Highways Agency Annual Report and Accounts 2011-2012

SECTION 6: Governance statement
Fraud Sub-Committee:
The Fraud Sub-Committee is chaired by the
Director of Finance and Business Services and
its membership comprises the Agency’s Fraud
Management Advisor, the Head of Audit and a
non executive board member, with representation
from the business, as required. The sub-committee
meets approximately every quarter (in line with
the Audit Committee) and reviews the results of
investigations that have been identified through
the fraud and whistleblowing facility to establish
whether the incident was unfounded, fraudulent
or can be dealt with through other management
routes.
During the year an assessment was undertaken
relating to the Bribery Act 2010 and the potential
risk of non compliance. The results clearly
indicated that the risk of our staff receiving or
entering into a bribe was low and that controls
are in place to mitigate against this occurring.
A fraud horizon scan was also undertaken by
the Fraud Management Advisor to evaluate the
control environment where the potential for fraud is
more significant. Results and ongoing actions are
monitored through the Fraud Sub-Committee.
The sub-committee reviews its own effectiveness
on an annual basis and takes forward actions to
improve its performance. The last exercise was
undertaken in March 2012 and actions were
agreed by the committee at its next meeting.
Progress on implementation will be monitored
throughout the year and results incorporated into
the next exercise.
During the course of the year a fraud was identified
within a contractor in the supply chain where
an individual had defrauded the contractor and
consequently the Agency had made overpayments
through the creation of fictitious schemes and
over-scoping costs on small works over a number
of years. This fraud impacted a relatively small
number of task orders placed with the main
contractor at the time in this one region. We worked
with the contractor to investigate the mechanics
of the fraud and reviewed our own related control
framework to understand how the fraud had
been exercised and also not been detected
earlier. The results from this work have identified
that whilst the breakdown of control rested solely
with the contractor in the supply chain, certain
improvements are needed to our own controls,
which will ensure stronger mitigation of the risk.
The Police were engaged in the investigation
and arrests have been made. Our investigations
have shown that the fraud ran for a number of
years including under the previous contractual
arrangement. Agreements have been reached with
all of the contractors involved to recover fully all
monies which have been overpaid.
To provide assurance that similar weaknesses did
not exist elsewhere within the supply chain, the
internal audit team carried out detailed reviews
across the tier one suppliers, concentrating on
the controls relating to small works procurement,
delivery and payment. The internal audit reviews
confirmed that overall, a reasonable level of
control was currently exercised by our contractors.
Management are taking the findings forward with
the supply chain community to ensure improvement
in their control environment.
Delivery of Investment
Programme Sub-Committee:
Responsibilities:
The Delivery of Investment Programme Sub-
Committee (DIP) is responsible for monitoring
the capital investment programme, tracking the
delivery of efficiencies and ensuring a strategic
approach to supply chain and commercial
activities.
DIP provides reports to the Executive Committee,
and by copy of minutes to the Board, of any
material risks to the delivery of the principal
capital investment programmes set out by
DfT for the Agency to deliver. It also monitors
progress in the delivery of the Agency’s capital
investment programme with specific review
of potential under or over spends in the year,
across the Spending Review 2010 period, and
beyond. DIP also considers how to mitigate
against these variances, either within the Agency
or, in conjunction with DfT Finance, across the
Department. Outcomes from PCF stage gate and
OGC gateway reviews are tracked, with common
themes identified and learning and best practice
shared with the business.
One of the responsibilities of DIP is to challenge
the financial outcomes of Spending Review 2010
delivery plans (existing cost plans) to ensure
clarity and the existence of a strong evidence
Highways Agency Annual Report and Accounts 2011-12