ACCOUNTANCY AGE ANALYSIS: Fraud costs taxpayer £3m.

The staff member spent several years taking the money after setting up false bank accounts into which client cheques were paid and money later withdrawn.

A civil servant for 30 years with the DSS, he was reported as needing the money to pay off a blackmailing gay lover who was threatening to reveal his sexuality to his elderly mother.

A church warden, he has since been jailed but only £692,500 of the money has been recovered.

The case is exceptional in the report but figures show the value of the frauds in central government departments increased by 46% during 1998/99 to more than £3m, although the number of cases was actually down by 9%.

Out of the 52 central government bodies that were surveyed, some 27 reported no fraud, but 25 bodies revealed 580 cases. Of those, 199 were in the Department of Social Security – by some distance the highest number – and 129 at the MOD. Prosecutions resulted in 18 people being jailed.

The report shows 214 cases, valued at £482,000, were due to a failure to observe proper controls – a factor sure to be of interest to the National Audit Office. However, more than £1.1m also went missing as a result of failing to separate duties. This type of fraud was up from just £7,000 and the report emphatically recognises separation of duties as a key principle of internal control.

‘Ideally no single person should have responsibility for all the stages of a transaction,’ it says and calls for increased management and post-transaction checks to be installed where it is difficult to separate responsibilities.

The growing use of computers to commit fraud is also underlined by the report which links ‘browsing’ on the Internet to more serious fraud.

‘Cases involving unauthorised access or unofficial browsing are not necessarily costly in themselves but could lead on to other frauds of significant value,’ says the report.

A spokesman for the Treasury says: ‘The important thing is what we are doing about it, and we are doing quite a lot.’

She said more information is being provided to government departments, seminars are being run each year and a special paper called Managing the Risk of Fraud has also been produced for managers who are required to produce anti-fraud plans.

Of all the money taken £885,000, or just 29%, has been recovered with government suffering a net loss of more than £2m. This, notes the report, indicates a marginal net improvement in recovery.

The largest amount of fraud, 34%, was characterised as ‘theft of assets’.

Travel and subsistence made up 12% and false claims for overtime represented 8% of the total.

The report acknowledges there is no fixed definition of fraud but, cautiously, it says that even the inappropriate use of the Internet has been included as a reportable offence.

This may be at the mundane end of the scale of fraud and while a single £1m loss is exceptional – there are plenty of other significant frauds listed.

One civil servant stole £80,000 through false expenses claims for journeys.

A number of other officers are believed to have been part of a network and are still under investigation.

Elsewhere another government worker convinced a junior colleague to divulge his computer password so he could keep his work up to date while on holiday.

He is then accused of paying himself pension payments in a case investigators believe involves £477,000.

For the full report visit

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