The Comptroller and Auditor General has qualified the 2009-10 accounts of the DWP, which have been qualified every year since 1988-89, because of the material level of fraud and error in expenditure on state benefits.

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The head of the National Audit Office, the Comptroller and Auditor General, has qualified the accounts of the Department for Work and Pensions, which have been qualified every year since 1988-89. The accounts have been qualified because of the material level of fraud and error in expenditure on state benefits, except for the State Pension which has a low level of error and therefore this element of the accounts has not been qualified. The total of overpayments made by DWP, due to fraud and error, is an estimated £3.1 billion (compared with £2.7 billion in 2008-09).

Across the £148 billion of benefits administered by DWP, a total of £1 billion was lost to fraud, £1.1 billion to customer error, and £1.1 billion to official error. The total sum lost is 2.1 per cent of overall benefit expenditure; this represents an increase in both the value and the proportion of benefits being overpaid, which were £2.7 billion and 2 per cent respectively in the previous year. Total underpayments in 2009-10 are estimated to be £1.3 billion.

Some benefits are prone to error and the Department faces significant challenges in administering a complex benefits system in a cost effective way. The Department has, however, put significant work into reducing fraud and error within the benefit system in recent years. This year, as a result of the economic downturn, the Department has faced a significant increase in demand for work-related benefits, which has worsened the levels of fraud and error.

"I have had to qualify my opinion on the Department for Work and Pensions accounts because of the levels of fraud and error: an estimated £3.1 billion of overpayments and £1.3 billion of underpayments. Over the last year the Department has been under increased pressure, caused by the increase in benefits claimants because of the economic downturn, and this has led to a slight increase in the error rate.

"Although the processing of benefits will always be subject to some degree of fraud and error, the Department should continue to find ways of driving down the level of funds that are erroneously overpaid to benefits claimants.

Amyas Morse, head of the National Audit Office

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