Examination of Witnesses (Questions 40-59)
MONDAY 30 APRIL 2001
MR KEVIN
TEBBIT, CMG AND
MR IAN
ANDREWS, CBE
40. I would expect those fairly general principles
to be in place but the question I think I would want to ask is
how does that actually translate into action? What concerns me
about this is that all those nice words have not actually translated
into action, have they?
(Mr Tebbit) Yes, they have been translated into action.
I do not know how to illustrate this for you. We have a Defence
Fraud Analysis Unit of 12 people. We have Fraud Alert road shows.
Even the pens we use, this one, for example, has the telephone
number of the Fraud Alert people on it. Everybody is encouraged
to use this. We have a confidential, as it were, whistle blower
line. We send out instructions and guidance and training throughout
the organisation. I gave a speech about it last October to raise
awareness. We encourage a culture of zero tolerance. We are tough,
if we can prosecute we will. If we have reasonable grounds short
of prosecution we dismiss. We have a tough reputation as a Department,
tougher than most. Even if, as it were, tribunals recommend reinstatement
we rarely accept that and instead we pay the amount which is adjudicated
because we do have a zero tolerance policy. But this does need
to be carried forward continuously and it is.
41. I appreciate you have only been there for
a limited amount of time but if I have heard your answer to the
Chairman correctly, you expect to publish a formal strategy in
September of this year. Why is it that systems were not put in
place earlier to combat fraud? After all, you are talking about
an area in which the report says on property management there
is an intrinsically high risk of fraud and corruption. Surely
this is an area which ought to have been given a higher priority
than a lower priority?
(Mr Tebbit) I think I am beginning to work out what
the issue is. What we have had so far has been a formal strategy,
and we have had lots of papers about that. It has been a strategy
based on processes. It has been a strategy which says all of the
processes involved in our property management need to be checked
and controlled and there has been a detailed system prescribed
for that, but it has not been risk based, it has been based on
making sure that all the processes are looked at in traditional
audit fashion. What is new, based on the model originally used
by the NAO, developed by us, is that we are now moving to a risk
based strategy focusing on those items or those areas where we
have reason to suspect or to be concerned greater than others,
whether it is high value or very high volume of low value activity
or contractors who have been in place for a long period working
with property managers in place for a long period. These sorts
of considerations give us a more differentiated risk based approach.
We have always had a strategy but, as I say, we are moving to
a better strategy than the one before.
(In the absence of the Chairman, Mr Alan
Williams was called to the Chair)
42. Let us have a look at some of the elements
of that strategy then. When was the Fraud Hotline set up?
(Mr Tebbit) I thought about 18 months ago but I would
require advice from my people, or we will let you have that information.
February 1999.
(Mr Andrews) That was when the current one was set
up. We have had a hotline for five years. The current one, based
on the Defence Fraud Analysis Unit, actually was set up last year.
43. So what is the number, Mr Andrews?
(Mr Tebbit) The telephone number is on the pen.
(Mr Andrews) 0207 807 8043.
44. How many times has it been contacted in
the last 18 months?
(Mr Tebbit) We can give you that figure. The number
is increasing, which is good. My sense is that it is about 20
something times but I need to give you the precise figure.
45. Twenty something times in the last 18 months?
(Mr Tebbit) Of which eight have been works services,
I am advised, yes.
46. How many investigations have been held as
a result of contact made through the Fraud Hotline?
(Mr Tebbit) I could not tell you precisely through
the Fraud Hotline. I can tell you, as I say, the number of investigations
that we have under way for all reasons, whether it is through
the hotline or through other forms of contact.
47. That is not broken down into the number
of people who might choose to use the Fraud Hotline?
(Mr Tebbit) I have not got that with me. Whether we
can find that out, I do not know. We focus more on—
48. Can we find out the value of those investigations,
the amount of money involved?
(Mr Tebbit) The Fraud Hotline, of course, does not
cost very much money, it is just a telephone number into our Fraud
Analysis Unit.
49. I am thinking about the value of the particular
cases that have been reported on by whoever is ringing the Fraud
Hotline, the value of the fraud.
(Mr Tebbit) As I say, at the moment we have only £2.5
million of fraud formally under investigation, so it is not a
huge figure in that context. We have seven cases currently being
investigated in the property area. The Fraud Analysis Unit, of
course, covers everything, not just the property area but the
whole of departmental fraud, and that was why I mentioned they
have 25 cases each year that they are investigating, not necessarily
that have been reported to them on the telephone.
(Mr Andrews) If I could just add to that. Every report
that is made to this Fraud Hotline is investigated by the Defence
Fraud Analysis Unit and, if appropriate, through the involvement
of the Ministry of Defence Police. Not all of the allegations
necessarily are found to be substantiated and lead to an investigation.
What I would say is that the Permanent Secretary referred to the
number of reports in the property management area and since we
embarked on our programme of fraud awareness training, of which
we were speaking earlier, we have reason to believe that a number
of calls received in the last few months were as a result of heightened
awareness following attendance on that training.
50. Good. That is the point I want to come on
to.
(Mr Tebbit) Can I be more precise even. I did write
it down and I can now refer back to it. As a result of our training
programme, which has just finished, we have had six allegations
of fraud from people who would not have contacted us previously.
My Analysis Unit has certainly got that far in working out whether
it is helping. It has certainly raised awareness.
51. Let me briefly touch on contact points for
staff to inform you. We have spoken about the hotline. Why was
there a lack of clarity, or perhaps there still is, about who
to contact and what their role is?
(Mr Tebbit) Let me put it the other way round, if
I may. We have promulgated the information much more thoroughly
and fully than was the case before. Previously we did have a system
where there was a separate investigation unit for the Procurement
Executive as distinct from the rest of the Department. That has
been integrated into one unit, that is the Defence Fraud Analysis
Unit, which is the recommended focal point for all fraud activity.
People can ring it directly or they can go through their line
management, if they feel comfortable in doing so, which itself
would then get in touch with the Defence Fraud Analysis Unit,
or they can get in direct touch with the police who, under the
arrangements we have agreed, and we have a steering committee
which has all the interests involved, would also report to the
Defence Fraud Analysis Unit. So they have, as it were, the database
and are an essential focal point having all the information, even
though the information may come to different people in the first
instance.
52. So how much does the whole mechanism to
tackle fraud actually cost you to run: the hotline, the unit,
the whole lot, the prosecutions that you bring? How much does
it cost?
(Mr Tebbit) It is hard to say because I would have
to add the cost of the Defence Fraud Analysis Unit, which is,
as I say, now 12 people, plus an element of the Ministry of Defence
Police Fraud Squad, which is about 30 strong I would guess, plus
elements of other people in the Defence Estates organisation.
What I would say is that these people are not, as it were, just
trying to deal with the end result of fraud, they are also engaged
in more constructive upstream work trying to prevent it happening
in the first place by increased awareness training. It is not
an easy calculation to make. I am happy to try to make it for
you subsequently but it would be misleading to put all of the
activity by the Fraud Analysis Unit and the other agencies involved
on the fraud detection end. We are using them much more creatively,
I think, on the awareness raising and training end of the issue
because these things should not happen in the first place[1].
53. I am obviously keen to get at the value
for the taxpayer as ever, so any closer we can get—
(Mr Tebbit) Perhaps I ought to add that we are gathering
statistics of this as we go along to try to ensure that it is
cost effective and focused properly so that we do not waste money
on nugatory activity and put it in the right areas. That is one
of the reasons why we have got our work with the Crown Prosecution
Service, because we want to establish whether we should be putting
more work into trying to secure convictions or more work into
recovery by other means.
54. A final question, if I may, which is a slightly
different area altogether and it is this question of annuality.
How much of the Department's work was allocated very late on in
the last financial year, let us say the last quarter? How much
of that, therefore, because it was allocated quite late, was allocated
without competition?
(Mr Tebbit) I take your point. It is very, very hard
to say. We have rules within some of our budget areas that they
cannot place work after December. The Air Force, for example,
has that rule to prevent the annuality issue. It has been a problem
in the past and it is a decreasing problem now. It will end this
year because in moving to resource accounting and budgeting there
is no benefit in trying to cram work in at the end of the year.
Prime contracting will certainly finish it completely because
with prime contracts we will be negotiating contracts running
over seven to ten years and there will be no incentive on any
side to try to rush things in at the end of the year without proper
evaluation and controls. It has been a problem in the past, it
is very much a decreasing one, and I think I should be happy to
see it go.
Mr Rendel
55. Mr Tebbit, your memo that you kindly sent
us to update the Committee, dated 2 March this year, indicates
that the number of cases of fraud has fallen very significantly
over the years. What do you think is the major reason for that?
(Mr Tebbit) I do not take very much comfort from that
because I do not know whether that really represents an underlying
trend or not. As I say, we are focusing more on what is at risk.
Are you looking at the difference between 12 cases reported the
year before last and seven cases this year?
56. Your memo that you sent us indicates in
relation to paragraph 1.4 213 cases reported in 1998-99, 120 referred
to the theft of assets.
(Mr Tebbit) I am sorry, yes.
57. Those are the figures for 1997-98, 1998-99
129 cases, 74 of which were actual theft and 1999-00 91 cases.
(Mr Tebbit) Indeed.
58. That is quite a significant drop.
(Mr Tebbit) It would indicate that there is. I think
that is the total, of which 12 I think of the 1999-2000 cases
were procurement contract cases. It looks like a drop, I would
not like to say that we are definitely going down completely.
Indeed, as a result of the work that we have been doing to raise
awareness I would not be at all surprised if things do not rise
as people get more ready to report concerns. I would not want
to take comfort or claim comfort that these figures show that
our current strategy is "working". I believe it is working
but I would not link these figures directly to it.
59. Very modest of you not to claim credit for
that but if there is no credit, if in fact the figures are not
going down, why are they reported as going down? Either there
is under reporting going on year by year or the number of cases
is actually going down?
(Mr Tebbit) There could be some under reporting. We
are certainly raising awareness.
1 Note by Witness: See Evidence, Appendix 1,
pages 25 to 26 (PAC 00-01/169). Back
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