Summary: There was fault by the Council in failing to audit Ms Y’s direct payment or carry out yearly financial assessments. This caused Ms Y and her family avoidable confusion. The Council will apologise, write off an overspend, reclaim an overpayment, reduce the outstanding client contribution and take action to improve services described in this statement.

The complaint

1. Ms X complained for Ms Y about North Tyneside Metropolitan Borough Council (the Council). She said:
1. there was fault in the way it recovered an overpayment of Ms Y’s direct payment
2. there was a failure to re-assess Ms Y’s care charge
3. it unfairly decided to change the arrangements for the direct payment to a managed account.
2. Ms X said this caused avoidable distress, a loss of control over the management of Ms Y’s care and support, and financial hardship.

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The Ombudsman’s role and powers

3. We investigate complaints about ‘maladministration’ and ‘service failure’. In this statement, I have used the word fault to refer to these. We must also consider whether any fault has had an adverse impact on the person making the complaint. I refer to this as ‘injustice’. If there has been fault which has caused an injustice, we may suggest a remedy. (Local Government Act 1974, sections 26(1) and 26A(1), as amended)
4. If we are satisfied with a council’s actions or proposed actions, we can complete our investigation and issue a decision statement. (Local Government Act 1974, section 30(1B) and 34H(i), as amended)

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How I considered this complaint

5. I considered Ms X’s complaint to us, the Council’s responses to the complaint and documents described later in this statement.
6. Ms X and the Council had an opportunity to comment on my draft decision. I considered any comments received before making a final decision.

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What I found

Relevant law and guidance

7. Councils may charge people for care and support. If they do so, they must first carry out a financial assessment, applying charging regulations, to decide how much the person can afford to pay.
8. A direct payment is money a council gives to a person with care and support needs. Direct payments enable a person to arrange their care in the way they want to. They can only be used to meet eligible care and support needs identified in a person’s care and support plan. (Care and Support Statutory Guidance, paragraph 12.1)
9. We expect councils to have regard to Care and Support Statutory Guidance (CSSG). I have summarised relevant paragraphs from CSSG below:
1. A council should review a care and support plan at least once a year, on request or in response to a change in circumstances. The purpose of a review is to see how a care and support plan has been working and to decide if any revisions need to be made to it. The council should act promptly after receiving a request for a review (paragraphs 13.19-21 and 13.32)
2. The law allows a direct payment to be made to a nominated person acting on behalf of the adult (paragraph 12.15)
3. It is a condition that the council must be satisfied the person (the adult or their nominated person) is able to manage the direct payment by themselves or with help and support. Councils should take reasonable steps to provide direct payment support and advice, and many do this by contracting with other organisations. (paragraph 12.21)
4. The council must be satisfied the direct payment is being used to meet the needs set out in the care and support plan and should have systems to monitor the payment to ensure effective use of public money. The Care and Support (Direct Payments) Regulations require councils to review a direct payment at least once a year. (paragraph 12.24)
5. Prepayment cards are a way of administering a direct payment without the need for a separate bank account. They shouldn’t be the only option on offer and a normal payment into a bank account should be an option too. (paragraph 12.58-9)
6. As well as monitoring direct payments to ensure their proper use, councils need to review the making of a direct payment at least every 12 months to ensure the person is comfortable with it and is not experiencing any issues. This review can happen at the same time as the review of the care and support plan (paragraph 12.64)
7. The review needs to include the nominated person (paragraph 12.65). It should be written and a copy given to all the parties. Where there are issues that need resolving, the method to resolve them should be agreed with all the parties as far as is reasonably practicable (paragraph 12.66)

What happened

Background

10. Ms Y has learning and physical disabilities and gets council funded care and support. Ms X lives in her own home and has a direct payment from the Council which she uses to employ and pay personal assistants (PAs) to support her. Ms X is a relative.
11. In 2012, Ms X signed a direct payment agreement with the Council to be Ms Y’s nominated person to manage her direct payment. The agreement said:
• Ms Y lacked mental capacity to sign the agreement and manage the direct payment
• Ms X needed to use the direct payment to secure care for Ms Y in line with the care and support plan
• The payment would be net of any care contribution by Ms X, following a financial assessment
• The direct payment would be reviewed at least once a year
• There would be an audit of the money at least once a year
• Cash payments should not be made to staff
• The person or nominee must open a bank account for the direct payment. The person’s care contribution must go into this account
• The person or nominee must keep bank records and receipts and must provide copies when requested
• There would be a review of the management of the direct payment if the Council considered there were funds used inappropriately or there were discrepancies in the information provided
• The Council had discretion to require repayment of all or part of the direct payment.
12. In February 2016, the Council audited the direct payment. The finance officer doing the audit noted there needed to be a discussion about spending because:
• Taxi expenses were paid to Ms Y’s mother who was also a PA. One payment of wages to her was very high
• The direct payment had been spent on things as well as PA wages such as dog-walking services, gardening equipment, a holiday, staff Christmas night out, gym equipment and other things which could possibly be classed as direct payment management expenses.
• Ms X was nominee until April. She had withdrawn from this and the direct payment was now in a High Street bank account in Ms Y’s name. A book-keeping service did the paperwork, but they could not be the nominee.
• Previously the account was in Ms Y’s name and her mother was managing the DP but this had to be changed as her mother is a PA and this caused a conflict of interest and was not in line with council policy.
• Ms Y was under-paying her care contribution.
13. The Council did not provide me with any evidence to suggest the concerns about spending described in the previous paragraph was discussed with Ms Y or her representatives in 2016.
14. There was a financial assessment in November 2016. The form set out Ms Y’s income and disregards (money the Council ignored for the charging calculation) including standard disability expenses of £10. The finance team sent Ms Y a letter with her assessed care contribution (£84) and explained she needed to pay this into her direct payment account.
15. In January 2017, Ms Y’s mother signed and returned the financial assessment form on behalf of Ms Y.
16. The Council completed a social care assessment in January 2018. This said nothing about how the direct payment was working
17. A review of the care and support plan in October 2018 said there were no issues with the care and support plan. It said a book-keeper was managing the direct payment and monitoring and a review of the direct payment needed to happen twice a year.
18. Ms Y’s social worker and a direct payment officer met in June 2019. The records indicate Ms Y’s mother had agreed to a reduction in Ms Y’s care hours. Ms Y’s mother asked about paying a dog walker and the social worker said management would likely say no.
19. A care and support plan dated October 2019 (but in place since June) set out the agreed care hours. It noted Ms Y’s client contribution was £84 and that the book-keeper would continue to manage the direct payment.
20. There were versions of the care and support plan in 2020 and 2021 but these did not have any significant changes to them (other than an increase to reflect that Ms Y’s farm was now charging for her to attend and the Council had agreed a payment to cover the cost of this). None of the plans mentioned any concerns about the use of the direct payment.
21. In March 2020, the finance team wrote to Ms Y setting out her weekly care contribution of £84.
22. Internal emails between council officers in March indicate there was an accidental over payment of £76,000 put into Ms Y’s direct payment bank account due to an administrative error. The book-keeper agreed there had been an overpayment, but thought it was only £55,000.
23. Emails between an officer and the book-keeper in June and July indicate council managers suggested they would prefer it if the direct payment moved to an account managed in-house by the direct payments team. An officer from the direct payments team said she was going to open a managed account and ask Ms Y’s book-keeper to send wage slips to the Council in future. Ms Y’s mother had earlier emailed officers asking them to sort out the finances saying she was feeling stressed and was happy to meet to resolve issues.
24. The Council told me the finance team carried out an audit of Ms Y’s direct payment in July 2020.
25. In August and September, the finance team wrote again saying Ms Y’s charge was rising to £126. The letter included a breakdown of Ms X’s income and her disregards and the calculation of the contribution. The family asked for a review of the financial assessment. In November, the Council wrote to say it had completed the review and Ms X’s charge remained £126.
26. At the end of October, the book-keeper said in an email to a council manager that she had attended a meeting about Ms Y’s direct payment several years earlier and council officers had asked her to take over managing payments from Ms Y’s bank account as previously one of Ms Y’s employees had access to the account. The book-keeper went on to say she had been sending in audit records every six months for a few years and nothing had been queried.
27. In December, the finance team wrote to Ms Y saying the Council would pay the direct payment gross of her charge and would in future invoice her for the charge as this would simplify things.
28. Ms X complained to the Council in November 2020. There was a meeting with Ms Y’s mother and a council manager in December to discuss the issues of the complaint. After the meeting, the Council sent a complaint response in January 2021 saying:
• The proposal was for a managed direct payment account and a prepayment card and prepayment bank account. The Council had not stopped the direct payment. The decision to move to managed account not been made yet.
• There was potentially a conflict of interest as the book-keeper was managing the account and paying themselves from the account. The bank would regard this as a breach of security as only the account holder should have access to the account. Changing to a pre-payment card would resolve this.
• Having a managed account meant the Council would pay all invoices, wages and ensure tax compliance. The payroll would run the same, but the Council would physically make payments. Ms Y would still have control over how her hours were used. Prepayment card audits took the Council less time
• The team tried to resolve the £76,000 overpayment, but this was delayed because the money was in a high street bank account. The overpayment happened because an old direct payment was being paid as well as a new direct payment on a new care and support plan
• The audit papers sent in took several months to retrieve as the office was partly closed due to the pandemic
• The direct payment was not audited as often as it should have been and the Council was sorry for this
• There was a delay responding to Ms X’s email asking the Council to clarify its concerns because the email went into a spam in box. As soon as this was identified a response an apology was provided
• All financial letters had been sent to Ms Y and copies provided to her mother
• Ms Y needed to pay her outstanding care contribution. A repayment plan could be set up.
• Ms Y had benefitted from the lack of a financial assessment each year because increases to benefits were not included
• At the meeting in December 2020, the Council agreed dog walking could be paid from the direct payment until June 2020 because it had not been clear about this previously. But it was not allowed after June 2020 because a dog walker was not part of Ms Y’s care and support plan.
• A computer was allowed from the direct payment as it was necessary to meet Ms Y’s eligible needs and so was an appropriate expense.
29. Ms X was unhappy with the Council’s response and said Ms Y did not want a managed account.
30. Emails between the book-keeper and officers in the Council’s finance team indicate the Council had still not reclaimed the overpayment in January 2021. The book-keeper said she was concerned and asked what was happening about recovery because the funds in the account were decreasing as she had been paying staff and so forth.
31. Ms X and two managers from the Council met in March 2021. The managers repeated matters summarised above. Ms X said the family had decided it was not worth the stress and so agreed to a managed account and prepayment card.
32. The Council provided a second complaint response after the meeting saying:
• It apologised for delays in complaint handling
• A senior manager had reviewed the financial assessment. Ms Y’s assessed contribution was £84 a week from November 2016 and this rose to £125 in August 2020. The higher figure would not take effect until 23 October 2020, a reduction of £481. Ms Y would have another financial assessment in November 2021.
• Their standing order set up was the amount to cover four weekly payments, but as payments only went out each calendar month, there was a shortfall.
33. Ms X was unhappy and asked the Council for a further complaint response. The Council’s final response did not identify any further fault and referred Ms X to us.
34. The finance team wrote to Ms X in July 2021 to say it was changing the direct payment to a managed account with immediate effect. The Council set up a new pre-payment bank account and instructed Ms X to transfer existing funds into this new account. The letter set out the weekly payments and the amount and advised her she would be invoiced for the care charge each four weeks and gave and direct payments. It also asked her to provide audit information for the last three months and from then on there was no need to send in audit information but she should keep receipts.

Comments from the Council

35. The Council told us:
• It did not audit Ms Y’s direct payment after 2016 because of staffing issues and volume of work. This was not in line with expected practice. The Council gave similar reasons for not doing yearly reviews of Ms Y’s financial assessment. It acknowledged the lack of auditing meant it did not pick up on the fact there was a continuous underpayment of the charge.
• It changed to paying direct payments gross of the charge and invoicing clients for the charge so it could spot similar problems with under-payment in future.
• There was no problem with clients using a book-keeper for payroll support but they should only be doing recruitment, processing time sheets, issuing payslips and ensuring tax compliance. The employer should be managing the bank account and paying wages. The Council viewed it as a conflict of interest because the book-keeper was paying herself from the bank account she was managing.
• There was also an overspend of £23,800 on the agreed support plan for 2020/21 Because the direct payment has been overspent from the support plan in the year 2020/21 there was currently not enough money in the account to pay back the overpayment. Support has been provided over and above what was agreed on the support plan and the Council was seeking to investigate this further.
• The family offered to pay 50% of the contributions owed (as of January 2021 this was 50% of £11,344) which the Council would accept.
• Following the audit, the current amount owed to the Council was £51,474. This was in line with the family’s view of the overpayment.
• When the account was transferred back to the Council to become a managed account, there was a balance of £38,845. This was despite the book-keeper saying she agreed there had been an overpayment of £55,000 and advising she was holding this back. The Council wanted repayment, but there was not enough money available.

Was there fault causing injustice?

There was fault in the way the Council recovered an overpayment of Ms Y’s direct payment

36. The Council has not yet recovered the overpayment. The Council should have taken immediate steps to recover the overpayment that occurred in March 2020 as soon as it recognised the administrative error it had made. I note the book-keeper disputed the amount of the overpayment, suggesting it was £55,000. As £55,000 was not in dispute, my view is the Council should have reclaimed this amount straight away when the error occurred in March 2020. It was fault not to do so.
37. Emails indicate the book-keeper chased council officers in January 2021 and warned them the balance in the account was decreasing rapidly because large wage payments being made. This means there is now not enough funds left for the Council to recover what it says it is owed. The Council’s view is that because there had been ongoing discussions with Ms X, it was reasonable to expect the funds would not be spent. I agree, yet the Council’s delay in taking the action required to reclaim the money meant there was a missed opportunity for it to protect public funds. And the delay in resolving how much needed to be repaid caused continuing confusion for the family.

There was a failure to re-assess Ms Y’s care charge

38. The Council was at fault because it failed to review Ms Y’s financial assessment yearly in line with benefit increases. However, Ms Y benefitted from a lower charge between November 2016 and August 2020 so the injustice to her is limited to avoidable confusion. Ms Y was underpaying the charge (her standing order was not enough to cover the charge) and this is why a debt accrued.
39. Had the Council audited Ms Y’s direct payment account more regularly (twice a year, as indicated on her care and support plan) then this issue would have been spotted earlier and could have been corrected. The failure to carry out regular audits was not in line with paragraphs 12.24 and 12.74 of Care and Support Statutory Guidance and was fault.
40. The Council has accepted Ms X’s offer to pay 50% of the amount that is owed. This is an appropriate remedy for the avoidable confusion. Ms Y will still need to pay back the other 50% of what is owed because social care is a chargeable service and everyone needs to pay their assessed contribution.

The Council unfairly decided to change the arrangements for the direct payment to a managed account.

41. The records suggested officers were concerned about management of the direct payment account as far back as 2016 when an audit took place. There is no evidence council officers raised any concerns with the family in 2016.
42. There were further concerns in 2020 when officers considered changing Ms Y’s account to a managed one, before discussion with the family. Care and Support Statutory Guidance, paragraph 12.66 says councils should try and resolve issues as far as is reasonably practicable. My view is the Council acted in line with this because it sought to discuss concerns and explained why a prepayment card and managed account would be more appropriate. I accept the family were against this proposed change in arrangements, but Care and Support Statutory Guidance does not say a council must reach an agreement, just that it should seek to resolve issues as far as is possible. By meeting with the family and addressing concerns through complaint correspondence, I am satisfied the Council took reasonable steps to resolve the dispute.

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Agreed action

43. The Council will, within one month:
1. Reclaim the £38,845 transferred to the managed account
2. Adjust the outstanding client contribution so it is 50% of what is owed, send Ms Y and adjusted invoice and negotiates an affordable repayment plan. This is an appropriate financial remedy to reflect the avoidable confusion caused by the Council’s failure to carry out regular audits
3. Apologise to the family for the avoidable confusion.
44. The Council has agreed not to reclaim any of the direct payment overspend (other than the overpayment identified at 43 (a)). I have taken into account:
• Ms Y’s vulnerability and probable lack of awareness of the overspend and other adults who were aware of the hours on her care and support plan, had day to day management of the care arrangements and funding.
• The direct payment agreement said Ms Y lacked mental capacity to manage a direct payment. I do not see how it would be fair or reasonable for the Council to reclaim the money from her.
• The Council’s view it had a reasonable expectation, having discussed the matter with the family and the book-keeper, that the overpaid funds would not be spent. I accept this is the case, but I also consider the Council’s delay meant a situation which was preventable was allowed to occur. I am not suggesting the Council was responsible for the actions of those who overspent the money. I am suggesting its failure to reclaim £55,000 that all parties agreed was owed, allowed the overspend to happen.
45. Within three months, the Council will ensure its staffing levels and systems enable it to:
1. carry out audits of direct payments at least yearly or more often where required
2. complete financial assessments at least yearly.

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Final decision

46. There was fault by the Council in failing to audit Ms Y’s direct payment or carry out yearly financial assessments. This caused Ms Y and her family avoidable confusion. The Council needs to apologise, write off an overspend, reclaim an overpayment, reduce the outstanding client contribution and take action to improve services described in this statement.
47. I have completed the investigation.

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Investigator's decision on behalf of the Ombudsman