Select Committee on Foreign Affairs Written Evidence


Annex

Fraud: Lessons Learned from Tel Aviv and other Frauds

  1.  I think you are all aware of the fraud that was discovered in Tel Aviv a little over a year ago. The National Audit Office have completed their report, which will be attached to the FCO 2004/05 Accounts. We expect Public Accounts Committee interest. The PUS may be called to give evidence.

  2.  Against this background, I attach a note written by Financial Compliance Unit on the lessons learned from the Tel Aviv and other frauds. I commend this to you. You should ensure both that those involved in management work in your post read it carefully and that the relevant checks are in place as far as possible.

  3.  The paper is a statement of good practice, not a catch-all document. It highlights some of the key indicators of fraud and the key steps which, in our experience, help you prevent it. It is neither a set of iron rules which must be followed nor a guarantee that fraud will be avoided by following them. Rather the paper is designed to help you discharge your responsibilities as SAO in support of Michael Jay as Accounting Officer.

  4.  You should be guided by your own judgement and common sense in the light of local circumstances. So, for example, if the circumstances of your post compel you to make cash payments or make it difficult to obtain invoices in every case, then you need to think about what flanking and/or other arrangements will help mitigate the risks ("compensating controls" in auditor speak). What I would say is that it would be much more difficult for an SAO to explain a fraud to the Accounting Officer if it has occurred by failure to implement the good practice set out in this paper.

  5.  I am aware that DSP and FCO guidance need to be updated, not least in the light of Prism, and we are working to this end.

  6.  Finally, may I repeat that if you would like specific advice on tackling fraud or you suspect malpractice in your post, please contact me or FCU immediately. I would encourage you to make use of their expertise.

D R Todd

Finance Director

3 November 2005





 
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