Written evidence |
Memorandum from the Serious
Serious Fraud Office Supplementary
This memorandum is intended to provide
the departmental select committee with an explanation of all changes
in resource relative to plans set out in the SFO Main Estimate
Supplementary Estimate Changes
Changes reflected in the Supplementary
Estimate relate to:
· The deposit of £19.000m
of Resource DEL via Reserve Claim resulting in an increase in
Resource DEL in 2013-14
· An increase in Net Cash Requirement
· The £19.000m Reserve
funding is in addition to £5m Reserve funding provided at
Main Estimates, so that the SFO's total Reserve funding for 13-14
The increase in RDEL from the Reserve
is in respect of the Tchenguiz litigation,to meet other legal
liabilities, to provide additional funding for the LIBOR investigation,
and to provide additional funding for two further significant
Change in control totals
The Supplementary Estimate will result
in the following changes to control totals
The table below compares final estimates
and outturn for the previous three years.
Approval of Memorandum
This memorandum has been prepared with
reference to guidance in the Estimates Manual provided
by HM Treasury. The information in this memorandum has been approved
on behalf of the Accounting Officer byBarny Todd, Chief Financial
Letter from the Clerk of
the Committee to Anne Smart, Financial Controller, Serious Fraud
Office, dated 12 February 2014
SFO Supplementary Estimate
Thank you for sending a copy of the
SFO's memorandum on its Supplementary Estimate 2013-14 under cover
of your letter of 11 February.
The Justice Committee considers that
it requires further information on your Supplementary Estimate
in order to discharge its responsibility to scrutinise the expenditure
involved, and would be grateful if you would provide a further
memorandum responding to the following questions. If there are
any answers which you would like the Committee to treat in confidence
please indicate the fact.
1. What are the two "further
significant investigations" referred to in the Memorandum?
2. How much of the £19 million
will be apportioned -
· to the Tchenguiz litigation
· to meet other legal liabilities
· to provide additional funding
for the LIBOR investigation
· to provide additional funding
for each of the two further significant investigations.
3. How much of the £19 million
has been (a) incurred and (b) disbursed?
4. Has the SFO's £11million
claim on the Contingencies Fund been effected?
5. Was the expenditure covered by
the Supplementary Estimate expected at the time of the Main Estimate?
If so, why were funds not able to be requested in relation to
these investigations at the time of the Main Estimate?
6. What has changed in terms of
the litigations and investigations since the Main Estimate to
require so much additional expenditure?
7. Have provisions been set up against
these litigations and investigations? If so, what provisions have
been made against each?
8. Are there likely to be additional
financial obligations to be met in relation to these litigations
and investigations in the future, and if so, how much in each
9. What uncertainties remain as
to expected expenditure on these litigations and investigations
in the future?
Please could your further memorandum
be with me no later than Friday 21 February to enable the Committee
to take it into account at its meeting on 25 February.
Letter from the Director
of the Serious Fraud Office, David Green CB QC, to the Clerk of
the Committee, dated 21 February 2014
Thank you for your letter of 12 February
to Anne Smart. I wanted to reply personally as the Committee raises
a number of very important questions.
I have answered each of the Committee's
questions below. I request that all financial information is kept
confidential. Knowledge of the resources that the SFO is devoting
to a particular case is operational material that would be of
assistance to suspects, and to the claimants in the Tchenguis
The SFO has received a total of £24m
additional funding for this financial year through the main and
supplementary estimates process.
This funding reflects the arrangement
through which 'Blockbuster' cases are supported. It is in the
nature of the SFO's work that significant additional funding can
be required at short notice. In a very short space of time, it
can become clear that an investigation, as wide as that into Libor,
is required. At the same time, I consider it would be unacceptable
to have expert investigators, lawyers and accountants as permanent
employees waiting around in case such an investigation is required.
Therefore, the current agreement with
HM Treasury is that the SFO submits claims for Reserve funding
where it is estimated the costs of new investigations are a certain
proportion or more of the budget.
For this financial year, the £24m
has been allocated by HM Treasury as follows:
|Rolls Royce investigation
|Barclays Qatar investigation
|Other legal liabilities
As you will see from the table, the
two further significant investigations referred to in the memorandum
are related to Barclays Qatar and Rolls Royce. The first of these
investigations began in 2012-13, [redacted]. The second investigation
was opened this financial year.
Of the £24m, £13.3m had been
incurred up to the end of December 2013. This is a mixture of
internal and external costs. The £11m advance from the Contingencies
Fund has now been received.
At the time of the Main Estimate, the
SFO was forecasting expenditure of £19m on blockbuster cases
and the Tchenguislitigation. Following discussions with
the Treasury, it was agreed that the funding need would have to
be finalised through the Supplementary Estimate process.
The additional £5m received through the Main estimates process
was agreed to meet some in-year needs.
As you might expect some needs have
also changed. [redacted]. More seriously, we have uncovered [redacted]historic
legal liabilities relating to the payment of VAT which date back
to Richard Alderman's time as Director.
We have made budgetary provisions for
next year. However, there will be additional financial obligations
in respect of blockbuster investigations and the Tchenguislitigation
during 2014-15. We currently expect these to be subject to a Supplementary
Estimate submission in December 2014 / January 2015 in the same
For an organisation like the SFO, there
are a many uncertainties about expenditure. As independent investigators
and prosecutors it is not possible to give the kind of commentary
needed to answer the Committee's final question. As explained
above, the need for a new and large-scale investigation can become
clear in very little time.
I hope the Committee will find this
further information helpful. I would be happy to provide further
information, if required. I am very grateful that additional funding
has been agreed this year, and keen that an appropriate and more
certain funding model can be agreed by all those with an interest.
[redacted]. Signifies redaction.