The Tribune

By NEIL HARTNELL

Tribune Business Editor

nhartnell@tribunemedia.net

Government employees have been accused of shredding accounting records “to conceal” corruption and wrongdoing, including a fraud involving food stamps normally issued to poor Bahamians.

Terrance Bastian, the Auditor-General, said the latter action was just one of numerous “egregious acts” that his team exposed through a two-year audit of the Department of Social Services accounts.

The audit, for the 24 months to end-June 2015, found that a senior member of the Department’s accounts staff had given instructions to shred and destroy accounting records and other documents for the years 2010-2013.

And the Auditor-General and his team later found that, before their audit report was completed, further orders had been given to destroy records from 2014 and 2015.

The report, which was tabled in the House of Assembly yesterday, said some Department of Social Services employees were attempting to ‘cover their tracks’ through the widespread document destruction.

“It was noted that instructions were given to destroy government documentation to conceal a fraud relating to food coupons and medical assistance, due to collusion between several staff members,” the Auditor-General found.

“Egregious acts were allowed to occur within the Department of Social Services because of the reliance on particular staff members, the lack of a reconciliation process and a breakdown in management oversight.”

The document destruction was revealed by a Department of Social Services employee to both its senior management and the Auditor General during the audit process, with the instructions said to have been given by a senior accounts executive.

Among the documents being destroyed via shredding were food coupons, cheques, vendor statements, receipts and other accounting documents.

The Auditor General’s team subsequently interviewed the senior accounts executive, who acknowledged “that the request was given with the knowledge of her supervisor” - who was also present at the interview.

“It was indicated by this staff member that these documents were for the years 2010 through 2013,” the Auditor General’s report said.

“Further, it was brought to our attention before the release of our audit report that in addition to the documents discovered to be shredded, instructions were given for the 2014 and 2015 documents to be shredded.”

The senior accounts staff members told the Auditor-General’s team that they were unaware of the ‘public records retention’ requirements of the Public Service Act 2010, and that their actions were tantamount to breaching this law.

Concluding that this episode highlighted both weak internal controls and “a severe lack of accountability”, the Auditor-General found: “It appears that the act of removing or destroying official information is a matter of normalcy among the staff members withing the Department of Social Services accounts department.”

Warning that the situation both undermined the accounts department’s integrity, and exposed Social Services to an increased risk of fraud and corruption, the report said the senior accounts staffer had no authority to remove or destroy the documents.

Calling for an investigation to be conducted into the Department’s document destruction, the Auditor-General said the actions were “indicative of attempting to conceal information needed in corroborating transactions executed by the accounting department”.

The report added that the Department of Social Services audit was “severely hindered” to the extent that the Auditor-General had to abandon an investigation related to medical payments - something that he regarded as “not tolerable”.

“Due to the destruction of government documents requested by the auditors, the audit of the Department of Social Services was severely impaired,” the Auditor-General’s report warned.

“Further, it was brought to our attention before the release of our audit report..... [that] instructions were given for 2014 and 2015 documents to be shredded.

“This act of gross negligence and indifference by staff members around the importance of retaining and protecting government documents further underscores our position in not being able to formulate a conclusion on the Department of Social Services.

“The continued destruction of documents, even during the audit process, indicates that there may be a level of fraud being perpetrated within the department.”

The Auditor-General’s findings indicate that the incidents of fraud uncovered by the audit may just be ‘the tip of the iceberg’ where the Department of Social Services is concerned.

The report details how the department’s executive management informed the Auditor General of an incident in August 2015, where staff members used pre-printed food stamps - intended to assist 10 low income Bahamians with maintaining a reasonable standard of living - to purchase $1,134 of groceries for themselves.

The Department of Social Services staff members employed food coupons intended for use at Stop N’ Shop Grocers, a business that no longer exists. They merely crossed out that store’s name and replaced it with an existing food store.

The latter’s management noticed “discrepancies” with the food stamps when they were used because they had not been authorised by the Department of Social Services director.

A “senior Department of Social Services accounts staff member” subsequently collected the food coupons from the store and, exploiting their authorisation to use the director’s signature stamp, affixed the necessary signature and returned the stamps to the store.

The same “accounts staff member” also processed the redeemed coupons and the payment to the food store, in a bid to conceal the scheme.

The Auditor General’s report revealed that one staff member was terminated after confession to the scam, while another two have been placed on administrative leave amid a continuing investigation.

“Through apparent collusion, staff members were able to perpetrate a fraudulent act utilising coupons intended for the disenfranchised,” the Auditor General found. “This act may also be indicative of a more complex scheme being perpetrated with public funds.

“The determination of how many times this graft could have occurred is undeterminable, as the amount of coupons issued by the Department of Social Services ranges in the millions of dollars each budget cycle.”

Given that the fraud was picked up by the food store, and not the Department of Social Services, the Auditor-General said this spoke volumes about the “impaired internal controls” of the agency.

“It also shows that there is a severe breakdown in the oversight by the responsible parties in this process in allowing coupons to be printed for closed businesses,” the report added.