Statement on the review into the fraud against the States of Guernsey

This Statement was made by me, as Chair of the Public Accounts Committe, at the Meeting of the States on 25 September 2012.

Deputy Bailiff, Members of the States


I am making this statement further to last week’s publication of the terms of reference for the Public Accounts Committee’s fraud review. On behalf of the Committee, I wish to expand on the information provided in the accompanying Media Release and advise what action it has taken since the Minister of the Treasury and Resources Department made his statement in July.


The Committee agreed at its meeting in July to commission and oversee the independent, external review into the specific incident of fraud, in liaison with the Chief Minister. Although we wanted to commence the review immediately, it was prudent that we take advice from the Guernsey Police and Law Officers on the potential impact the review could have on the ongoing criminal investigation.


It mustn’t be forgotten that we are not dealing with a basic bread and butter review here. The fact is a criminal act has been committed against the States of Guernsey, which affects the people of Guernsey, and a police investigation is underway.


It is not the wish of the Committee, or in the interests of the people of Guernsey, to jeopardise the Police investigation. We wish to get to the heart of this incident as quickly as possible but will pursue this matter responsibly and with regard to the professional advice of those seeking to establish criminal responsibility and the recovery of funds. The clear legal advice is that the section of the review considering the circumstances of the specific incident of fraud should not be conducted until the criminal investigation has been completed.


However, the Committee will carry out a broader review into the appropriateness of financial controls relating to fraud prevention across the States of Guernsey as soon as possible. Part of the Committee’s mandate is to ensure that proper scrutiny is given to the States’ assets, expenditure and revenues to ensure that States’ bodies operate to the highest standards in the management of their financial affairs. The purpose of this review is to consider the effectiveness of financial controls in place to minimise the risk of fraud and to provide an independent assurance that processes and procedures across the States are to an acceptable standard. The Treasury and Resources Department is responsible for the regulation and control of States’ financial affairs. Whilst we have received assurances from the Minister of the Treasury and Resources Department that controls have been changed, we must have independent validation that they are now fit for purpose. It is imperative that the public are assured, and those outside this Island are in no doubt, that the States of Guernsey are not ‘open to fraud’.


In publishing the terms of reference, we also announced that we would be commissioning external reviewers to undertake both stages of the review. I have made very clear my views on the use of external consultants and my desire that the PAC undertakes an increasing number of reviews in-house. At this early stage of the current Committee’s existence we simply do not have the resources or expertise available to undertake this review. This is why the Committee has an existing budget available for ‘contracted out work’ which this review is expected to fall within.


The staff of the PAC and the Scrutiny Committee were amalgamated at the start of this political term. There is a total of 4 members of staff available to support the work of both Committees. We lack staff resources. This is a highly specialised area and large elements of this review will require relevant expertise that we currently do not have available without outsourcing. During this political term I will endeavour to ensure that the Committee is appropriately resourced. However, at the present time, it would be unrealistic of the Committee to expect the team to single-handily undertake a review of this nature.


In addition, we agree with the Chief Minister that the PAC, working together with the external experts, will give the public assurance that this is a thorough and independent review.


I would like to clarify the use of the term ‘external’. By this we mean external to the States of Guernsey, not the Island itself. Given the quality and experience of our financial services industry, the expertise we require is clearly available on-Island. We are seeking to commission a local business to investigate and produce a report in line with the terms of reference and aim to announce the reviewer and the timescale for the review by the next States meeting.


As many Members will be aware, there have been reports previously published on States internal controls. Indeed, the former PAC issued such a report on risk management in the last year. The Committee will not be replicating work previously undertaken but will assess how effectively previous recommendations and findings have been implemented.  It is essential that attention is focussed on the effects of the changes made following the fraud incident, as well as the effects of recent changes in the management structure in the Treasury and Resources Department and the implementation of the Shared Transaction Service Centre.


Finally, I would also like to make a brief comment regarding disclosure of information that will be received as part of this review. I can confirm that we will publish all relevant information arising from our review, unless we are advised that we cannot do so for legal reasons or because it would not be in the public interest to do so.


The public will have answers and I trust will understand that, in these unique circumstances, these should be the right answers and the not the quick answers.


Thank you

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