Examination of Witnesses (Questions 120
- 139)
MONDAY 11 FEBRUARY 1998
SIR JOHN
KERR, KCMG and MR
MICHAEL ARTHUR,
CMG
120. It is not a particularly large embassy
and, given that this is the fraudulent aspect, what is the total
annual stationery budget for the Amman Embassy?
(Sir John Kerr) I cannot tell you the answer.
The total overall budget is £1.2 million of which pay is--
121. Pay is obviously the largest proportion,
would you say, at about two-thirds?
(Sir John Kerr) Yes, pay is about 0.3, as I recall.
I cannot find it.
122. I would like a note, if possible, to
have a breakdown of the total.
(Sir John Kerr) I have found it. Stationery is
£17,626.
123. That is the annual estimate?
(Sir John Kerr) That is the correct payment for
stationery bought by the Embassy in Amman from local suppliers.
124. So the actual fraud then was nearly
double the amount actually needed?
(Sir John Kerr) Correct.
125. So it was not a little blip in terms
of a little nodule on the top of your budget estimate, but it
was something that really should have leapt out and those Biros
should have consumed you if you were not already drowned by them.
(Sir John Kerr) I totally agree with you, that
it is extraordinary and almost inexplicable.
126. What about all these 'phone calls?
There are £7,000 worth of 'phone calls. That, as I work it
out, is more than a year constantly on two telephones, at least
by British Telecom's standards. I do not know what the charges
are, but that is a lot of people making a lot of 'phone calls.
(Sir John Kerr) The actual expenditure, the local
budget estimated expenditure is £52,250.
127. £52,000 a year for telephone calls?
That is interesting. Now, what about this? This is the interesting
one, water. I know that water is short in that part of the world,
but it is not a nuclear power station that we are talking about.
We are talking about an embassy with 80 staff in it. Now, £34,000
on water, is that what-spring water? Just tell me what sort of
water that is?
(Sir John Kerr) This is a utilities bill and this
is the total of frauds on utilities bills for the houses of the
British staff which previously they had paid for themselves, which
is why I thought Mr Wardle was not right to say that this one
might have gone on for years.
128. But in terms of the number of litres
of water that that represents, it is almost the Dead Sea, is it
not?
(Sir John Kerr) I am sorry, but I do not know
the price of water.
129. It would be interesting to look at
your typical expected estimate for the staff households or whatever
we are talking about here, so if you have got that, I would be
grateful to see that, so a note on that would be useful. Just
on petrol as well[8],
£21,000 worth, I reckon that takes you around the world about
twelve times. It is physically impossible actually to drive constantly
throughout that period twelve times around the world. Somebody
really should have spotted this. Where are all your staff driving
to and how much is your annual mileage budget? What does that
come to? What do you set aside for mileage annually?
(Sir John Kerr) What that petrol item here is
is bulk deliveries to the pump from which the Embassy Land Rovers
and cars are supplied. What we have, sometimes only twice, sometimes
three times, is the same document or, as Mr Wardle said, the delivery
note as well as the invoice or a photocopy of the delivery note
or the invoice--
130. No, I realise that, but fraud is what
we are talking about today. However, it does lead into the whole
question about the efficiency and the management of your resources
at this Embassy. Is it an efficient way of managing your resources
to have this petrol pump situation there with obviously large
amounts of money able to escape people's notice? Why do you have
to have your own petrol pump?
(Sir John Kerr) I am sorry, I think it almost
certainly is efficient. I have been driving around in one of these
Land Rovers and I do not think in a city like Amman where there
are not many petrol stations, and this is not an absolutely normal
thing to do, that an embassy compound has its own pump. It is
also a city where I would not wish the community to be going out,
as of now, to have to buy their petrol on the street. This is
a city where a petrol bomb was thrown into our Embassy today,
where we had quite a nasty incident outside, but thanks to the
Jordanian police, the place did not blow up. This is quite a serious
point, but your question is perfectly fair because these are disgraceful
numbers which should have been detected.
131. Can you tell me what your annual petrol
mileage estimate is?
(Sir John Kerr) I am sorry, I cannot.
132. I would be interested in a note about
it because I cannot imagine it would come anywhere near this.
What is your annual budget for all of the embassies, the 222 posts?
What does that come to generally? It is obviously £1.2 million
for Amman here, but what does it roughly come to?
(Sir John Kerr) Well, if you take the vote of
the Diplomatic Service and you leave out the BBC and the British
Council, which we are also responsible for, we are talking about
£700 million.
133. So it is important to make sure that
you are monitoring the efficiency of the way in which that money
is spent as well as any fraud which comes into it and those things
almost go hand in hand, would you not accept? If you are looking
for fraud and you are looking for efficiency at the same time,
things would jump out at you?
(Sir John Kerr) I would agree 101 per cent.
134. What I am keen to find out from you
is not just an anti- fraud strategy for all of your embassies,
but also an efficiency-drive strategy as well. I have not detected
that from you today, Sir John, and I want to get a feeling that
you are taking this very seriously and want to implement a new
approach to this whole matter. Is that something you are intending
to do?
(Sir John Kerr) Absolutely. I am sorry, I am rather
obsessed with fraud in the last few days, not coincidentally.
Mr Davies
135. Last time you were with us, Sir John,
I commented that there were no women in your staff. I am glad
to see you seem to have embarked on a radical equal opportunities
drive. I hope that will continue. If I can continue along some
of the threads that have already been picked up because we are
a bit late in the day, you commented obviously that the basis
of this fraud is not particularly complicated or complex. What
essentially is happening is that people are getting receipts or
delivery notes and invoices and making up multiple applications,
albeit in different months, and what has been asserted is that
the senior manager who was retired with a very large salary had
presumably had posts, it can only be described that he had posts
elsewhere in other embassies before this post? That is correct,
is it not?
(Sir John Kerr) Yes, indeed. I think he had over
30 years' service.
136. And so does that imply that he was
familiar with the practice of authorising receipts and delivery
notes instead of invoices for payments?
(Sir John Kerr) No.
137. So he arrived in this post, you are
inferring then, having in the past not accepted that sort of practice,
and then suddenly when he arrived in Amman, Jordan, he accepts
this sort of thing. In other words, there is not a fear in your
mind that there is a whole trail of incompetence and fraud actually
behind this particular manager's activity or, indeed, more worryingly,
that this sort of loose accounting practice does not happen in
other embassies that you are in charge of?
(Sir John Kerr) The last half of your question
I answered when I answered Mr Hope's cross- examination on it.
There are posts that are at risk and there are posts where we
should be making a particular effort, and I hope we are. I think
we need to make an effort across the board as well to make sure
that attitudes are right. As to the previous career of this man,
this is not a man who has committed a fraud. This is a man who
has been derelict in his duty to prevent fraud.
138. I understand that, but what I would
also perhaps say is that you have made clear that there were something
like four checks, including your Financial Compliance Unit, of
activities in an area where fraud had previously been detected
within the previous year which did not pick this up, even though
the nature of the fraud is so rudimentary and crass that any small
business person in Britain, for instance, could not expect not
to have a full lot of invoices going to the Inland Revenue. No-one
would dream of a situation where they thought they would get away
with the situation, if they were a builder or something, that
you could just duplicate receipts and delivery notes and this
sort of thing. It is just so unbelievable that you have four checks
and you paid these people and nobody picked that up.
(Sir John Kerr) I agree with you.
139. And is it not amazing, following on
Mr Leslie's points, that if one of the sub-budgets, for instance
the stationery example, was doubled and these four lots of checkers
arrive-presumably they are trained accountants-and nobody noticed
this in four checks, are you not a bit worried that the people
who are supposed to be the police force for accountancy under
your jurisdiction more generally are, in fact, incompetent because
they cannot even pick up the most rudimentary wheeze?
(Sir John Kerr) Could I distinguish a little bit
between the four groups of people. The Financial Compliance Unit
team sent out by the Foreign Office in August 1995 was specifically
to look at the pensions case, which was not on the account. The
fraudster stopped while they were there, we now see from the records.
But they were not looking for that. They were not looking for
more fraud. They thought one was enough.
8 Note: See Evidence, Appendix 1, page 21 (PAC 208). Back
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