MoD and property fraud

The Ministry of Defence, one of the largest single buyers of maintenance work in the UK public sector, has an unacceptably low level of control to combat property fraud, according to the National Audit Office. Sir John Bourn, Comptroller and Auditor General, recently told Parliament that while the MoD’s stated policy is one of zero tolerance of fraud, it had not undertaken a department-wide review of fraud risk and lacks a coherent anti-fraud strategy. To date the MoD has operated a complicated management structure to combat fraud, a fact which it acknowledged to the NAO. In a move to tighten procedures it has since set up a high-level Fraud Prevention Steering Group which will organise anti-fraud initiatives, work on a prevention and detection strategy and educate staff. The NAO report also found that the existing agreements with contractors which provide such services as window replacement, roof repairs and building extensions, failed to stipulate their duty to protect the department from fraud. Essential controls, such as referral to experts on pricing of projects, inspection of completed work and reconciliations between invoice figures and contractual rates, were not always implemented and discrepancies discovered were not investigated in all cases. The 200 property managers, who oversee annual expenditure of UK£900 million across 2,500 sites, frequently found it difficult to make the distinction between fraud, poor performance and sharp practice. The department has recently set up a central database in an attempt to collate all suspected frauds. Weaknesses in investigation procedures and the difficulty in securing sufficiently strong evidence means that very few cases are successfully prosecuted. The NAO has recommended a full risk assessment programme that will form the basis of department-wide fraud strategy with tailored approaches to various cost centres including property management. It calls on the MoD to seek ways to incentivise contractors to prevent and detect fraud, for the simplification of fraud reporting and investigation structures and improved data collection, with regular quality review of fraud risk management. The department has already undertaken to improve its controls by application of the NAO’s risk assessment model.