Fraud Squad investigates pounds 20m 'wasted' on NHS plan

FRAUD charges are being considered after Wessex Regional Health Authority's admission that at least pounds 20m of National Health Service money was thrown away in a grand plan to link up the authority's administration and 300 hospitals in one massive computer project.

The Fraud Squad has passed a report to the Crown Prosecution Service following its investigation into business transactions between the health authority and computer supply firms. The authority is also considering civil action to recover money lost on its now defunct Regional Information Systems Plan (RISP).

Fraud inquiries coincide with the release of one of the most damning reports ever issued by a district auditor. It criticises the lack of financial control exercised by the authority in the 1980s during RISP implementation, which left the authority open to exploitation by employees and contractors. The report, by Richard da Costa, also criticises the way contracts were awarded and the purchase of a pounds 3m IBM computer that languished in storage for 18 months.

Despite trade press stories concerning waste, incompetence and possible fraud within the authority, it continued to defend the project during the 1980s, insisting there was no overspend. More than pounds 40m was spent on RISP before it was axed in 1990 by Ken Jarrold, Wessex's new regional general manager.

Mr Jarrold admits 'fundamental budgetary mismanagement' make it impossible to know exactly how much was spent, by whom and for what. He said: 'As much as pounds 20m - perhaps even more - was spent on projects which accrued no benefit to the NHS in the Wessex region. All the available evidence suggests that the interests of the authority were subverted, deliberately or otherwise.'

Professor Joan Higgins, an authority member, said: 'This is one of the most shocking reports on a matter of public business. Huge sums of public money have been squandered which could have been spent in patient care.'

Officials at the Winchester HQ opted for the region-wide computer system which they estimated would cost pounds 75m. Members were told it would cost pounds 26m because the higher estimate was considered 'politically unacceptable'. Mr da Costa says the project was charcterised by 'a failure to provide members with sufficient information on which to base their decision'.

Five companies were shortlisted after bidding for the contract. In February 1986 the Digital Equipment Company appeared to have won but a few months later, after being approached by one of the disgruntled losers, Wessex awarded the contract to a consortium led by the consultants Arthur Andersen which included the computer firm IBM. The decision raised eyebrows. Arthur Andersen had previously advised the authority on RISP. However, the company denies any impropriety.

The auditor reports that the Arthur Andersen consortium was ranked fourth in the initial selection and fell short of other bids on amended selection criteria. He finds the events 'disturbing' and says there was 'an unacceptable conflict of interest' because the successful tenderer appeared to have had access to confidential information concerning rival bids and the evaluation process.

The report states the position was exacerbated when key officers were involved in competing bids during privatisation of the authority's computing services. Sixty health authority staff transferred to a newly formed company, Wessex Integrated Systems, which took over the authority's IBM computer system.

Robin Little, Wessex's former regional treasurer, is described in the report as 'the only officer who had full knowledge of the financing of RISP'. He resigned in 1987 to join a consultancy firm which considered whether the authority's computer services should be privatised. He later became a director of Wessex Integrated Systems, one of two private companies to which he recommended the authority's computer services be transferred. The contract was awarded without competition.

For two months in 1989 he was both client and contractor when seconded back to the authority as regional information systems manager. Mr Little died last October. But the auditor says Mr Little's conflicting interests meant the authority paid for more contract employees than it needed or could afford.

The report claims officials refused to allow the auditing of contracts, or contract payments to consultants and contractors, citing the protection of commercially sensitive information. Mr da Costa believes that may have had more to do with hiding 'the shortcomings of officers'.

Last year two health authority staff and two employees of Abbey Business Consultancy, later aquired by AT&T Istel, were sacked as police investigated allegations of corruption.

Tony Collins is executive editor of Computer Weekly.