Select Committee on Public Accounts Minutes of Evidence

Supplementary memorandum submitted by the Ministry of Defence, updating the C&AG'S Report (PAC 00-01/84)

1. The purpose of this memorandum is to update certain information contained in the Comptroller and Auditor General's report (HC 469) which was published on 18 May 2000. The paragraph numbers refer to paragraphs in the C&AG's report.


2. The number of Top Level Budgets (TLB) holders in the Ministry of Defence is now 11, not 13, as quoted in the report.


3. The Department takes very seriously the criticisms made in the report (at paragraphs 4, 2-8 and elsewhere) that MoD has no formal strategy for managing risks of fraud either for the organisation as a whole, or for specific areas of activity. In paragraph 2.12, the report states that:

    ". . . the Department have in place many important components of the necessary infrastructure to deter, detect and investigate fraud."

Since the report was published, substantial progress has been made on many of the intiatives referred to in the report and action is in train on others. These include:

    —  Publication of a Fraud Policy Statement and Fraud Response Plan to TLB holders, Command/Civil Secretaries and to Defence Agency Chief Executives. This reinforces the message that fraud, theft and irregularity will not be tolerated in MoD.

    —  Clarification to our contractors of our policy on fraud and the action we expect of them to improve deterrence and detection.

    —  Appointment of a dedicated Project Manager to oversee the implementation of the Fraud Reponse Plan.

    —  Publication of a number of Best Practice Guides.

    —  Creation of a Defence Estates Fraud deterrence web-site.

    —  Launch of the MOD Police/DFAU Fraud Alert Campaign.

    —  Roll-out of Fraud Awareness training to over 95 per cent of the Department's Property Managers.

    —  Progress with the introduction of Prime Contracting, which will provide tighter controls against fraud. Two contacts have been placed to date with more than 20 currently in the pipeline.

    —  Introduction of a programme of "no-notice" inspections. Since the C&AG's report was published, MoD has carried out several "Blue Sky" reviews—no notice inspections of selected defence establishments—aimed in part at establishing whether appropriate procedures to detect and deter fraud are in place.


4. The report states that: "In total they have £1.1 million of individuals' assets restrained pending future court proceedings."

The Department now has a total of £200,000 of individuals' assets restrained pending future court proceedings.


5. The report states that: "Furthermore, of 213 cases reported in 1998-99, 120 were actually theft of assets, which is not strictly fraud, but is classed as fraud for the purposes of reporting by departments to the Treasury."

The figures quoted are those for 1997-98. The 1998-99 Treasury Fraud Report stated that the MoD reported 129 cases in 1998-99, 74 of which were actually theft of assets.

The 1999-2000 Treasury Fraud Report has not yet been published but the MoD's return to the Treasury reported 91 cases, of which 44 involved theft of assets.


6. The report states that: "The number of cases of property management fraud was less than 10 per cent of the total reported in 1998-99. But taking into account cases reported in previous years, property management cases represent some 50 per cent by number, and over 75 per cent by value of all frauds currently being investigated by the Department. The total estimated fraud loss of those cases under investigation by the Ministry of Defence Police Fraud Squad is £17 million."

The total estimated fraud loss of cases currently under investigation by the MDP Fraud Squad is £18 million. Approximatey 33 per cent of these are property management cases which represent some £2.5 million by value (or approximately 14 per cent of all current cases).


7. The report at Figure 3 currently shows that an individual with suspicions of fraud might report these direct to the Defence Procurement Agency through PolC4F. To improve consistency, all reports of fraud are now routed to the DFAU and this message is reinforced at all awareness seminars and other related training sessions, and in the associated literature and Departmental instructions. This is reflected in the revised Figure 3.


8. The report states that: "The Fraud Squad are currently investigating about 30 cases of alleged fraud, with an estimated loss to the Department of £17 million. About 75 per cent of this loss (£13 million) is a result of alleged fraud in the property management areas, but the Fraud Squad estimated that 25 per cent of their fraud investigation resources are devoted to property management cases."

The current position is that MDP Fraud Squad are investigating 24 cases of alleged fraud, with an estimated loss to the Department of £18 million. About 14 per cent of this loss (£2.5 million) is a result of alleged fraud in the property management area. The Fraud Squad estimate that 37 per cent of their fraud investigation resources are now devoted to property management cases.

Ministry of Defence

2 March 2001

previous page contents next page

House of Commons home page Parliament home page House of Lords home page search page enquiries index

© Parliamentary copyright 2001
Prepared 12 September 2001