A smarter approach to tackling fraud: Lessons for departments from the NAO's MoD report

Effective management of fraud and economic crime is essential to protecting public money and ensuring that government resources are used for their intended purposes. A recent National Audit Office (NAO) report on the Ministry of Defence (MoD) highlights significant opportunities for improvement in counter-fraud efforts, offering lessons that could be applied across government.

Background and Context

The Cabinet Office and the Treasury expect departments to achieve a return on investment of £3 for every £1 spent on counter-fraud work. However, over the past four years, the MoD has reported an average return of just 48p for every £1 spent. This gap underscores untapped potential to make savings and ensure that public money is directed toward government priorities. The NAO's review identifies systemic issues, including a lack of alignment, incomplete data, and limited assurance over the value delivered by counter-fraud activities.

Key Figures and Entities

The NAO's Fraud and Propriety team conducted the review, with Christopher Barrett, a senior audit manager, contributing to the analysis. The report focuses on the MoD's counter-fraud landscape, which involves multiple teams with varying remits and powers. Similar complexity exists across government, particularly between departments and their arm’s-length bodies, or within functions such as counter-fraud, commercial, and finance teams.

Legal and Financial Mechanisms

Effective counter-fraud work requires a clear understanding of fraud risks, robust financial estimates of losses, and well-defined objectives. The NAO found that the MoD has not fully assessed the costs of individual risks or the effectiveness of its controls. Additionally, while the MoD receives hundreds of fraud allegations annually, relatively few lead to tangible outcomes such as recoveries, criminal action, or prevention of future fraud. The report emphasizes the need for better data-sharing, clearer ownership of risks, and a focus on outcomes rather than just activity.

International Implications and Policy Response

The lessons from the MoD's experience are relevant to other government departments, particularly as public finances remain under pressure. By treating counter-fraud as a value-generating activity with clear ownership and a focus on results, departments can achieve real savings for the public purse. The NAO's recommendations aim to improve coordination, strengthen governance, and increase the return on counter-fraud investments, providing a roadmap for broader public sector reform.

Sources

This report draws on the National Audit Office's report on the MoD's management of fraud and economic crime, as well as guidance from the Cabinet Office and the Treasury on counter-fraud expectations. Additional insights are derived from Civil Service World's coverage of the NAO's findings and related investigations into public sector fraud.