Client Funds Accounts - Statutory Child maintenance Schemes 2015-16

Posted On: 
16th December 2016

Amyas Morse, Comptroller and Auditor General, has qualified his audit opinions on the Client Funds Accounts of the Department for Work and Pensions on the grounds of material errors in the calculations of child maintenance assessments. He has also given an adverse (the most serious) opinion on the truth and fairness of the outstanding maintenance arrears on the 1993 and 2003 schemes.

The statutory child maintenance schemes in Great Britain are delivered by the DWP, which is leading the schemes through a period of major reform.

The Department no longer accepts new cases to be administered under the older 1993 and 2003 schemes. While case closure continues, however, the Department continues to run the older schemes concurrently with the new 2012 scheme. Once cases are closed on the 1993 and 2003 Schemes, the client can then choose whether to reapply under the 2012 Scheme rules. The 2012 scheme is reported separately from the 1993 and 2003 schemes.

The Client Funds Accounts record the receipts of child maintenance from non-resident parents; payments to parents with care and the Secretary of State; arrears of unpaid assessments from non-resident parents; and a statement of cash balances held at the year end (the value of maintenance received which has not yet been paid out).

Irregular receipts and payments – 1993 and 2003 schemes

In 2015-16, the Department received £638.5 million in respect of child maintenance from non-resident parents assessed under the 1993 and 2003 schemes. The NAO has estimated that errors in assessments result in overpayments of child maintenance amounting to £3.3 million (0.51% of receipts) and underpayments totalling £4.5 million (0.71% of receipts).

Irregular receipts and payments – 2012 scheme

In 2015-16, the Department received £39.9 million. The NAO has estimated that errors in assessments result in overpayments of child maintenance amounting to £278,122 (0.7% of receipts) and underpayments totalling £587,227 (1.47% of receipts).

Outstanding maintenance arrears on 1993 and 2003 schemes

The balance of £3.976 billion as at 31 March 2016 is the cumulative total of outstanding arrears since the Child Support Agency was established in 1993. This balance represents the total amount owed by non-resident parents to either the parent with care or, in some instances, the Secretary of State. Current legislation allows the Department to write off arrears only in very limited¬ circumstances. The NAO considers that these figures do not give a true and fair view because of the level of error in the underlying case data, which is a result of both inaccurate maintenance assessments by caseworkers and incorrect processing of cases. The best available estimates of the impact of incorrect processing of cases indicate that the reported arrears at 31 March 2016 are overstated by around £15.9 million and understated by around £115.8 million.

The future of the Client Funds schemes

The Department is currently part-way through the process of closing cases on the 1993 and 2003 schemes, issuing letters to customers who have cases on the 1993 and 2003 systems informing them that their cases are to be closed and inviting them to apply under the 2012 scheme rules. The Department is already reporting improved levels of accuracy in the 2012 scheme as compared with the same stage for the 1993 and 2003 schemes. Cases assessed under the 2012 scheme use an automated interface with HMRC systems for the majority of maintenance assessments, which the Department believes will further enhance accuracy both in the initial maintenance assessment calculations and at annual review. Any arrears that have accumulated under the 1993 and 2003 schemes, however, will not transfer to the 2012 scheme account and are likely to remain in the 1993 and 2003 scheme account for a long period of time, with no current plans to address these.