Third Report - The MoD’s tackling of economic crime and misconduct
Select Committee
Public Accounts Committee
HC 91
29 May 2026
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Recommendations
3 results
3
The Department does not have a reliable estimate of its fraud losses or the information...
Recommendation
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 …
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4
The Department faces a particularly high risk of fraud in its procurement, but there is...
Recommendation
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 …
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5
The fragmented structure of the Department’s counter-fraud and police teams limits its ability to respond...
Recommendation
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 …
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Conclusions (27) Observations and findings — click to expand
2
Conclusion
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 …
6
Conclusion
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 …
7
Conclusion
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 …
1
Conclusion
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
8
Conclusion
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
9
Conclusion
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 …
10
Conclusion
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 …
11
Conclusion
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 …
12
Conclusion
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 …
13
Conclusion
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 …
14
Conclusion
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 …
15
Conclusion
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 …
16
Conclusion
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 …
17
Conclusion
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 …
18
Conclusion
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 …
19
Conclusion
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 …
20
Conclusion
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 …
21
Conclusion
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 …
22
Conclusion
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 …
23
Conclusion
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 …
24
Conclusion
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 …
25
Conclusion
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 …
26
Conclusion
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 …
27
Conclusion
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 …
28
Conclusion
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 …
29
Conclusion
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 …
30
Conclusion
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 …