Letter to the Clerk of the Committee from
the Head of the Parliamentary Relations and Devolution Team, Foreign
and Commonwealth Office
FRAUD IN
TEL AVIV
Thank you for your letter of 9 January.
In answer to your first question, we have taken
a number of steps to ensure that there is no repetition of the
fraud in Tel Aviv. On the question of Rest Home Payments, we have
checked with all of our overseas posts and confirmed that all
additional payments or allowances that are paid as part of salary
are correct and based on the proper scale. We found no evidence
of a similar fraud at any other post. We have amended our internal
audit package so that additional payments made with salary are
automatically scrutinised as part of the audit. We have also issued
a "Lessons Learned" paper that focuses on the weaknesses
which allowed the Tel Aviv Fraud to go undetected. This paper
has been sent out to all Heads of Posts and Departments in London—a
copy is attached for the Committee's information.
The key weaknesses that allowed the bag clearance
element of the fraud to happen were cash payments, hand written
receipts and lack of rotation of duties. We have a world wide
initiative to reduce cash payments: this is an area that is closely
looked at in our self-audit package as well as by visiting Audit
and Financial Compliance teams. We are also making further improvements
to our guidance and anti-fraud training presentations to highlight
the importance of questioning hand written receipts and invoices
and benefits of rotation of duties of staff working overseas.
Prism, our new financial management computer
package, will enable us to gather more informed and detailed budgetary
and financial information. This has enabled us to develop more
analytical end of month checks of Posts accounts and the introduction
of a monthly management account report to the Head of Post. The
embedded controls within Prism, for example the need to match
an invoice to a Purchase Order before it is paid, have also strengthened
our payments procedures.
We have also increased the number of staff in
Internal Audit Department and Financial Compliance Unit thus enabling
a increased frequency of internal audits of medium risk posts
from every five to four years (high risk posts are audited every
three years) and an increase in FCU proactive visits from 10 a
year to 15 a year.
On your second point, this incident was not
raised in briefing for the Committee's visit to Israel because
the present system for commissioning briefing does not cover fraud.
We will, however, check with our Financial Compliance Unit when
preparing future briefing. It was not raised by Post while the
Committee was in Israel as it was not thought to be relevant to
the purpose of the Committee's visit.
I attach a full copy of the report for your
information.
Chris Stanton
14 February 2006
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