• While the MoD recovered more than it spent on counter-fraud work in 2024-25, over the last four years it recouped on average just 48p for every £1 spent (government expects that public bodies should save £3 for every £1 spent). 
  • Procurement fraud, asset theft, personnel management issues and information exploitation constitute the MoD’s main areas of fraud risk. 
  • NAO recommends several measures to help MoD better manage fraud and economic crime, including setting a department-wide objective to bring down the overall level of estimated financial loss.

The Ministry of Defence (MoD) recouped less than half the money it spent over the last four years on tackling criminal economic activity including procurement fraud, theft of assets such as laptops, weaponry and armour, and pay and expenses fraud, according to a new National Audit Office (NAO) report.1

This is because of ongoing challenges that include a limited shared understanding of departmental objectives, a fragmented structure leading to inefficiencies in investigations, and a historic lack of trust between counter-fraud and police teams – although its return on counter-fraud spending is improving.

Like all parts of government, the MoD is vulnerable to economic crime including fraud, bribery and corruption. It has in place a counter-fraud team and several defence police authorities who can tackle such threats.2

But recent whistleblowing disclosures to the NAO indicate that individual allegations can take a long time to resolve or do not reach a satisfactory resolution and that overall, the MoD could manage fraud and economic crime far more effectively.

The MoD reports that its potential exposure to fraud can reach up to £1.5 billion a year, mostly from procurement. But, as it acknowledges, this is only a broad estimate that does not take into account the effectiveness of its controls.

Although the MoD receives hundreds of allegations of suspected fraud or economic crime each year, relatively few result in detection, disruption and recovery. Government expects that public bodies should save £3 for every £1 spent on counter-fraud work, yet between 2021-22 and 2024-25, the MoD reported a return of just 48p for every £1 spent. In 2024-25, however, it saved £1.34 for every £1 spent.3

The MoD also has limited assurance that cases assigned outside of its counter-fraud and police teams are handled appropriately and it does not always know and centrally record how its police services investigate fraud against the department.

The NAO has identified several key challenges preventing the MoD from strengthening its response to fraud and economic crime.4 These include not having a department-wide objective to minimise fraud losses and protect defence capability; a fragmented structure that makes it hard for the MoD’s counter-fraud and police teams to acquire the specialist resources to investigate cases effectively; and a historic lack of trust between counter-fraud and police teams, with unclear lines of reporting, duplication and missed investigative opportunities. A series of internal and external reviews of MoD policing have drawn similar conclusions.5

The MoD has recently strengthened its approach to managing fraud and economic crime by increasing and improving its use of fraud risk assessments, embedding police staff within counter-fraud teams, and working on a joint investigative model for criminal economic activity.

To build on this, the MoD should:

  • set a department-wide objective to bring down the overall level of estimated financial loss due to fraud and economic crime 
  • empower a senior official to act as the MoD’s representative in cases where the department is the victim of economic crime
  • establish an accountable multi-disciplinary body that brings together the various counter-fraud and police teams that investigate economic crime
  • improve the triaging of cases
  • improve its counter-fraud performance by gathering intelligence from across the department, developing its understanding of fraud risk and publishing a detailed estimate of its total fraud losses
  • gather complete information on fraud incidents either through a single case management system or through aligning its case management systems
  • identify where analytics would be most helpful in tackling fraud and economic crime, and resource these in a way that maximises returns on investment

“The MoD could make significant savings if it better managed its losses from fraud and other forms of economic crime.

“Using this resource more effectively will require the MoD to reform the way it goes about tackling fraud and other economic crime, but would enable it to achieve real savings that could be used to enhance the country’s defence capability.”

Gareth Davies, head of the NAO

Read the full report

MoD’s management of losses from fraud and other economic crime

Notes for editors

  1. The report is available on the NAO website via the following link: https://www.nao.org.uk/reports/mods-management-of-losses-from-fraud-and-other-economic-crime/
  2. Paragraph 1 of the report details the counter-fraud team and defence police authorities responsible for responding to threats of economic crime.
  3. Between 2021-22 and 2024-25, the MoD reported to Cabinet Office that it spent an average of £5.7 million a year on counter-fraud work and prevented and recovered an average of £2.8 million, of which half was fraud and half was error. This is a return of 48p for every £1 spent. In 2024-25, the MoD’s prevention and recovery improved to £6.4 million – a return of £1.34 for every £1 spent. This is an increase on previous years largely due to a one-off recovery of £3.8 million as a result of a commercial project completed in 2023 that identified £17.5 million of potentially recoverable overpayments.
  4. See Paragraph 10 of the report.
  5. See Paragraph 5 of the report.

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