Counter Fraud - Case History

The client was a government department dealing with substantial safety critical engineering projects. Following a major restructuring, a fraud vulnerability review was requested and undertaken by staff currently working within OVAG Limited.

Several areas of risk were examined, including security, treasury, internal audit, pre-employment screening and supplier vetting.

Interviews of senior staff touched on the organisation's procedures for vetting the integrity, competence and consistency of suppliers and for checking for any undeclared relationships between suppliers and internal Contracts and Purchasing Department staff.

The systems of control as outlined were impressive but when the investigators took their next step of interviewing the staff responsible for operating the system they learned the truth. The system had been designed, implemented and then later abandoned and the staff redeployed as part of the restructuring operation. The organisation therefore no longer had any contractor vetting procedures in force and no effective control of its tendering processes.

Appropriate arrangements were re-designed and installed, but in the course of enquiries the investigation team discovered commonalities between the residential addresses of two of the Contracts and Purchasing staff and several of the suppliers who had received payments during the previous year. Three companies operated by the spouse of one of the department heads were also found to have received payments.

It came as no surprise to the investigators to discover that the payment of many of these invoices had been facilitated by a procedure in which large amounts were paid in several small payments, each of which was just below a floor limit requiring a second signature for approval.

As a consequence of the review, four people lost their jobs and control and procedural recommendations were adopted.

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