Nest says no members’ money was taken but admits that if the £1.4m is not recovered, its loan will be increased by an equivalent amount and members will end up ultimately paying for the loss through charges.
Nest chief executive Tim Jones has asked not to be considered for a bonus this year. Last year he was awarded a bonus of between £15,000 and £20,000 on top of his £230,000 salary.
The disclosure of the fraud came in Nest’s annual accounts which show the scheme had 275,000 members across 900 employers at the end of June 2013 and held £11m assets under management.
National Audit Office comptroller and auditor general Amyas C E Morse says: “The fraud arose because of a serious control failure within the Corporation. The Corporation recognises this, and has commenced a wider programme of work to improve its systems, as well as ensuring that its employees are aware of the risks of frauds and know what actions to take to minimise the risk of loss to public funds in the future.
A statement from Nest chief executive Tim Jones and Nest chairman Laurence Churchill says: “In January 2013 we were notified that there had been an incident of fraud. This fraud was directed at Nest Corporation, resulting in a loss of £1,446k from our operating budget. It was of a type known as mandate fraud, involving the diversion of a supplier payment. No money was taken from members’ retirement pots.
“As soon as we were made aware of the fraud, we ensured that all relevant regulatory authorities and the police were notified and worked closely with the Department for Work and Pensions to understand how this had happened and to independently investigate the incident. We also initiated steps to strengthen controls over the payment process.
“A wider programme of work has since been agreed to further improve Nest Corporation systems, people and processes. As part of this, we asked Deloitte to undertake a detailed assessment of the design and operating effectiveness of key internal controls across Nest Corporation. This work is being overseen by the Audit Committee and is substantially complete. The Audit Committee will also monitor completion of any actions arising.
We have reviewed our fraud awareness training and have carried out additional training to appropriate staff.”
