Supplementary memorandum submitted by
the Ministry of Defence, updating the C&AG'S Report (PAC 00-01/84)
1. The purpose of this memorandum is to update certain
information contained in the Comptroller and Auditor General's
report (HC 469) which was published on 18 May 2000. The paragraph
numbers refer to paragraphs in the C&AG's report.
EXECUTIVE SUMMARY
PARAGRAPHS 16 AND
PARAGRAPHS 2.14 AND
2.15 OF THE
REPORT
2. The number of Top Level Budgets (TLB) holders
in the Ministry of Defence is now 11, not 13, as quoted in the
report.
PROGRESS SINCE
THE REPORT
WAS PUBLISHED
3. The Department takes very seriously the criticisms
made in the report (at paragraphs 4, 2-8 and elsewhere) that MoD
has no formal strategy for managing risks of fraud either for
the organisation as a whole, or for specific areas of activity.
In paragraph 2.12, the report states that:
". . . the Department have in place many
important components of the necessary infrastructure to deter,
detect and investigate fraud."
Since the report was published, substantial progress
has been made on many of the intiatives referred to in the report
and action is in train on others. These include:
— Publication of a Fraud Policy Statement
and Fraud Response Plan to TLB holders, Command/Civil Secretaries
and to Defence Agency Chief Executives. This reinforces the message
that fraud, theft and irregularity will not be tolerated in MoD.
— Clarification to our contractors
of our policy on fraud and the action we expect of them to improve
deterrence and detection.
— Appointment of a dedicated Project
Manager to oversee the implementation of the Fraud Reponse Plan.
— Publication of a number of Best Practice
Guides.
— Creation of a Defence Estates Fraud
deterrence web-site.
— Launch of the MOD Police/DFAU Fraud
Alert Campaign.
— Roll-out of Fraud Awareness training
to over 95 per cent of the Department's Property Managers.
— Progress with the introduction of
Prime Contracting, which will provide tighter controls against
fraud. Two contacts have been placed to date with more than 20
currently in the pipeline.
— Introduction of a programme of "no-notice"
inspections. Since the C&AG's report was published, MoD has
carried out several "Blue Sky" reviews—no notice
inspections of selected defence establishments—aimed in
part at establishing whether appropriate procedures to detect
and deter fraud are in place.
EXECUTIVE SUMMARY
PARAGRAPH 14 AND
PARAGRAPH 4.20 OF
THE REPORT
4. The report states that: "In total they have
£1.1 million of individuals' assets restrained pending future
court proceedings."
The Department now has a total of £200,000 of
individuals' assets restrained pending future court proceedings.
PARAGRAPH 1.4
5. The report states that: "Furthermore, of
213 cases reported in 1998-99, 120 were actually theft of assets,
which is not strictly fraud, but is classed as fraud for the purposes
of reporting by departments to the Treasury."
The figures quoted are those for 1997-98. The 1998-99
Treasury Fraud Report stated that the MoD reported 129 cases in
1998-99, 74 of which were actually theft of assets.
The 1999-2000 Treasury Fraud Report has not yet been
published but the MoD's return to the Treasury reported 91 cases,
of which 44 involved theft of assets.
PARAGRAPH 1.5
6. The report states that: "The number of cases
of property management fraud was less than 10 per cent of the
total reported in 1998-99. But taking into account cases reported
in previous years, property management cases represent some 50
per cent by number, and over 75 per cent by value of all frauds
currently being investigated by the Department. The total estimated
fraud loss of those cases under investigation by the Ministry
of Defence Police Fraud Squad is £17 million."
The total estimated fraud loss of cases currently
under investigation by the MDP Fraud Squad is £18 million.
Approximatey 33 per cent of these are property management cases
which represent some £2.5 million by value (or approximately
14 per cent of all current cases).
PARAGRAPH 2.18
7. The report at Figure 3 currently shows that an
individual with suspicions of fraud might report these direct
to the Defence Procurement Agency through PolC4F. To improve consistency,
all reports of fraud are now routed to the DFAU and this message
is reinforced at all awareness seminars and other related training
sessions, and in the associated literature and Departmental instructions.
This is reflected in the revised Figure 3.
PARAGRAPH 4.15
8. The report states that: "The Fraud Squad
are currently investigating about 30 cases of alleged fraud, with
an estimated loss to the Department of £17 million. About
75 per cent of this loss (£13 million) is a result of alleged
fraud in the property management areas, but the Fraud Squad estimated
that 25 per cent of their fraud investigation resources are devoted
to property management cases."
The current position is that MDP Fraud Squad are
investigating 24 cases of alleged fraud, with an estimated loss
to the Department of £18 million. About 14 per cent of this
loss (£2.5 million) is a result of alleged fraud in the property
management area. The Fraud Squad estimate that 37 per cent of
their fraud investigation resources are now devoted to property
management cases.
Ministry of Defence
2 March 2001
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