Sir John Bourn, head of the NAO, was forced to qualify the accounts after benefit award errors and fraud led to around £400m of losses from the fund in 1999/2000.
According to estimates produced by the Department of Social Security, errors by officials in assessing incapacity benefits totalled £252m, and the fraudulent use of order books and girocheques cost the fund £59m.
Errors and frauds over the jobseeker’s allowance cost £54m and £32m was lost through errors in retirement pensions and widows’ benefits.
Sir John said: ‘The scale of fraud and error in benefits paid out of the National Insurance Fund is substantial and I have therefore qualified my audit opinion.’
Between 1999 and 2000, more than £50bn was paid out from the fund, management of which had passed from the DSS to the Inland Revenue in April 1999.
At the same time, the Revenue assumed responsibility for the National Insurance recording System, known as NIRS2, a system that has been hit by several contraversies, including continued underpayments to pensioners.
Earlier delays and a phased implementation have led to a backlog of work which the Revenue hopes to clear by October 2001.
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