Investigation of Suspected Fraud in the Water Service
A report published today by John Dowdall, the Comptroller and Auditor General for Northern Ireland (C&AG), examines how Water Service for Northern Ireland dealt with two separate complaints about the handling of contracts in two Divisional Offices.
In the first case, there was an allegation of fraud and impropriety and a number of investigations were carried out between 1997 and 2003. While the investigations did not find evidence of fraud, Water Service has issued legal proceeding for the recovery of overpayments of almost £100,000 from a contractor.
In the second case, where there were allegations of impropriety, investigations have been completed and the Northern Ireland Audit Office (NIAO) is awaiting a report. Again fraud has not been proven.
- In October 1997 a member of staff (the Complainant) made allegations of fraud against his line manager, which included:
- a contractor was being used for work instead of a more appropriate contractor;
- a sewer scheme had cost £145,000 when it should have cost £20,000; and
- a payment of £4,986 was made for work which had not been done (paragraph 5 and Appendices 2 to 5).
- Despite eight reports covering different aspects of the investigations the case is still not resolved as legal action is being taken to recover almost £100,000 from the contractor (Figure 1 and paragraph 77).
- In one of the eight reports a consultant identified nine officers against whom disciplinary charges should be laid. Three officers were suspended and were subsequently disciplined and reinstated. Three had retired and three had no action taken against them (paragraphs 39 & 40).
- In 1997 Water Service consulted the police. It was agreed that, although control of contracts was poor and records were not properly kept, there was no evidence of fraud at this stage of the investigation. It was also agreed that Water Service should continue with the investigation and the police would only be involved if evidence of fraud was uncovered during further investigation. While the police were not further consulted about the possibility of fraudulent acts Water Service told NIAO that, on reflection, the police might usefully have been re-engaged once the first Consultant's report had been received (paragraphs 7 & 61).
- NIAO concluded that as a case study in fraud investigation and deterrence this case raised a number of concerns:
- in response to a serious allegation of fraud the senior management of the Water Service should have initiated, at the outset, an independent and properly resourced investigation which could have dealt with the matter authoritatively. The failure to do this has undoubtedly constrained the extent of disciplinary action and hindered the timely recovery of public funds (paragraph 77); and
- the handling of this case does not send the right signal to staff about the rigour with which the Department will pursue and punish fraud and impropriety nor does it send the right signal to contractors about the vigour with which it will react to suspected fraud or overcharging (paragraph 77).
- During 1998 a contractor made allegations about the administration of contracts. The Principal Professional Technical Officer responsible for staff supervising the contracts investigated the contractor's allegations and found that, with one exception, there was no substance to the allegations and that the quality of workmanship was generally satisfactory (paragraphs 62 to 64).
- The exception related to an allegation concerning the supply of free pipes by Water Service to a contractor, for which the contractor was paid for both supplying and laying pipes. The matter was passed to the police for investigation but the police found insufficient evidence to proceed with their investigation (paragraphs 65 and 66).
- In 2001 Water Service received a further complaint about the administration of contracts and further investigations were launched, which included a review of work undertaken in the previous investigation (paragraphs 69 to 71).
- In this case too, NIAO has some concerns about the manner in which the investigations were handled. One of these investigations, which was a review of the work undertaken in a previous investigation, uncovered examples of working practices which seem to indicate that the complainant's allegations did have some foundation (paragraph 81).
Water Service told NIAO that the Department has issued guidance for staff who may be required to handle suspected fraud cases. This covers appropriate action to be taken from the point when fraud is suspected by a local manager, through the various stages of the disciplinary process. The guidance covers key issues that must be addressed by managers and personnel officers under existing procedures such as protecting evidence, an individual's rights, duty of care aspects, when to suspend and when to involve the police (paragraph 78).