Internal Fraud in Ordnance Survey of Northern Ireland

Ordnance Survey of Northern Ireland (the Agency) is an Executive Agency within the Department of Culture, Arts and Leisure. In August 2003, the Agency uncovered an internal fraud and a subsequent investigation found that the fraudster, Mr Norman Steenson, a supervisor within its Accounts Branch, had perpetrated the fraud over a five year period between 1998 and 2003, defrauding the Agency of £70,690.

The fraudster was formally charged by the Police with stealing cash and falsifying records. He pleaded guilty at Belfast Crown Court in January 2006, was subsequently sentenced to twelve months imprisonment, suspended for two years, and the Court ordered him to repay £30,000.

Today, John Dowdall CB, Comptroller and Auditor General (C&AG), produced a report which highlights the circumstances in which the fraud took place; the Agency’s handling of the subsequent investigation; and the actions it took to correct the failings in its control environment, to impose sanctions and to recover its losses. The report found that:

• The fraudster committed the fraud by replacing cash received from the sale of maps, with cheques to the equivalent value, which he had earlier stolen from the incoming post. As credit controller, the fraudster was able to create fictitious credit notes to amend customer accounts to the value of the stolen cheques, thereby clearing the outstanding debt.
• The Agency responded promptly when the fraud was recognised. It informed Internal Audit and the C&AG, engaged the police, established a Case Management Group, commissioned a number of reviews and sought restitution. The investigation that was undertaken resulted in a successful criminal prosecution.
• The fraud persisted because of the absence of, or the non-compliance with, basic controls. These included the failure to secure segregation of duties; placing excessive responsibility and trust in a single individual; lack of basic security controls for cash and cheque receipts; and the lack of supervisory checks by senior management.
• The lack of compliance with, or the absence of, system controls was particularly surprising given that there had been a previous fraud within the Agency’s Map Shop office in 1991. The Audit Office would have expected the Agency to have been particularly vigilant and to have operated a more robust control environment in all its cash-handling functions.
• Management oversight was clearly not operating to the extent it should have been, with too much reliance on the integrity and honesty of the fraudster, and less supervision than may have been expected. This may have given the fraudster the confidence to continue with his activities over a prolonged period. Following discovery of the fraud, the Agency commissioned an internal investigation to identify what, if any, internal disciplinary action was appropriate. As a result of this, the Agency took appropriate internal disciplinary action, and a member of staff received a written reprimand for failing to properly supervise the fraudster.
• The fraudster did not promise to make voluntary restitution of the stolen monies. However, the sentencing Judge directed that he should pay £30,000 compensation to the Agency within 12 months. No payment has yet been made. The Agency has initiated civil action to recover the balance of £40,690.
• There were a number of fraud indicators over the life of the fraud that should have been recognised by management in the Agency, particularly those who had a financial management background. The Audit Office considered that had the full range of anti-fraud measures been in place and the indicators acted on appropriately and expeditiously, this fraud could have been prevented or, at least, identified much earlier during its five-year life.
• The Department assured the Audit Office that the Agency has reviewed and tightened its procedures, since the fraud was discovered, including acting upon the findings of the investigations, in order to ensure that such an event cannot occur again.