How government effectively tackles and responds to potential fraud is essential to protecting public money.
In January we at the National Audit Office’s Fraud and Propriety team published a report on the MoD’s management of losses from fraud and other economic crime.
This work gave us a chance to get into the detail of how one part of government could better manage and bring down the fraud it faces. We found that there are significant opportunities for the MoD to achieve greater savings from its counter-fraud work, and we think many of these lessons can in fact be applied across the rest of government too.
Cabinet Office and Treasury expect departments to achieve a return on investment of £3 for every £1 spent on counter-fraud work. Yet over the past four years, the MoD has reported an average return of just 48p for every £1 spent. This gap highlights untapped potential to make savings and ensure that public money can be spent on the government's priorities.
Many of the underlying issues in the report will resonate with other departments: a lack of alignment, incomplete data and limited assurance over whether counter-fraud activity is delivering the value that it should.
With public finances under sustained pressure, the report provides practical insights to reduce losses, increase savings and strengthen deterrence against fraud across the public sector.
Understanding fraud risks and estimating the scale of loss
A clear understanding of fraud risk is the foundation of effective counter-fraud work.
We found that while the MoD has made progress in identifying where its key risks lie, it doesn’t assess the possible costs of each risk, fully understand how well its controls help mitigate this, or have a robust financial estimate of the total level of fraud it faces.
This challenge is by no means unique to defence.
Without credible estimates and a proper understanding of how controls are working, senior leaders cannot know where to prioritise counter-fraud resources, nor determine whether interventions are working. This means that potentially significant savings are left unrealised.
We set out four of the key lessons from our work below.
1. Leadership, clear objectives and culture make the difference
We highlighted the need for the MoD to improve leadership and culture around counter-fraud. A message to all departments: tackling fraud effectively requires sustained leadership attention. Rather than being viewed solely as a technical or compliance activity, counter-fraud work represents a significant opportunity for departments to unlock savings, strengthen controls and better reinforce public confidence that fraud will not be tolerated.
One key aspect is having clearly defined and communicated counter-fraud objectives across the organisation. When senior leaders prioritise counter-fraud in this way, it shapes organisational culture and reinforces accountability. Staff are more likely to report concerns, teams are more willing to share information and counter-fraud work is better aligned with objectives – such as minimising losses and protecting service delivery.
Without leadership focus, even well-designed processes can struggle to achieve impact.
2. Focus on outcomes, not just activity
Finding fraud is extremely important, but the real value comes from what happens next.
The MoD receives hundreds of allegations of suspected fraud and economic crime each year, yet the MoD’s data suggests that relatively few lead to strong outcomes such as recoveries, criminal or service justice action, or prevention of future fraud.
Outcomes like these aid counter-fraud efforts in several ways. First, they help recover public money and protect operational capability and service delivery. Second, they deter future fraud by signalling that allegations are taken seriously and acted upon. And third, they enable organisational learning to improve processes and controls, leading to greater prevention and detection.
Effective counter-fraud activity depends on turning investigations into tangible results and learning. But this requires a pragmatic and coordinated approach.
3. Clarify structures, improve triage and reduce duplication
The MoD’s counter-fraud landscape involves multiple teams with different remits and powers. While this reflects the MoD’s unique operating environment, similar complexity exists across government – whether between departments and their arm’s-length bodies, or across functions within an organisation (e.g. counter-fraud and commercial or finance teams).
Clear ownership of fraud risks and thresholds for investigation, effective triage of allegations, and strong working relationships between all teams involved in counter-fraud work are essential. Where responsibilities are fragmented, cases can fall between the gaps or be handled inconsistently. Public bodies can benefit from ensuring that roles are well defined and that teams are incentivised to collaborate, rather than operate in silos.
4. Use data effectively to drive assurance and insight
Good data underpins effective fraud management.
Our report highlights gaps in the MoD’s ability to centrally understand potential fraud cases and their outcomes across the department, due to inconsistent records across fragmented data systems. This means the MoD simply doesn’t bring together the information it needs to know if possible fraud cases are being taken forward in the most effective way.
As government becomes increasingly data-driven, counter-fraud work needs to keep pace. Data-sharing, as a key aspect of this, is often discussed in terms of external partners, but internal sharing is just as important. When teams work from consistent and useable data, departments gain a clearer picture about what is working and where controls need to improve. Better data also helps counter-fraud leaders gauge whether investigations are proportionate, timely and uphold value for money.
Applying the lessons
Our report makes a series of recommendations to the MoD that are aimed at improving coordination, strengthening governance and increasing the return from counter-fraud activity.
We encourage all parts of government to read these and see where they too can improve.
Counter-fraud work is an opportunity, not a burden. Departments that treat it as a value-generating activity with clear ownership and a focus on results stand to deliver real savings for the public purse.
Christopher Barrett is a manager within the fraud and propriety team at the NAO. See all our work on fraud and propriety here