Published Tuesday, 12 March 2013
NI Water has been criticised for its handling of suspected fraud. (© Presseye)
A Northern Ireland Audit Office (NIAO) report reviewed an investigation and disciplinary hearing carried out by the company in 2010.
Invoice slicing, when contractors submit a number of invoices that fall below the remit that requires authorisation by a senior manager, can be an indication of fraud.
NI Water launched a probe into payments of £465,000 made to a company which held the contract for meter installation and management services, which did not have budgetary approval.
The amount was paid after the contractor submitted numerous invoices with a value of £20,000.
The report found that an instruction had been given to a contractor to limit invoices to NI Water to below this amount, but concluded there had been no indicators of fraud in this case.
Auditor General Kieran Donnelly said of NI Water's investigation: "I have concerns about the conclusions drawn, given the limited scope of the investigation and inadequacies in the methodology employed."
He added: "While acknowledging that this investigation took place during a difficult period in NI Water's history, my view is that, on the whole, the guiding principles for the proper conduct of a fraud investigation were not followed."
The probe was carried out at at time when four non-executive board members were dismissed within NI Water and a number of senior executives subject to disciplinary procedures.
The report found that the body was slow to react to suspected fraud, and did not seek advice from PSNI or any other public sector counter-fraud specialists.
It also found the body's internal fraud investigation team had limited experience in investigating fraud and its probe was not sufficiently detailed and rigorous.
No formal follow-up audit was carried out by NI Water after it had recommended addressing "serious control weaknesses" in contract management- so it was unclear whether any recommendations had been implemented by management.
The auditor criticised the Department for Regional Development, which oversees the body, and said it should have done more to ensure guiding principles for suspected fraud investigations were being followed.
The report stated that NI Water should not have started a disciplinary process against two employees before the internal fraud investigation was completed and evidence secured.
It said there had been "significant shortcomings" in the disciplinary hearing process which followed the investigation.
As a result of its findings, the Audit Office has recommended the establishment of a Northern Ireland public sector fraud investigation service.