Wednesday 25 July 2012
Statement made by the Minister of the Treasury and Resources Department, Deputy Gavin St Pier, to the States of Deliberation, on the morning of Wednesday 25 July 2012
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Mr Bailiff, Members of the States,
It is my unenviable responsibility to inform you that, unfortunately, the States has fallen victim to a significant fraud. On 10th July, my Department was notified that a legitimate payment of £2.6m - which was contractually due to Lagan Construction in respect of the airport runway refurbishment contract - was paid to a third party and not Lagan Construction.
This resulted from the Department receiving a fraudulent letter that appeared to be from Lagan Construction that advised a change in their bank account. These instructions appeared to be genuine. The department made the change to our systems and when due the monthly payment was fraudulently paid to the third party's account and not Lagan Construction.
Sir, members of the Assembly and members of the public will, like me, quite rightly be angry and no doubt have many questions:
- How could it be allowed to happen?
- Could it happen again?
- Do we know who is responsible?
- Can the funds be recovered?
- How long have you known?
- And so on.
The purpose of this Ministerial Statement is to start to address some of those questions.
My Department does, of course, have internal controls in place. Clearly these were inadequate in preventing this particular fraud from occurring. The internal controls were immediately changed to prevent a recurrence.
The police were immediately notified and are leading a criminal investigation. My Department is providing full co-operation with this investigation. I cannot provide further information in relation to the investigation as this, quite rightly, is a matter being conducted by the police who will, no doubt, reveal what they can, when they can.
Sir, in order to recoup the loss, we will need to trace and recover the funds - this is never an easy or quick task. At this stage I can give no indication of the prospects of recovery, but clearly we will do everything we practically can to do so.
My Department also immediately initiated its own internal enquiry led by the Head of Internal Audit. I was informed of the fraud late on 11th July. I requested a preliminary internal report. This was delivered to me at the end of last week. It was discussed by my Board at its meeting yesterday afternoon - its first meeting since the fraud was discovered.
On Monday of this week I provided a full briefing to Policy Council - again, its first meeting since the fraud was revealed. At my request, Policy Council has agreed to commission an independent, external review. As members will know, generally it is my ambition to reduce reliance on external consultants. But this is an occasion where an impartial, third party investigation is absolutely essential to preserve public confidence in the ability of my Department to discharge its functions. My Department would also welcome the involvement of the Public Accounts Committee, if they so wish.
Sir, the theft of £2.6m of taxpayers' money is disturbing. It would be bad enough in the best of times; but it is even less bearable in the current fiscal situation, when so much is being done and is expected of every Department to contain and reduce public expenditure.
I hope that members will agree with my assessment that this matter was best disclosed by way of this Ministerial Statement - not by press release. Given the timetable of events, today is the very earliest opportunity I have had to bring this matter to public attention.
Whilst I would like to answer any questions, Members will appreciate that given the on-going police investigation and the limited amount of information currently available, I am very unlikely at this stage to be able to provide full and accurate answers. However, Members of the Assembly and members of the public should be reassured. There is no cover-up; there will be no cover-up. But in order to learn lessons, we must now - coolly and calmly - direct our anger to understand exactly what happened and what went wrong. In order to do this effectively, we must have openness, transparency and honesty. As much information as can disclosed without prejudicing the investigations and any actions arising from them, will be disclosed as soon as possible.