A GOVERNMENT watchdog has issued a stinging criticism of a North-East council over the way it investigates benefit fraud.

A report published by the Benefit Fraud Inspectorate yesterday highlighted a series of failings exposed during a six-week investigation of Durham City Council's housing benefits system.

The council, which in 2004-05 administered £19m in housing benefit, insists it has tightened up procedures since the inspection, which was carried out last year.

The review was launched after it emerged that, during 2004-05, only six fraud investigations carried out by the authority had ended in sanction - either a police caution, a penalty fine or court appearance - and only one sanction had been issued in the first quarter of 2005-06.

That compares to the 7,000 claims the council dealt with during 2004-05, of which fewer than 400 led to a fraud investigation.

The inspectorate report concluded that the main reason for the low level of sanctions was "a lack of management control and strategic direction".

The report added: "The inspection found limited evidence of in-depth fraud investigations and, in some cases, investigators were undertaking routine work appropriate to other staff."

It said that the council had undertaken no quality checks on investigators' work, that management information was "unreliable for a variety of reasons" and that statistics reported to the Government were "inaccurate".

However, the report accepted that the council had since taken positive steps to improve its performance, by restructuring the department in January last year and increasing the number of staff engaged in counter-fraud work.

It also acknowledged that some quality checks were now in place and the future introduction of computer systems would improve the management of anti-fraud operations.

Following the publication of the report, the council insisted that activity is increasing, with 11 sanctions completed in the current financial year and a further ten cases at an advanced stage, likely to end in sanction.

It also pointed out that, in addition to the six sanctions issued in 2004-05, a further 131 claims were either cancelled or paid at a reduced rate after being investigated by the fraud team.

Councillor Bob Wynn, portfolio member for finance, said he was pleased that no recommendations are to be made to the Secretary of State for further action.

He added: "We aim to continue the steady improvements that we have been making since last year and are continuously looking at ways of preventing fraud and error from entering the housing and council tax benefit system in the first place."

He added: "Before the inspection team had completed their assessment, we had developed an action plan to address all the recommendations, the vast majority of which have been completed."