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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