| CAUSES OF THE IRREGULARITIES
|
| |
| (i) Embassy Procedures
|
| |
| C&AG's Report, para 16
| 18. Mr Zureik had been employed by the Embassy between 1968 and 1989, taking over as accountant in 1978. During this period he had been responsible for receiving and distributing payable orders as well as being one of a number of official and private citizens eligible to attest Annual Declarations of Entitlement for pensioners paid through the Embassy.
|
| |
Qs 5 and 30
Qs 18-19
Q 69
Q 40
Q 59
| 19. The Foreign and Commonwealth Office said that it was quite wrong that Mr Zureik had been able both to handle the payable orders and to witness the annual declarations. They recognised that it was a general principle that duties should be separated and the Embassy should have ensured that. This, backed up by banks accepting non-negotiable payable orders, was the core weakness. A proper separation of duties and normal line management supervision would have prevented the irregularities. Instead there had been a weakness in the system which quite a large number of people had failed to detect over a period of 20 years; but that did not absolve individuals of all responsibility.
|
| |
Q 39
Q 70
Q 60
Qs 18, 48 and 63
| 20. The Foreign and Commonwealth Office told our predecessors that they had very clear standing instructions about the separation of duties. But in Amman there was a lapse and they had not been properly applied to the pensions arrangements. In addition there was an absence of specific instructions relating to pensions procedure. The Embassy did not apply the standard checks and controls because the pensions transactions were a peripheral activity off the account. Moreover, the Administration had failed to send explicit instructions in 1982 when the system changed from cash payments to payable orders. Between them the Administration and the Foreign and Commonwealth Office should have ensured that there were adequate instructions; but there had been a lack of communication between the two departments.
|
| |
Qs 4 and 24
Q 17
Q 119
| 21. Mr Zureik had been able to exploit the weaknesses in the system, of which he had a good knowledge. He had been able to corrupt the records very early on so that the Administration were matching one fraudulent signature against another fraudulent signature. All the evidence suggested that what had happened was a one-man affair; a lot of people had misjudged Mr Zureik over a long period.
|
| |
| (ii) Exploitation of Weaknesses
|
| |
| C&AG's Report, para 18
| 22. When he left the Embassy in 1988, Mr Zureik wrote to the Administration, in the guise of a pensioner, asking for payable orders and other correspondence, including the Annual Declarations of Entitlement, to be sent to a specified PO Box number. He did the same for another pension in 1989 after leaving the Embassy. The Administration agreed to these requests. These and three other pensions, which the Embassy were already sending to PO Boxes, were still being misappropriated in 1995. Despite losing his job, therefore, Mr Zureik was able to continue to receive and encash payable orders. He also provided the Annual Declarations of Entitlement, forging the signatures of his successor and others, thereby by- passing the Embassy and dealing directly with the Administration.
|
| |
C&AG's Report, para 20
Qs 7, 17 and 79
| 23. After Mr Zureik's resignation, eight pensions continued to be sent to the Embassy where they remained uncollected and not returned to the Administration. This might not have seemed unusual as some pensioners lived in rural areas and might have allowed orders to accumulate because of travelling problems. In response to his successor's enquiries, Mr Zureik claimed that the pensioners had moved to the West Bank and could not be contacted. In 1989, when the Annual Declarations of Entitlement were not returned, the Administration suspended these payments. In 1990 the Embassy returned a number of uncollected payable orders for military pensioners to the Ministry of Defence.
|
| |
| (iii) Investigation of Irregularities
|
| |
C&AG's Report, para 15
Qs 7, 17 and 79
| 24. Between June 1993 and December 1994 the Administration and the Embassy embarked on a lengthy investigation. They took action progressively as the story unfolded, investigating any impropriety as soon as they became aware of it. They looked very carefully at all the pensions being paid in Jordan; and stopped those about which they were doubtful. There was no evidence that any member of the UK-based staff, or any other member of the locally engaged staff, was implicated.
|
| |
| Q 80
| 25. The Administration were not entirely happy that it took three years to uncover the whole story. The atrocious state of the records made it difficult for them to establish what had been going on. Another factor was that their records had been corrupted, which meant that the Administration could not rely on them.
|
| |
Q 79
C&AG's Report, para 21
Q 21
Q 50
| 26. As soon as the investigation showed that there was an individual under suspicion, the Administration started to prepare a case for a prosecution. Mr Zureik faced charges in the Jordanian courts of fraud, theft, negligence, forgery and embezzlement. The Administration told our predecessors that the court action was now taking place. The Administration, with the co-operation of the Jordanian authorities and the British Embassy have brought a civil case in an attempt to obtain full restitution of the money misappropriated. They are hoping to secure full disclosure from the accused of the facts of the irregularities, including the names of all the pensioners involved and the names of any accomplices.
|
| |
| Q 16
| 27. The Administration believed that they had a good chance of a conviction in the criminal proceedings and a good chance of success in the civil proceedings. They were determined to recover as much as possible, if not all, of the amount lost.
|
| |
| (iv) Conclusions
|
| |
| 28. We are alarmed at the seriousness of the weaknesses in the Embassy's procedures which Mr Zureik was able to exploit for so long. We are particularly disturbed that there was no separation of duties, such that Mr Zureik was able both to handle payable orders as well as to attest the Annual Declarations of Entitlement. As the Foreign and Commonwealth Office's standing instructions call for the separation of duties, a fundamental feature of control, we regard it as all the more reprehensible that the Embassy failed to ensure that these functions were performed by different officers.
|
| |
| 29. We share the concern expressed by the Foreign and Commonwealth Office and the Administration that there was a lack of co-ordination between them. We are disturbed that no instructions were issued to the Embassy governing the management and accounting for the Administration's pensions payments. While we note the view of the Administration and of the Foreign and Commonwealth Office that the irregularities were facilitated by weaknesses in the system, we emphasise that it is the job of management to ensure that the right systems are in place and that they are operated effectively.
|
| |
| 30. We find it disturbing that the Jordanian pension payable orders were not recorded in the Embassy's accounts; and the absence of a financial record in Amman evidently made it easier for the irregularities to be perpetrated and more difficult for them to be investigated. We consider it unacceptable that financial instruments were not properly safeguarded. There should be full and proper accountability for all the money and other valuables in a post's charge, including funds held on behalf of third parties. We therefore recommend that instructions to this effect be issued to all Foreign and Commonwealth Ofice posts. We also recommend that the Treasury ensures that the Government Accounting Manual contains guidance on this point.
|
| |
| 31. We are concerned that, because of the weaknesses in the system, the irregularities only came to light following a chance enquiry about a deceased pensioner. While it was right that the subsequent investigations were extensive, we underline the Administration's concern that taking three years to complete them was too long. We note that this was because the records were not reliable, partly because some forged signatures were being compared with other forged signatures. We stress that all apparent irregularities in the handling of public money should be investigated urgently, not only because of their inherent seriousness but so that any necessary disciplinary measures and litigation may be put in hand as soon as possible.
|
