Internal Fraud in the Sports Institute for Northern Ireland & Development of Ballycastle and Rathlin Harbours
John Dowdall CB, Comptroller and Auditor General for Northern Ireland, today published a report into (1) an Internal fraud in the Sports Institute for Northern Ireland and (2) the Development of Ballycastle and Rathlin Harbours.
1. Internal fraud in the Sports Institute for Northern Ireland
The Sports Institute for Northern Ireland (SINI) is a company established in 2004 as a joint venture of the Sports Council for Northern Ireland and the University of Ulster. Between October 2005 and August 2006 an employee, Richard Nash, stole approximately £75,000 from the Company. After he came under suspicion, the police were informed in September 2006. He was subsequently charged with the theft of £66,547. On 11 October 2007 at Belfast Crown Court he pleaded guilty to these charges. He received an 18 month prison sentence suspended for 2 years.
The report produced today considers the circumstances surrounding the fraud. It presents some important lessons for the public sector in Northern Ireland:
- The fraudster stole funds by making unauthorised payments to the bank accounts of his wife and daughter. As payroll administrator, he disguised these payments as legitimate salary payments to other members of SINI staff and as contributions to the pension fund. He also cashed cheques from the SINI bank account and from a staff fund account.
- The fraudster was able to commit the fraud due to a particularly weak control environment in SINI. Most damagingly, no controls were established over the internet banking system which was used to make more than 90 per cent of the fraudulent payments.
- The fraudster came under suspicion in August 2006 due to the alertness of a member of staff. There were a number of warning signs of possible fraud in his behaviour that were not recognised by management. Most significantly, his obstruction of internal audit from January 2006 onwards should have been the trigger for a review of his activities.
- SINI, the Sports Council and the University of Ulster responded positively once the fraud was recognised. Swift action was taken to secure the company’s assets and financial records and the fraudster was suspended within 48 hours. The police were alerted quickly, the sponsoring departments and the NIAO informed, and an investigation begun which contributed to a successful prosecution.
- SINI took action to freeze the assets of Richard Nash, his wife and daughter. The company has recovered £64,592 and remains committed to pursuing its outstanding losses.
2. Development of Ballycastle and Rathlin Harbours
During the early 1990s there were increasing concerns about the adequacy of the ferry provision between Ballycastle and Rathlin Island. When options for improving the service were examined it became apparent that any significant upgrading would require substantial improvements at both harbours, in particular Ballycastle harbour, in order to provide a safe and reliable ferry service.
In 1996 an agreement was reached for a service operating between Ballycastle and Campbeltown in Scotland and provision for this was incorporated into the development plans for Ballycastle harbour. The contracts to develop Ballycastle and Rathlin harbours both experienced significant cost and time overruns. The unsubsidised Campbeltown service operated for three summer seasons from July 1997 until September 1999 when the operator withdrew from the route due to unsustainable losses. There were two unsuccessful attempts in 2002 and 2005 respectively to reinstate the service with the offer of an annual subsidy of up to £1 million. The Scottish Government, which has lead responsibility for this ferry service, and the Northern Ireland Executive are currently examining the case for restoring the service.
The report published today examines the role of the Department of the Environment (and later the Department for Regional Development) (the Department) in the development of the two harbours. It also looks at the operation of the two ferry services.
- The Audit Office found that there had not been a sufficiently rigorous assessment of the viability of the proposed Campbeltown service before the decision was taken to provide the additional facilities required at Ballycastle harbour at a cost of around £2 million. The failure, to date, to secure a viable ferry service to Campbeltown has meant that these additional facilities remain underutilised.
- Although the Scottish authorities were taking the lead role in the moves to establish the Campbeltown service, the Department could have done more to satisfy itself that the commitments being entered into were appropriate before expenditure was allocated to the project.
- The upgrading of Ballycastle harbour began while there was still uncertainty about the Campbeltown service and this led to additional expenditure of around half a million pounds being paid to contractors because of the suspension and subsequent reinstatement of elements of the work.
- Mr Dowdall has set out a number of lessons for public bodies in the handling of joint projects. He recommends that, while one party may be taking the lead role in a joint project, the other parties involved need to take sufficient steps to satisfy themselves about the viability of the proposal. He also recommends that in future joint projects it is essential that best practice guidance is applied appropriately, and that proper agreements are put in place in order to establish clear understandings as to the respective roles, responsibilities and accountability arrangements.