Measures to prevent civil servants misappropriating public funds are still not in place four years after fraudster Harrison Isaac Jr. swindled almost $2 million from government.

Auditor General Larry Dennis says in his annual report that accounting controls in the Accountant General's office have not improved since Isaac, a management accountant in the department, was arrested in 2004.

Isaac was sentenced to more than four-and-a-half years in jail after pleading guilty to 15 fraud-related charges

His scam exploiting a loophole in safety checks to siphon off $1,899,888 to various bank accounts through Internet transfers was the largest ever against the Bermuda Government.

Yet Mr. Dennis said it had not prompted those in charge to improve financial controls.

He warned that failure by the Accountant General's department to properly "reconcile"bank accounts i.e. check the department's records against statements from the bank could lead staff to "inevitably recognise this process as an opportunity to perpetrate fraud".

His report, tabled in the House of Assembly on Friday, describes the controls in place for the Government's 50-plus bank accounts as "seriously deficient" and says they offer "little assurance that fraud could not occur and not remain undetected for extended periods".

He said the Accountant General's department had accepted almost 40 recommendations for improvement in 2004, including one calling for all bank accounts to be reconciled monthly and independently approved within 30 days of month ends.

Yet the process has never been put in place and in 2007 most reconciliations took place months in arrears.

When anomalies occur they are not investigated, according to Mr. Dennis, meaning public funds are unaccounted for.

He cited $5.5 million of unexplained withdrawals on bank statements that had not been recorded in the Government's general ledger.

There were also discrepancies involving deposits: two large bank accounts used to deposit money from revenue-generating departments had $133 million recorded in the ledger but more than $134 million on the bank statements. "A million dollars is a lot of cash to have unaccounted for," said Mr. Dennis.

He said three-quarters of the bank accounts were not fully reconciled, meaning there was an unexplained shortfall of $4.3 million.

Mr. Dennis claimed the Account General's department made the "dangerous assumption" that the differences would be cancelled out eventually.

"In the unlikely event that over time these unexplained transactions do cancel out, failure to investigate them could still conceal misappropriations of public money, misallocations of revenues, and/or failure to extinguish accounts receivable," he said.

His conclusion was that there has been no improvement since Isaac took advantage of the ineffective controls. "Few if any of the recommendations made by an independent consultant who reviewed the controls following the misappropriation have been implemented," he said.

The Accountant-General said progress had been made but had been hampered by system changes, the late provision of data by a local bank and internal computer malfunctions.