19 May 2000
In an investigation, the watchdog found the MoD's anti-fraud controls on its property unacceptably low, with the complete absence of a department-wide fraud strategy and an out-of-date risk assessment.
The MoD spends around £900m a year on managing and maintaining its diverse property portfolio, which includes 45,000 buildings on 2,500 sites.
The department, one of the biggest spenders on property maintenance in the public sector, has already estimated that up to 20%, or £180m, of its property budget is open to fraud. However, the NAO estimates the figure to be closer to £135m, or 15%.
Despite these high estimates, the MoD prosecutes few cases successfully. Of the 70 cases bought between 1994 and 1997, only half had enough evidence for court action, and only four were successful, none of which related to property. Yet the MoD holds some £900,000 in individuals' assets frozen in suspected property fraud cases.
'The ministry has not paid enough attention to this important issue, and this is illustrated well by its abject failure when it comes to punishing those perpetrating fraud,' said David Davis, chair of the Public Accounts Committee. 'This is simply not good enough.'
The NAO is also critical of the department's 'fragmented approach', with a staff of more than 1,000 involved in property. Almost a fifth of the 200 property managers, the key staff who deal with expenditure, have never attended a fraud awareness training session.
The NAO also raised questions over the MoD's contracts with private companies, which, it says, provides few incentives to detect or report fraud.
'The risk of fraud in property management is intrinsically high, and despite a number of departmental fraud management initiatives, remains at unacceptable levels,' said Sir John Bourn, the auditor general.
The NAO makes a number of recommendations, including simplifying fraud reporting responsibilities and implementing risk assessments, although it acknowledges the work the MoD has already begun to reduce the risk of fraud.
PFmay2000
