(2) That further work is carried out to secure the recovery of 0.641m of outstanding debt as outlined in paragraph 3.2.

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1 Cabinet Member for Finance Write-off of Adults Services Bad Debts July 2015 Report by Executive Director Corporate Resources and Services and Deputy Director of Finance Ref No: FIN06(15/16) Key Decision: Yes Part I Electoral Divisions: (or N/A) Executive Summary In the financial year 2014/15 income of almost 38m was generated as part of the Adult Social Care and Health budget, arising from customer contributions towards the cost of care. The majority of income ( 33m) relates to residential care with the remainder coming from people receiving care in the community. As at the end of March 2015, there was 4.7m of aged debt outstanding, of which 0.8m relates to 2011 or before. Following a review to determine whether the debts are recoverable, it has been concluded that there is no likelihood of recovering 1.187m of the debt due to the age of the debt, the value, or lack of activity.this conclusion is supported by legal advice. Work is in hand to pursue a further 0.641m. Improvements to the processes have been implemented involving both West Sussex and Capita staff along with more robust monitoring and reporting arrangements to ensure the situation remains under control. Recommendations (1) That 1.187m of outstanding debts which can no longer be collected are written off against the provision which has been established as part of the closedown of the 2014/15 accounts, as outlined in paragraph 3.1. (2) That further work is carried out to secure the recovery of 0.641m of outstanding debt as outlined in paragraph Background and Context 1.1 In the financial year 2014/15 income of almost 38m was generated as part of the Adult Social Care and Health budget, arising from customer contributions towards the cost of care. The majority of income ( 33m) relates to residential care with the remainder coming from people receiving care in the community. The Adult Income Group (AIG) was established in 2013 to maximise income generation and improve the debt recovery processes within West Sussex and Capita. One major area of concern identified by the group was the level of aged debt, across both residential

2 and non-residential care, with 4.8m outstanding at the end of March 2015, of which 1.3m relates to 2011 or before. These figures exclude long term debt where a legal charge has been placed on a property which is owned by the debtor who does not have the ability to pay for their care needs, known as a deferred payment. At the end of March 2015, there was 6.6m of this type of debt outstanding. 1.2 Work has been carried out over the last few months to identify the issues which have resulted in the significant increase in outstanding debt over the last four years. The investigation concentrated on the examination of all invoices which have been blocked (ie, when the debt is not actively pursued) to establish: the reason for the block being placed on the debt initially, whether there have been any subsequent communications with the debtor, the efforts that have been taken to resolve the issues, the processes that are currently in place which have prevented the debt being settled. 1.3 A working group comprising finance representatives from the Income and Banking team in Corporate Finance and Service Finance along with the SSO Contract Management Team and Capita Service Finance was established to review the results of the investigation and to make recommendations to AIG for action to resolve the current position and to ensure processes and procedures going forward are robust to minimise future occurrences. 2. Findings 2.1 The Adults Services debt environment has undergone major changes in recent years. The main factors have been a restructure within finance in 2010/11, the introduction of a new financial and case management system (Frameworki) and the subsequent outsourcing of the transactional services to Capita. This resulted in a loss of continuity of staffing and availability of some historic records. As a result there has been insufficient challenge on the reason for a block (a temporary hold on chasing an individual debt) being placed against an invoice resulting in debts accruing. In many cases the block has never subsequently been removed, meaning that the debt, while remaining on the County Council s books, is not actively pursued. 2.2 The examination of the invoices demonstrated that the majority of the accrued aged debt is a result of blocks being put on the invoice to prevent reminder letters being issued when the invoice had been disputed or access to funds were unavailable. The invoices were categorised into the following headings: debt that may be recoverable following re-intervention, debt identified for write off due to age, inactivity or value where deemed beyond recovery,

3 debt identified that may be recoverable in part or full in the future but potentially could be written off, debt identified as incorrectly raised in the accounts in the first place. 2.3 Since investigations began in September 2014, 0.247m of outstanding invoices have been recovered and 0.133m of invoices have been reversed in the accounts as the clients were either overcharged or there has been a change in their circumstances meaning the debt is no longer due. 3. Proposal 3.1 As a result of the work carried out, there is no likelihood of recovering 1.187m of the aged debt. This conclusion is supported by legal advice. In closing the 2014/15 accounts a provision has been created and it is proposed that these debts are written off against this provision in 2015/16. The debt comprises: (e) Home claw-back invoices ( 0.115m) relates to 10 providers where invoices had been raised to claw-back overpayments to homes following the death or transfer of the resident. There has been no recent action, and due to unresolved disputes, the age of the debt and the fact that the majority of the homes have since closed, there is no possibility of recovering the debt, Blocked invoices ( 0.226m) relates to 174 customers where due to age, lack of activity, dispute and value no action has been taken and the debt is now deemed to be irrecoverable, Deferred Payment Negative Equity ( 0.195m) relates to nine customers where the value of the property exceeds the debt accrued resulting in the need for the deferred payment to be written off if still active and any overcharged deferred invoices cancelled, Deferred Payment Write Offs ( 0.093m) - relates to five customers where the debt remaining has been deemed irrecoverable due to lack of evidence and the age of the debt, Legal Write Offs ( 0.558m) relates to 71 blocked customers which have been identified by Legal Services as requiring write off as recovery is now deemed impossible. 3.2 In addition, there are a further two categories of debt, which total 0.641m, where there is further work in hand but there is a possibility that part or all of the debt may need to be written off: Deferred Payment aged debt ( 0.392m) relates to nine deceased customers where due to age, non-communication or dispute the debt may not be recoverable. A charge has been secured on the property so potentially the debt may be repaid in full or part at some time in the future. Where a representative has been identified, letters have been issued to re-establish contact but lack of files and the age of the debt has made this difficult,

4 Aged block debt ( 0.249m) relates to 16 customers where action has been taken to contact representatives or solicitors but potentially due to age, dispute or insolvency the debt may not be paid in full or part in the future. 3.3 If, following further work, it proves impossible to secure these outstanding debts, where necessary, Cabinet Member approval will subsequently be sought to write off all or part of these debts. 3.4 Capita Service Finance and the Debt Recovery Officer in the Income and Banking Team have been tasked with re-establishing contact with known representatives of customers where invoices totalling 0.332m have been identified as potentially recoverable. Debt reminder letters have been issued and an on-going monitoring process instigated to ensure debts are tracked and actioned in accordance with the current procedure. 4. Way Forward 4.1 As a result of the investigation the following steps are being implemented to ensure that the level of overdue debt is kept to a minimum: A revised block process has been designed by the Income and Banking Team in consultation with the SSO Contract Management Team and Capita Service Finance and has recently been implemented. The new process ensures that only the budget holder can agree for a block to be placed on an account, it also ensures that there is an audit trail for the decision-making and a monitoring process that requires the service to resolve the block in a timely manner, A Deferred Payment Officer post has been created and appointed to ensure that the deferred payment process and procedures are closely monitored and timely action to ensure future debt is kept under control and appropriate steps taken when necessary to pursue for repayment, Aged debt within Adults Services will be reported regularly to AIG who will actively monitor the position to ensure the level of outstanding debt is kept under control. 5. Consultation 5.1 Senior officers across the council have been consulted and following extensive work to try to collect the outstanding debt, there is no other option than to write off the aged debt. 6. Resource Implications and Value for Money 6.1 As part of the closedown for the 2014/15 accounts, the opportunity has been taken to utilise uncommitted balances of 0.939m held in reserves, along with 0.889m of the 2014/15 contingency, which again was unallocated at year end, to fund the creation of the provision and the reserve.

5 7. Impact of the proposal 7.1 There is believed to be no impact by this decision on Equality, Human Rights or Social Value. There are also no known implications under the Crime and Disorder Act. An Equality Impact Report is not required for this decision as it is a report dealing with internal or procedural matters only. 8. Risk Management Implications 8.1 The timely recovery of income due to the authority is essential to the council s policy to maximise its income streams. Under-recovery of income against a budget will result in a budgetary pressure. Steps are being taken to ensure that the situation does not recur and impact the Adult Services budget. Peter Lewis Executive Director Corporate Resources and Services Debbie Middleton Deputy Director of Finance Contact: (Debbie Middleton, ) Background Papers None.