarises the results of 13 fraud and error surveys conducted by the Department over the past five years or so, covering approximately 70% of the Department's expenditure. These surveys are used to help identify the risk factors that give rise to fraud and error and to inform changes that help reduce the level of fraud and error into the future. The surveys also provide an indicative estimate of the level of fraud and error in the system. In general, for most schemes surveyed this ranges between 0.5% and 5%, with farm assist being a notable outlier at 10.4%. Across all 13 schemes, the net level of fraud and error averaged about 2%, a level that the Comptroller and Auditor General assesses to be material. However, I would draw attention to the fact that this rate stands comparison with equivalent rates in social welfare administrations in other states, for example, 1.9% in the United Kingdom, 5% in Israel and 3.5% in Canada, and indeed, to rates of bad debt, which are typically 2% to 5%, and shrinkage, typically 2%, in commercial industry.

The second chapter, Chapter 17, reports on the findings of an audit of overpayments conducted by the Comptroller and Auditor General and makes six recommendations as to how the Department can improve its performance. As Accounting Officer, I accept all six recommendations and have already initiated steps to give effect to them, including the assignment of additional staff to control activity in the pensions area and to the central debt recovery unit. Additional staff have also been assigned to our accounts division to implement a process of monthly reconciliations between our general ledger and debt recovery systems. Finally, a review of outstanding debt has been completed and I will shortly submit a proposal to the Department of Public Expenditure and Reform with respect to the prioritisation of our debt recovery activity, including a proposal for a structured write-off or write-down of a stock of very aged debt.

The third chapter, Chapter 18, examines the Department's performance in implementing control reviews. The Department undertakes approximately 950,000 reviews of claims each year to determine if the claim is still valid and if the payment amount is correct.

The Comptroller and Auditor General makes three recommendations as to how these reviews can be improved including increasing the number of medical reviews, ensuring that a review status is assigned to all medical claims, and taking steps to reduce the risk associated with automatic claim renewal.

As Accounting Officer, I agree with these recommendations and have taken steps to implement them. I have authorised the recruitment of additional medical assessors and the profiling of medical claims that do not have a review status has commenced. Automatic renewal of family income supplement claims was discontinued prior to the publication of the Comptroller and Auditor General’s report.

As regards appeals, as members are aware, all decisions taken by the Department’s deciding officers and designated persons are appealable to the chief appeals officer. In any year, approximately 85% of claims are awarded and just 1% of decisions are appealed, of which approximately 60% have a favourable outcome. In other words, 0.6% of all claim decisions are revised when appealed. It should also be noted that in 40% of claims that are revised, the decision is made prior to a formal appeal assessment, typically because additional information submitted by the appellant at the appeal stage is provided to the deciding officer who, taking that information into account, revises his or her original decision. The trend of additional information being provided at appeal stage is particularly prevalent in medical schemes.

I am aware that some members have concerns that the timeframe to finalise an appeal is inordinately long. However, it must be noted that the appeals process is a quasi-judicial process. Appeals officers are required to decide all appeals on a de novo basis having provided both the appellant and the Department with an opportunity to make submissions. Appeals decisions are subject to review by the higher courts and must be formally written to quasi-judicial standards, which is time-consuming. In order to mitigate time delays, appellants generally have access to welfare payments throughout the appeals process and any decisions made in their favour are backdated to the original claim date to ensure the claimant is not disadvantaged in monetary terms.

I wish to conclude by referring back to the challenge of achieving a balance between control and service in a large-scale operations environment. To give members a sense of scale, it is worthwhile noting that while we sit here this morning the 6,500 staff of the Department will host 430 one-to-one activation meetings with jobseekers, process 26,000 applications for welfare payments, make 118,000 payments to a value of some €28 million, answer 10,000 phone calls, finalise 1,600 control reviews, complete 1,200 standard authentication framework environment, SAFE, registrations and register 45 marriages, including two same-sex marriages. In addition, departmental staff will be working to progress three significant legislative items involving pension entitlements, employment rights and welfare payments.

Given the scale and scope of the Department’s operations, it is inevitable that there will be individual lapses by members of staff, that complex business processes will fail from time to time, that some processes will not keep pace with the level of change and, regrettably, that a very small minority of people will manage to defraud the system. I say that not in an attempt to diminish the issue of fraud and error but to highlight that the issue must be considered in the round. I believe and hope the members of the committee will agree that, when taken in the round, the staff of the Department do an extraordinarily good job of delivering a very broad and complex set of services in a manner that achieves an appropriate balance between the necessity to minimise loss to fraud and error while delivering on the even greater necessity to deliver an effective and responsive service to their clients. My colleagues and I will be pleased to take any questions members may have.