Recommendations & Conclusions
30 items
2
Conclusion
Third Report - The MoD’s tackling of ec…
The Department has not responded to the huge potential fraud risk it faces with the degree of focus and leadership we would expect. Previous reviews of Defence policing have repeatedly identified siloed working, weak ownership and a lack of trust between the different parts of the Department responsible for tackling …
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The Department has not responded to the huge potential fraud risk it faces with the degree of focus and leadership we would expect. Previous reviews of Defence policing have repeatedly identified siloed working, weak ownership and a lack of trust between the different parts of the Department responsible for tackling fraud and economic crime. While the Department considers some of these cultural issues to be historic and points to examples of improved collaboration—such as embedding a Ministry of Defence Police officer within its counter-fraud team—the NAO 3 reported that this remains inconsistent and could be further strengthened. The Department recognises that it needs to improve its counter-fraud strategy and culture, strengthen capability, clarify accountability and increase collaboration across the organisation. It has set out plans for the Director General Finance to develop a stronger understanding of fraud risks and to hold parts of the organisation to account. However, these steps do not amount to clear, sustained leadership of the counter-fraud agenda, as the Department still lacks a single senior individual with primary responsibility for bringing together the various functions involved in responding to fraud, with a clear mandate to reduce losses. Without strong, visible leadership at a senior level, the Department is unlikely to deliver the cultural shift in counter-fraud working that it acknowledges is required, or to make meaningful progress in addressing the significant fraud risks it faces. recommendation The Department should appoint a senior (two-star) individual who is predominantly focused on supporting the Permanent Secretary to tackle fraud and economic crime, improve the collaboration of those involved in investigating these issues, and change the culture of the whole department so that it treats preventing fraud and economic crime with the attention it requires.
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HM Treasury
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Recommendation
Third Report - The MoD’s tackling of ec…
The Department does not have a reliable estimate of its fraud losses or the information it needs to effectively prioritise counter-fraud activity. While it has reported that it may be exposed to up to £1.5 billion of fraud losses each year, this figure is derived from external benchmarks rather than …
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The Department does not have a reliable estimate of its fraud losses or the information it needs to effectively prioritise counter-fraud activity. While it has reported that it may be exposed to up to £1.5 billion of fraud losses each year, this figure is derived from external benchmarks rather than a robust assessment of the Department’s own fraud risks and controls. The Department itself describes the estimate as an academic construct. Without a credible understanding of the scale and nature of its potential losses, the Department cannot make informed decisions about where to focus its counter-fraud effort. During our evidence session it was unable to say when it would have a reliable estimate, instead pointing to its counter-fraud strategy due in September 2026 as setting out future plans. The Department later told us that it expects work to develop a more reliable estimate was likely to take about a year. Alongside this, the Department’s numerous fraud risk registers do not quantify potential fraud losses, limiting their usefulness as a management tool. The Department accepts that it has not made sufficiently active use of them to direct resources to the areas of highest risk. It told us that it intends to include estimated fraud values in its risk registers during 2026–27 and that it is engaging with the NHS Counter Fraud Authority, which publishes a transparent, risk-based estimate of its fraud exposure. But these steps remain prospective and underline that the Department is operating without the basic information it needs to effectively manage a significant and well-recognised risk to public money. 4 recommendation The Department should work with the Public Sector Fraud Authority and NHS Counter Fraud Authority to develop a more robust estimate of its fraud losses. The Department should set out its plan to improve its estimate in its 2025–26 annual report. From 2026–27 it should publish an increasingly robust estimate in its annual reports, based on a growing
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HM Treasury
4
Recommendation
Third Report - The MoD’s tackling of ec…
The Department faces a particularly high risk of fraud in its procurement, but there is little evidence that its work to select and oversee contractors deters or penalises dishonest behaviour. Procurement makes up most of the Department’s estimated £1.5 billion exposure to fraud and most of the value of the …
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The Department faces a particularly high risk of fraud in its procurement, but there is little evidence that its work to select and oversee contractors deters or penalises dishonest behaviour. Procurement makes up most of the Department’s estimated £1.5 billion exposure to fraud and most of the value of the fraud allegations it receives. The Department recognises that it faces serious risks of commercial fraud and that it needs to watch for what it describes as sharp commercial practice. In 2024–25, the Department stopped around £400 million of contract payments that it judged to be invalid. Suppliers had submitted these claims even though open-book arrangements give the Department access to their financial data. This, together with the Department’s lack of clarity about when it should refer commercial disputes to the police or counter-fraud teams, suggests that suppliers may regularly and repeatedly claim more than they are entitled to. It also suggests that the Department does not do enough to deter this behaviour. A 2024 exercise to identify ‘commercial leakage’ found £17.5 million of potential overpayments in digital procurement. The Department has not extended this type of exercise across the rest of its procurement activity, limiting its ability to protect public money and take action against possible fraud. We are also concerned about whether the Department’s response to commercial threats, including the risks created when staff move between the Department and its suppliers, is strong enough to deter future fraud. recommendation The Department should work with the Public Sector Fraud Authority to develop a playbook for how it will apply its counter-fraud capabilities within its commercial activities. This should set out how it will investigate and take criminal or service justice action to deter malicious actors including suppliers, individuals or collusive networks, who may abuse contract arrangements, payment processes, or conflicts of interest for personal
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HM Treasury
5
Recommendation
Third Report - The MoD’s tackling of ec…
The fragmented structure of the Department’s counter-fraud and police teams limits its ability to respond effectively to allegations of fraud and economic crime or to understand how cases are progressing. The Department is a large and complex organisation, and it needs strong 5 working relationships and a coordinated approach to …
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The fragmented structure of the Department’s counter-fraud and police teams limits its ability to respond effectively to allegations of fraud and economic crime or to understand how cases are progressing. The Department is a large and complex organisation, and it needs strong 5 working relationships and a coordinated approach to deal with fraud properly. However, responsibility for responding to fraud and economic crime is split across several counter-fraud and police teams. These operate separately and lack the structures needed to communicate consistently and manage cases in a joined-up way. This may create gaps that fraudsters can exploit. The Department uses several case management systems to record fraud cases, which means it does not have a clear overall view of case progress or outcomes. As a result, it is harder for the Department to check that allegations have been investigated properly, and it is more difficult to give feedback to people who report suspected fraud. The Department told us that it plans to improve its understanding and assurance over how investigations are carried out by sampling cases. It also said there may be an opportunity to introduce a case management system that both its counter-fraud and police teams can access. In addition, the Department referred to its new integrated investigative model and other proposals that it plans to set out in its counter-fraud strategy, due in September 2026. These are intended to improve coordination and ensure the Department makes full use of its counter-fraud capability. recommendation As part of its Defence Reform programme to improve its structure and governance, and in updating its counter-fraud strategy, the Department should set out how it will enable effective joint working between its counter-fraud and police teams, including: • improved triage of cases to the most appropriate investigating body; • shared access to reliable information about case progress and outcomes; and • the economies of scal
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HM Treasury
6
Conclusion
Third Report - The MoD’s tackling of ec…
The Department has yet to capitalise on the use of new technologies and data analytics to detect and prevent more fraud. We recently found that emerging technologies such as data analytics are a vital tool to help government tackle fraud and error. The Department’s improved counter-fraud savings in 2024–25 were …
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The Department has yet to capitalise on the use of new technologies and data analytics to detect and prevent more fraud. We recently found that emerging technologies such as data analytics are a vital tool to help government tackle fraud and error. The Department’s improved counter-fraud savings in 2024–25 were largely the result of a single data analytics project examining ‘commercial leakage’ in its digital procurement contracts. But so far, the Department told us its use of analytics has been focused on finding fraud that has already happened and seeing if it can recover the money. This includes activities like retrospectively checking for duplicate invoices. The Department intends to move these checks earlier in the process, so that incorrect payments are prevented in the first place. 6 plans to use technology to strengthen its control environment as part of its Defence Reform programme. But the Department has provided very little detail on the specific data analytics techniques it will use to prevent fraud losses from happening, or on how and when these approaches will be embedded consistently across the Department. However, as our predecessor Committee warned in September 2023, fraudsters also use data analytics so this will be an ongoing war to defeat them. recommendation The Department should, within six months, write to the Committee with an assessment of areas of fraud risk where data analytics could be applied cost-effectively to detect and prevent fraud. The Department should clearly set out its plan and timelines to exploit these opportunities, and the savings it expects to achieve from this. We understand that there may be confidentiality considerations, in which case the Department should write to us privately in response to this recommendation.
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HM Treasury
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Conclusion
Third Report - The MoD’s tackling of ec…
The issues faced by the Department around counter-fraud are not unique, and many of the lessons can be applied across government. All parts of government need to prioritise building a strong counter-fraud culture, clear leadership accountability, a better understanding of fraud risks, effective deterrence, and the use of data to …
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The issues faced by the Department around counter-fraud are not unique, and many of the lessons can be applied across government. All parts of government need to prioritise building a strong counter-fraud culture, clear leadership accountability, a better understanding of fraud risks, effective deterrence, and the use of data to prevent fraud from happening. The previous Committee reported that tackling fraud requires stronger leadership at senior levels and better information on the scale of fraud. We found that government as a whole has not been able to explain clearly how it will deliver the significant fraud savings it expects from the use of data analytics in practice. recommendation The Public Sector Fraud Authority should circulate our report to all counter-fraud teams and support them to reflect on how they too can improve the savings they achieve from counter-fraud work, and consider the learnings from this in the fraud savings targets they agree with public bodies. 7 1 Performance in managing fraud losses Introduction
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HM Treasury
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Conclusion
Third Report - The MoD’s tackling of ec…
On the basis of a report by the Comptroller and Auditor General, we took evidence from the Ministry of Defence (the Department) on its management of financial losses due to fraud and other economic crime.1
HM Treasury
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Conclusion
Third Report - The MoD’s tackling of ec…
The Department told us it was confident that these plans would lead to improved counter-fraud performance and it believes it is on track to meet the government’s expected return of £3 for every £1 spent on counter-fraud by 2028, “if not sooner”.15 Culture and leadership
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The Department told us it was confident that these plans would lead to improved counter-fraud performance and it believes it is on track to meet the government’s expected return of £3 for every £1 spent on counter-fraud by 2028, “if not sooner”.15 Culture and leadership
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HM Treasury
9
Conclusion
Third Report - The MoD’s tackling of ec…
Previous reviews of Defence policing have highlighted issues relevant to how the Department manages fraud and economic crime. These include siloed working and mistrust between counter-fraud and police teams, inefficiencies and duplication, while the relatively few criminal investigations tend not to be the complex or serious cases. There is a …
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Previous reviews of Defence policing have highlighted issues relevant to how the Department manages fraud and economic crime. These include siloed working and mistrust between counter-fraud and police teams, inefficiencies and duplication, while the relatively few criminal investigations tend not to be the complex or serious cases. There is a strong consensus among officials that the Department’s operating model around fraud and economic crime needs to improve and that this issue requires more senior attention across the organisation.16 The previous Committee reported that senior officials across government must demonstrate leadership, set the tone from the top, and give the public the impression that they are serious about fighting fraud.17
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HM Treasury
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Conclusion
Third Report - The MoD’s tackling of ec…
The Department acknowledged that fraud is a serious risk, and that as a large, complex organisation that spends very significant amounts of money on complex procurement, it has a particular reason to be focused on fraud compared with other parts of government.18 We expressed scepticism that the Department recognises the …
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The Department acknowledged that fraud is a serious risk, and that as a large, complex organisation that spends very significant amounts of money on complex procurement, it has a particular reason to be focused on fraud compared with other parts of government.18 We expressed scepticism that the Department recognises the scale of the challenge it faces and asked it to explain how it will give the issue of fraud the seriousness it requires.19 The Department noted that it had taken steps to improve, but accepted that there is more it needs to do to get better at managing the risk of 12 Qq 2-3 13 Qq 3-4 14 Letter from Ministry of Defence, 20 March 2026 15 Qq 2 and 4 16 C&AG’s Report, para 5 17 Committee of Public Accounts, Tackling fraud and corruption against government, Sixty- Ninth Report of Session 2022–23, HC 1230, 8 September 2023, Summary and conclusion 1 18 Q 5 19 Qq 5, 19, 28-29 and 59 10 fraud.20 In particular it told us that a “cultural shift” is needed to ensure collaboration and regular engagement between the various parts of Defence with a role in tackling fraud.21
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HM Treasury
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Conclusion
Third Report - The MoD’s tackling of ec…
The Department recognised that there has been a “tricky relationship” in the past between its counter-fraud and police teams, with issues around willingness to share information impacting the timeliness of reporting on case progress.22 It told us it believes these challenges were driven by a lack of understanding around what …
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The Department recognised that there has been a “tricky relationship” in the past between its counter-fraud and police teams, with issues around willingness to share information impacting the timeliness of reporting on case progress.22 It told us it believes these challenges were driven by a lack of understanding around what can be shared and how, and that they are now historic.23 As evidence of this, the Department highlighted that the NAO’s report notes a member of the Ministry of Defence Police is embedded with Confidential Hotline, which is run by Fraud Defence.24
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HM Treasury
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Conclusion
Third Report - The MoD’s tackling of ec…
The NAO report notes that some areas within the Department do not consider fraud to be a major risk and can be reluctant to engage with counter-fraud teams.25 The Department told us a number of times that it is not complacent and that senior leadership is placing “great importance” on …
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The NAO report notes that some areas within the Department do not consider fraud to be a major risk and can be reluctant to engage with counter-fraud teams.25 The Department told us a number of times that it is not complacent and that senior leadership is placing “great importance” on establishing the right culture of trust and collaboration between teams across the organisation.26 It explained that maximising the value it gets out of every pound of taxpayers’ money will require it having the right controls, skills and capability, but also the right culture and, ultimately, leadership.27
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HM Treasury
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Conclusion
Third Report - The MoD’s tackling of ec…
The Department told us that it plans to strengthen its leadership and oversight of the fraud function through the role of Director General Finance, who has responsibility for fraud on the Department’s Executive Committee.28 As part of this the Department committed to improving its risk registers and that the Director …
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The Department told us that it plans to strengthen its leadership and oversight of the fraud function through the role of Director General Finance, who has responsibility for fraud on the Department’s Executive Committee.28 As part of this the Department committed to improving its risk registers and that the Director General Finance will use them in a more focused way to hold the organisation to account for its activities.29 It also told us that leadership on tackling fraud requires the Permanent Secretary to be saying in public that “this matters. This is something that all leaders in my Department should be taking seriously”.30 20 Q 29 21 Q 23 22 Q 24 23 Q 17 24 Qq 14 and 55 25 Q 19; C&AG’s Report, para 11 26 Qq 2, 8 and 19 27 Qq 19 and 22 28 Qq 10 and 22 29 Qq 10 and 22 30 Q 22 11 2 Understanding fraud risk and deterrence The scale of potential fraud losses
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HM Treasury
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Conclusion
Third Report - The MoD’s tackling of ec…
The Department estimates that it is exposed to up to £1.5 billion a year of losses to fraud and economic crime. The NAO’s report notes that this estimate is based on external industry benchmarks, not built up from its understanding of its own fraud risks and controls.31 The Department has …
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The Department estimates that it is exposed to up to £1.5 billion a year of losses to fraud and economic crime. The NAO’s report notes that this estimate is based on external industry benchmarks, not built up from its understanding of its own fraud risks and controls.31 The Department has over 100 fraud risk registers covering various areas of areas of the organisation. But these are of limited use for managing fraud as they do not include a financial assessment of potential loss and around half of the risks are rated as ‘critical’ or ‘severe’.32
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HM Treasury
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Conclusion
Third Report - The MoD’s tackling of ec…
The Department explained that it considers its existing £1.5 billion estimate of potential annual fraud loss to be an “academic construct” as it is based on benchmarking drawn from external organisations.33 It acknowledged that developing a more robust estimate is critical so that it can understand the totality of its …
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The Department explained that it considers its existing £1.5 billion estimate of potential annual fraud loss to be an “academic construct” as it is based on benchmarking drawn from external organisations.33 It acknowledged that developing a more robust estimate is critical so that it can understand the totality of its fraud losses and where it needs to direct its activities.34
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HM Treasury
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Conclusion
Third Report - The MoD’s tackling of ec…
Despite being asked repeatedly during the session the Department could not give us a firm date for when it would have a robust estimate in place.35 Following the session the Department wrote to tell us that its work to develop a new estimate will involve understanding its enterprise fraud risk …
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Despite being asked repeatedly during the session the Department could not give us a firm date for when it would have a robust estimate in place.35 Following the session the Department wrote to tell us that its work to develop a new estimate will involve understanding its enterprise fraud risk landscape, assessing the effectiveness of its controls and calculating the residual fraud risk exposure. It explained that for some risk areas, such as procurement, it may need to rely on benchmarking. It said it expects this work to run over around one year, with initial assessments of less complex categories by the end of 2026. It said it will set out a phased plan with delivery dates in its refreshed counter-fraud strategy and reconfirmed its commitment to send us a summary of the strategy after its expected completion in September 2026.36 31 C&AG’s Report, para 2.2 32 C&AG’s Report, para 2.11 33 Qq 35 and 37 34 Qq 34 35 Qq 31-34 and 41 36 Letter from Ministry of Defence, 20 March 2026 12
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HM Treasury
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Conclusion
Third Report - The MoD’s tackling of ec…
The Department explained that it is working closely with the Public Sector Fraud Authority to identify the best methodologies, but cautioned that measuring potential fraud loss is “really difficult”.37 The Department also explained that it is seeking to learn from the NHS Counter Fraud Authority, which has experience publishing a …
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The Department explained that it is working closely with the Public Sector Fraud Authority to identify the best methodologies, but cautioned that measuring potential fraud loss is “really difficult”.37 The Department also explained that it is seeking to learn from the NHS Counter Fraud Authority, which has experience publishing a high-level fraud loss estimate broken down by thematic risk areas.38 It told us that its impression from looking at the NHS is that it this is “incredibly complex and challenging” which, it explained, is why it does not believe it will be able to quickly produce a similar estimate for the whole of defence, but will instead over the next year focus on the areas of highest risk.39
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HM Treasury
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Conclusion
Third Report - The MoD’s tackling of ec…
The Department also explained that it plans to improve and make more active use of its existing risk registers to help it focus on where the estimate should be matured and what methodologies it can use.40 It added that going forward it will ensure that its risk registers include an …
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The Department also explained that it plans to improve and make more active use of its existing risk registers to help it focus on where the estimate should be matured and what methodologies it can use.40 It added that going forward it will ensure that its risk registers include an assessment of the potential financial value of fraud loss by area.41 It explained that its updated counter-fraud strategy will set out its plans to respond to fraud in high risk areas, and that underneath that it will develop a detailed plan for where it will to focus its counter-fraud resource and activities.42 Exposure to fraud in procurement
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HM Treasury
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Conclusion
Third Report - The MoD’s tackling of ec…
Most of the Department’s estimated £1.5 billion exposure to fraud loss is in its procurement expenditure.43 The Department spends around £40 billion a year on Defence procurement, which it expects to rise to over £70 billion by 2028–29.44 Examples of fraud risks in procurement include suppliers overcharging for goods and …
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Most of the Department’s estimated £1.5 billion exposure to fraud loss is in its procurement expenditure.43 The Department spends around £40 billion a year on Defence procurement, which it expects to rise to over £70 billion by 2028–29.44 Examples of fraud risks in procurement include suppliers overcharging for goods and services and pre-contract fraud, such as bid rigging.45 Despite this significant fraud risk exposure, the Department has reported low levels of detected fraud in its procurement and relatively few criminal outcomes such as prosecution that could serve as a deterrent.46 The NAO’s report notes an impression among the Department’s counter- fraud and assurance teams that their colleagues in commercial teams do not routinely consider supplier relationships from a counter-fraud perspective.47 37 Q 30 38 Qq 30-31 39 Qq 31-32 and 34 40 Qq 31 and 39 41 Q 39 42 Q 39 43 C&AG’s Report, para 4 44 C&AG’s Report, para 2.6 45 C&AG’s Report, Figure 5 46 C&AG’s Report, paras 4-5 47 C&AG’s Report, para 2.14 13
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HM Treasury
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Conclusion
Third Report - The MoD’s tackling of ec…
The Department told us it believes it has good controls throughout the contract life cycle to prevent and minimise fraud.48 It told us its use of ‘open-book’ contracts is a particular strength as this enables oversight of suppliers.49 The Department also told us that last year its Cost Assurance and …
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The Department told us it believes it has good controls throughout the contract life cycle to prevent and minimise fraud.48 It told us its use of ‘open-book’ contracts is a particular strength as this enables oversight of suppliers.49 The Department also told us that last year its Cost Assurance and Analysis Service disallowed some £400 million of potential supplier costs, which it noted are not captured in its reporting to the Public Sector Fraud Authority on its counter-fraud savings.50 After the session the Department wrote to us to explain that payments to suppliers are blocked automatically if they fail a three-way check between invoice, purchase order and confirmation of receipt. Invoices that cannot be corrected in a straightforward manner are formally rejected. Reasons for rejection can include lack of a valid purchase order and exceeding contractual limits, with the most common reason being contractor error. The Department also added that the rejection of an invoice does not imply fraud.51
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HM Treasury
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Conclusion
Third Report - The MoD’s tackling of ec…
The Department told us it recognised the issues raised in the NAO’s report around the lack of join up between its commercial and counter- fraud teams.52 It told us that it believes it undertakes robust negotiations and has strong commercial controls, but that its commercial teams may encounter difficulty in …
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The Department told us it recognised the issues raised in the NAO’s report around the lack of join up between its commercial and counter- fraud teams.52 It told us that it believes it undertakes robust negotiations and has strong commercial controls, but that its commercial teams may encounter difficulty in separating “sharp commercial practice” from activity which may involve the intent to commit fraud.53 It acknowledged there is more it can do to build its understanding of when supplier behaviours cross that boundary.54 The Department told us it would like to “codify” more of the relationship between its counter-fraud and commercial teams.55 It acknowledged that it needs a better “understanding and illumination” of the Defence supply chain.56 The Department added that it has opportunities it to improve its return on counter-fraud investment by making greater use of analytics to flag and prevent more irregular contract payments before they happen.57 As a recent example of more joined up working, the Department highlighted an exercise in which it used analytics to identify “commercial leakage”, which the NAO reports identified £17.5 million of potential overcharging in digital procurement contracts.58 48 Qq 6 and 9 49 Q 5 50 Q 9 51 Letter from Ministry of Defence, 20 March 2026 52 Q 46, C&AG’s Report, para 2.14 53 Qq 21 and 45 54 Q 45 55 Qq 45-46 56 Q 50 57 Qq 8-9 58 Q 46; C&AG’s report, para 2.8 14
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Conclusion
Third Report - The MoD’s tackling of ec…
We asked the Department how it manages the risk of fraud when its commercial staff move to roles with its suppliers.59 The Department explained it follows best government practice around business appointment rules. This includes conflict of interest declarations and periods where staff are ‘debarred’ from taking jobs with suppliers.60 …
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We asked the Department how it manages the risk of fraud when its commercial staff move to roles with its suppliers.59 The Department explained it follows best government practice around business appointment rules. This includes conflict of interest declarations and periods where staff are ‘debarred’ from taking jobs with suppliers.60 It also told us that officials taking jobs with suppliers can help to keep valuable skills within the supply chain, which the Department will need to achieve the Defence Industrial Strategy.61 The NAO has previously reported that there are inconsistencies in how different parts of the Department manage conflicts of interest, for example not all areas require annual disclosures for all staff or have an easily accessible central disclosure system.62 59 Q 47 60 Qq 47-48 61 Q 47 62 C&AG’s Report , Managing conflicts of interest, Session 2024–25, HC 307, 22 November 2024, Figure 4 and pp 26-27 15 3 Counter-fraud structure and capability Siloed counter-fraud and police teams
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HM Treasury
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Conclusion
Third Report - The MoD’s tackling of ec…
The Department’s capability is split across multiple teams that function mostly independently, with siloed working, duplication, unclear roles, and missed investigative opportunities contributing to weak outcomes and low financial returns on counter-fraud activity.63 The Department’s counter- fraud and police teams also use separate case management systems, limiting shared visibility of …
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The Department’s capability is split across multiple teams that function mostly independently, with siloed working, duplication, unclear roles, and missed investigative opportunities contributing to weak outcomes and low financial returns on counter-fraud activity.63 The Department’s counter- fraud and police teams also use separate case management systems, limiting shared visibility of case progress and outcomes.64 This structure makes it difficult for the Department to ensure cases are routed to the right investigative body, to maintain consistent standards of investigation across business areas, or to obtain a complete and reliable picture of case progress and outcomes across its various systems.65 The NAO reported that this also means no part of the Department has the economies of scale needed to build and maintain specialist skills, such as digital forensics.66
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Conclusion
Third Report - The MoD’s tackling of ec…
The NAO highlighted that the Department’s teams lack awareness of each other’s criteria and thresholds for pursuing or prioritising cases.67 We questioned the Department whether this, combined with its structure, would make it challenging for it to decide the most appropriate route to investigate potential fraud, and whether it may …
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The NAO highlighted that the Department’s teams lack awareness of each other’s criteria and thresholds for pursuing or prioritising cases.67 We questioned the Department whether this, combined with its structure, would make it challenging for it to decide the most appropriate route to investigate potential fraud, and whether it may be leaving gaps malicious actors could exploit.68 The Department told us there are standard operating procedures that assess the information in a case, the type of allegation raised, whether it should follow a criminal route or whether more information is needed before allocation.69 The Department also said that cases not meeting the criminal threshold are still recorded as intelligence to identify patterns that may later support an investigation.70 But the NAO also found that there are no clear mechanisms for other parts of the MoD to continue looking at a case to see if non-criminal routes would be 63 C&AG’s Report, paras 1.4-1.5 and 4.3-4.6 64 C&AG’s Report, para 4.14 65 C&AG’s Report, paras 3.7-3.9 and 4.14 66 C&AG’s Report, para 4.3 67 C&AG’s Report, para 4.7 68 Qq 16 and 51 69 Q 51 70 Q 53 16 appropriate.71 The Department told us it intends to address this gap through its planned integrated investigative team, which would ensure that cases closed by police can be passed back to counter-fraud for further triage where appropriate.72 The Department acknowledged that it needs a robust mechanism to ensure this happens consistently.73
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Conclusion
Third Report - The MoD’s tackling of ec…
The Department told us it is “improving and consolidating [its] approach to the Confidential Hotline and the case management system”, as well as exploring the possibility of providing officials in Fraud Defence with access to the Ministry of Defence Police case management system.74 However, the Department cautioned that this is …
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The Department told us it is “improving and consolidating [its] approach to the Confidential Hotline and the case management system”, as well as exploring the possibility of providing officials in Fraud Defence with access to the Ministry of Defence Police case management system.74 However, the Department cautioned that this is governed by whether access controls can be put in place on the protection of police information.75 The Department asks for Fraud Defence to be informed of updates on investigations, but the NAO report found inconsistencies between records of investigations held on the different systems.76 Separately, the Department also told us that it plans to strengthen assurance over fraud investigations outside its counter-fraud and police teams, including through increased sampling as part of its work “strengthening [its] systems of accountability” and alignment under its new strategy.77
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HM Treasury
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Conclusion
Third Report - The MoD’s tackling of ec…
We asked the Department about the feedback given to whistleblowers from the Confidential Hotline. The Department told us that feedback is provided to whistleblowers in every case, noting that details provided would be case-specific. However, the separate case management systems operated by counter-fraud and police teams and limited visibility over …
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We asked the Department about the feedback given to whistleblowers from the Confidential Hotline. The Department told us that feedback is provided to whistleblowers in every case, noting that details provided would be case-specific. However, the separate case management systems operated by counter-fraud and police teams and limited visibility over them may mean it is difficult for the Department to provide accurate and consistent feedback to whistleblowers.78
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HM Treasury
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Conclusion
Third Report - The MoD’s tackling of ec…
We challenged the Department on how it intends to improve coordination across defence and deliver better value for money. The Department acknowledged these issues and told us it is seeking to improve coordination and strengthen governance as part of its Defence Reform programme and upcoming counter-fraud strategy refresh.79 The Department …
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We challenged the Department on how it intends to improve coordination across defence and deliver better value for money. The Department acknowledged these issues and told us it is seeking to improve coordination and strengthen governance as part of its Defence Reform programme and upcoming counter-fraud strategy refresh.79 The Department told us it requires a systemic approach, including through its new integrated investigative model.80 The Department told us this model “requires all the different parties to come together and work 71 C&AG’s Report, para 4.8 72 Qq 52-53 73 Q 53 74 Qq 3 and 57 75 Q 57 76 C&AG’s report, paras 3.6-3.7 and 4.14 77 Qq 3 and 17 78 Qq 26-27 79 Qq 15 and 22 80 Q 22 17 collaboratively to drive the behaviour we need to see”.81 In response to concerns about potential missed opportunities through a complex structure, the Department explained that the new model is intended to ensure that cases closed by the police can “seamlessly” return for further triage and allocation where appropriate. It also noted that the model may involve linking or joining the case management systems used by Fraud Defence and the Ministry of Defence Police, though this would depend on appropriate access controls.82 The Department told us it will set out how it is taking forward the integrated investigative model in its September 2026 counter-fraud strategy.83 Limited use of data analytics
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Conclusion
Third Report - The MoD’s tackling of ec…
We recently reported that emerging technologies such as data analytics are a vital tool to help government tackle fraud and error, and recommended that government use data analytics to move from a system of detecting and recovering fraud, to one more focused on preventing fraud in the first place.84 The …
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We recently reported that emerging technologies such as data analytics are a vital tool to help government tackle fraud and error, and recommended that government use data analytics to move from a system of detecting and recovering fraud, to one more focused on preventing fraud in the first place.84 The Department has not yet capitalised on the potential of data analytics and new technology to strengthen its counter-fraud response. The Department’s use of analytics remains limited and inconsistent, with most of the increased counter-fraud savings in 2024–25 coming from a one-off exercise to detect “commercial leakage”.85 The Department has conducted or commissioned several analytics initiatives, but it has not yet demonstrated that these produced significant savings or led to the introduction of preventative controls.86
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Conclusion
Third Report - The MoD’s tackling of ec…
The Department told us that technology and analytics would enable it to review data in real time and strengthen controls but acknowledged that it is still at an early stage in developing these capabilities and requires a more systematic approach to using analytics to prevent, detect and recover fraud.87 For …
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The Department told us that technology and analytics would enable it to review data in real time and strengthen controls but acknowledged that it is still at an early stage in developing these capabilities and requires a more systematic approach to using analytics to prevent, detect and recover fraud.87 For example, it explained that duplicate invoice checks have historically been applied retrospectively, and that it is beginning to embed continuous checks into its new tooling to avoid incorrect payments progressing through the system.88 The Department also said that analytics is currently used to identify irregularities in data, and that 81 Q 19 82 Qq 52 and 57 83 Q 58 84 Committee of Public Accounts, Government use of data analytics on error and fraud, Seventy-fifth Report of session 2024–26, HC 891, 27 March 2026 85 C&AG’s Report, paras 2.2-2.10 86 C&AG’s Report, para 4.12 87 Qq 3 and 13 88 Q 13 18 some fraud-prevention flags are being incorporated into the procurement processes, with the aim of strengthening controls throughout the procurement cycle.89
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Conclusion
Third Report - The MoD’s tackling of ec…
The Department told us it plans to move towards a more proactive use of technology and data analytics in its counter-fraud efforts.90 As part of its Defence Reform programme, the Department told us it plans to strengthen its control environment and said that analytics should, over time, enable it to …
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The Department told us it plans to move towards a more proactive use of technology and data analytics in its counter-fraud efforts.90 As part of its Defence Reform programme, the Department told us it plans to strengthen its control environment and said that analytics should, over time, enable it to review the whole picture to spot irregularities, rather than relying solely on people reporting concerns.91 The Department also told us it is investing in new tools and techniques to improve its ability to “identify irregularities in the system that need to be explored further by [its] fraud experts”, and that it needs to focus more on how analytics can support recovery as well as detection.92 The Department further explained that future phases of its corporate services modernisation programme will bring its services onto the cloud and build in automation for more of its control checks in a way that is “quick, seamless and data-driven”.93 89 Qq 7-9 90 Qq 3-4 91 Qq 13 and 60 92 Q 3 93 Q 60 19
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