MSD accepts Privacy Commissioner's recommendations

Deputy Chief Executive for Service Delivery Viv Rickard says the Ministry has accepted recommendations from the Office of the Privacy Commissioner (OPC) into how it uses a section of the Social Security Act.

"The Privacy Commissioner has found we have been acting inconsistently with our legal obligations – we accept this finding.

"Questions have been raised around the nearly 2,300 serious high risk fraud investigations undertaken by our MSD fraud investigators where we ask for information from third parties, and the breadth of information we collect. These high risk investigations are about 17 percent of the 13,250 allegations we get every year.

"The small number of cases we investigate using this measure are at the high end of the spectrum where there are serious, often multiple, allegations of fraud over a significant period of time, usually involving large sums of money.

"The allegations often relate to people who on the face of it have set out to deliberately mislead in order to receive benefits they’re not entitled to.

"We recognise we have to balance clients’ privacy rights alongside our responsibility to taxpayers to investigate serious fraud in a timely way, and to establish the facts.

"In 71 percent of these investigations the person has to pay money back and/or their benefit changes. When we do prosecute, 96 percent of the cases are successful."

The current practice was introduced publicly in 2012 under the approach the Government of the day had to taking a harder line on benefit fraud and speeding up investigations.

"95 percent of the time people didn’t provide the necessary information when we asked them directly, meaning we had to go to third parties anyway, delaying investigations."

The Ministry has made changes in line with the OPC’s current views, including:

• Amending our processes ensuring staff make a case-by-case decision on whether to first go to the client, or to a third party and to make sure the right amount of information is collected.
• Suspending all requests for information to telecommunications companies and Police, pending review of the Code of Conduct.
• A commitment to review the Code of Conduct that applies to the section and continuing to work with the OPC.
• Commissioning an independent assessment of fraud practices and policies.

"We take a prevention-first approach, using conversations with clients and data matching agreements to detect and stop anomalies early. We don’t investigate lightly.

"We will need to continue to go directly to outside parties for information without going to the client first, where we believe there is a risk of collusion, evidence tampering, witness intimidation, or we can’t locate the client.

"We will also be working with the Government Chief Privacy Officer to ensure the implementation of the OPC’s recommendations is in line with best practice across government agencies," Mr Rickard says.

Editor’s notes:

MSD works with more than one million people every year

This is made up of:

• 400,000 people getting a benefit (including their partners)
• 168,000 students getting allowances and loans
• 8,500 people getting Veteran’s Pension
• 778,000 people getting NZ Super
• 106,000 people working and getting extra help.

We administer $24.2 billion in financial assistance a year, providing financial support, help to get work, housing, student loans, childcare support and more.

Investigating fraud, collecting overpayments and maintaining accurate benefit entitlements

We spend $48.2 million a year to investigate fraudulent payments, and to collect overpayments from former clients.

Of this $22.4 million is to detect and investigate clients committing fraud, the remaining amount is for the collection of overpayments and maintaining correct benefit entitlements through information sharing with other agencies.

We have 107 dedicated fraud investigators out of a total workforce of 7,000.

Allegations, investigations and prosecutions

Allegations of benefit fraud nearly all come from members of the public. We had 13,250 calls to our 0800 Allegation line last year.

Not all allegations result in a formal investigation. MSD does an assessment first to determine the likelihood and severity of the alleged fraud.

On average-, 2,299 allegations have needed a formal investigation each year and in these high risk cases MSD often seeks information, under the Social Security Act, from third parties.

71% of these investigations resulted in a client having to pay money back or the client’s payments were changed.

In a small number of cases (around 300 a year), MSD prosecutes individuals. 96% of prosecutions are successful.

What is Section 11?

- Section 11 (now known as Schedule 6) is a legal provision that allows MSD to collect information from clients and third parties for specific purposes, including as part of fraud investigations.

- This provision is supported by a Code of Conduct (the Code), setting out the requirements MSD must follow when using Section 11, including that information be sought from the client first, except where doing so would prejudice the maintenance of the law.

  - These figures are an average of four financial years (FY 14/15 to FY 17/18).