The Report
of the Iraq Inquiry
692.
The FCU’s
investigation had highlighted numerous failures in the FCO’s
internal
control
system, which had allowed the theft of the phones and their
subsequent misuse
to continue
undetected for a period of some 18 months. The FCU had identified,
and
agreed with
the NAO, actions to reduce the risk of another similar
incident.
693.
The NAO
visited the DFID Iraq team in London in May 2007, to undertake a
review
of internal
financial control procedures as part of its audit of DFID’s 2006/07
Resource
Accounts.433
The NAO
team was unable to visit Iraq due to the security
situation.
694.
The NAO
concluded that, overall, DFID was operating good controls
over
transactions
through the local (Iraqi) imprest and bank account, and that
budgetary
control,
asset management and corporate governance controls were
operating
effectively.
Projects had been properly approved, and there was evidence that
project
outputs and
outcomes were being monitored.
695.
Mr Martin
Dinham, DFID Director Europe, Middle East and Americas, told
the
Inquiry:
“… a
National Audit Office investigation … said that the systems that we
had in place
were
sensible, suitable, that all the various safeguards that they would
have liked
to have
seen were there. So we got – remarkable in the circumstances – we
got
a very
clean bill of health from the NAO, which … is completely
independent of
696.
The Inquiry is
also aware of one major fraud perpetrated against a
DFID
programme.
697.
DFID’s
Southern Iraq Employment and Services Programme (SIESP)
was
approved in
July 2004, providing £10m for infrastructure services and £6m
for
employment
generation.435
A total of
£0.5m was allocated for programme administration.
698.
In May 2005,
the DFID Office in Basra closed the employment
generation
component
of the SIESP after an assessment identified “worrying issues”. The
Office
asked
DFID’s Internal Audit Department (IAD) to visit Basra to review the
SIESP and
identify
lessons for other programmes.
699.
The IAD
identified several flaws in the design of the component. It
concluded that:
•
A “key
driver” of the SIESP had been “political (and consequent
senior
management)
pressure in Whitehall and beyond to achieve visible
results
…
In retrospect, these pressures appear unreasonable but at the
time were
generally
irresistible.” Warnings against proceeding with a programme
of
“such high
fiduciary risk and intangible benefit” had not been
heeded.
433
National
Audit Office, 2006/07
Audit Visit – DFID Iraq.
434
Public
hearing, 17 December 2009, page 109.
435
Report DFID
Internal Audit Department, 11 August 2005, ‘Visit Report: Basra,
Iraq 26th
–
31st
July
2005’.
560