Government has elected to re-establish a dedicated audit unit in response to a number of recent incidents of fraud which saw some $2 million go missing from Government coffers.

The Internal Audit Unit, initially to be run by an interim audit officer who cannot yet be named, will sit within the Accountant General?s office but will answer to Financial Secretary Donald Scott to preserve the integrity of the function, Finance Minister Paula Cox said at a Press conference yesterday.

The move marks the implementation of a recommendation from a UK-based independent auditor, Jonathan Stanley, hired by Government after it detected that money had gone missing from the Accountant General?s office.

Yesterday, Ms Cox said broken down internal controls in a number of Government departments allowed acts of ?financial impropriety? to occur within the ranks of the Civil Service.

The interim officer will be in place until a permanent Internal Audit Officer is recruited, while four other posts are also being created within the unit which will have oversight over all of Government departments and quangos.

Ms Cox said the process should be fully up and running within six to eight months.

And Accountant General Joyce Hayward said the remit for the unit is larger than just financial with the team also being tasked with audit management and technology processes.

Government hinted at bringing back the internal audit function, after it was abolished in years past as unnecessary, in the House of Assembly last month at the same time as Premier Alex Scott said the Criminal Code against theft and fraud was due to be strengthened.

Another measure the Accountant General?s Department has said it will be pursuing is implementation of an Electronic Data Interchange (EDI) which would cut down on the risk of cheque fraud.

The need to update the Criminal Code follows scrutiny of the handling of funds at the Bermuda Housing Corporation (BHC) which resulted in a two-year Police investigation finding that behaviours may have been unethical but not illegal. Concerns were raised that some of the laws over this area may be outdated, with legislation sometimes dating back 100 years.

The most flagrant breach alleged to have occurred in Government was within the Accountant General?s office by former management accountant Harrison Issac Jr. who was extradited to the US after charges of stealing $1.9 million from Government were laid. The fraud is alleged to have occurred while Mr. Issac was setting up a Government account with the Bank of New York to comply with post-9/11 rules on the handling of US dollars.

Last year another former employee of the Accountant General?s office pleaded guilty to stealing nearly $160,000 in public funds. Allegations of theft were also laid against an Immigration officer.

Auditor General Larry Dennis last month slammed lax internal controls within Government for fostering an environment where fraud can thrive.

He called for whistleblower legislation to be put in place to protect Civil Servants who may not now feel comfortable to report breaches without such laws to protect them.

Ms Cox suppressed some of that concern yesterday, saying she knew of examples where Civil Servants reported the possible misdeeds of peers.

And she said a climate of tension that has at times existed between MPs and Mr. Dennis was ?natural? and had not precluded Government heeding his ?valid recommendations?.

Mr. Dennis has underscored internal deficiencies within the workings of Government, from the mounting debts owed to the Social Insurance department by delinquent taxpayers to his concerns on internal controls, in his annual report.