Ministry of Social Development payment errors topped $2.5m, thousands affected - review

More than 30,000 benefits and other payments were wrongly suspended with concerns continually raised for three months before being appropriately escalated, a government review has found.The botch-ups affected more than 2400 main beneficiaries and some were left thousands of dollars out of pocket before they were backpaid, while the total arrears bill reached $2.5 million.The Ministry of Social Development (MSD) on Thursday released its review into two major problems that surfaced following a law change last year.The change required many beneficiaries to confirm their circumstances annually to ensure they remained eligible for their payments.The Winter Energy Payment (WEP) should have been exempt from that process, but it was not, which meant thousands of pensioners missed out on payments they should have received.Secondly, processing delays caused by a high volume of people confirming their circumstances meant some paperwork was not checked in time, so their benefit payments stopped.MSD apologised and everyone had been backpaid, but none would receive compensation because that is not authorised under the law, the review said.MSD chief executive Debbie Power said it is usually good at implementing complex legislation, often under short time frames."That did not happen in this case," she said."We did not meet the expectations we have of ourselves, or that others have of us."Staff did not properly consider legislation implicationsThe review found 16,720 pensioners' and veterans' WEP payments were wrongly suspended.It detailed the complex web of payments some people receive, and revealed staff did not consider that the WEP for pensioners must be explicitly excluded from the new law when it was being drafted."In this case, MSD failed to fully explore all interactions to ensure that the legislation gave full effect to the policy intent," it said."WEP was omitted, due to the assumption that WEP for NZ Superannuation and Veteran's Pension clients would not be impacted."The highest missed payment total was $468.21.MSD slow to escalateMinister of Social Development Louise Upston.RNZ/Nick MonroThe WEP problem was first raised on 30 April by an MSD staffer, the review said.Staff and clients continued to raise it over three months, but were told the system was operating as intended under the legislation, "which was technically correct".They appeared to be individual client concerns and MSD did not identify a wider pattern, it said.Senior leadership was not told until 13 August."When queries on the treatment of WEP began, this should have been the opportunity to step back and question whether the legislation was operating in line with the original intent of the policy," it said."This experience highlights the importance of frontline staff as an early source of insight in understanding emerging risks or unintended consequences before they are visible in formal reporting."MSD underestimated workload, more than 2400 lost main benefitsDelays following the "confirming your circumstances" process saw 2460 people's main benefit suspended (more than $800,000 in total), while 11,990 people had their supplementary assistance stopped ($1.7m in total).The average arrears payment for a beneficiary was $390, while the highest was nearly $3000.For supplementary assistance payments like the Accommodation Supplement or Disability Allowance, the average was $140 while the highest payment was about $2800.MSD did not anticipate the number of clients that would report changes in their circumstances, or the volume of people who would return them by post rather than digitally, the review found.That meant a higher than expected workload which staff could not keep up with.The problem was compounded by clients receiving automatic emails from MSD telling them their payments would be suspended, it said."This increased the number of clients contacting MSD at a time when staff were already managing higher-than expected mandatory CYC review workloads."This increased the number of clients affected by delays and the scale of the impacts."On top of that, an IT update disrupted the email notification process so some clients were unaware they had a letter waiting for them in MyMSD, its client portal.RecommendationsThe review recommended:amending the Social Security Act 2018 to ensure WEP for pensioners is excluded from the mandatory reviews processstrengthening quality assurance processes around legislation development, including sign-off from someone senior who is independent from the policystrengthen the handling of law changes that affect operationsimprove modelling ahead of significant operational changes, including factoring in "significant areas of uncertainty" and ensuring it is independently challenged.