Police launched an investigation amid allegations of fraud in National Drug Commission expenditures, according to a critical report on public accounts in 2005/06.

Staff may have colluded for improper transactions in the absence of genuine oversight, the Public Accounts Committee says in its report tabled in the House of Assembly on Wednesday.

Other allegations in the document include excessive delays completing accounts by Government bodies and more than $20 million in unapproved expenditure.

The report was filed by PAC chairman Shadow Finance Minister Bob Richards, former Shadow Finance Minister Patricia Gordon-Pamplin and Progressive Labour Party backbenchers Zane DeSilva, Walter Lister and Patrice Minors.

Regarding the National Drug Commission, the PAC reports: "Your committee discovered that due to poor controls and inadequate documentation, fraudulent or criminal behaviour may have been a factor in some NDC expenditures.

"Management control systems and oversight were simply not working properly, and it appears that there may have been some collusion between certain staff members resulting in fraudulent or improper purchases and transactions.

"A Police investigation was initiated as a result of the serious problems in the NDC accounts and records, including missing invoices and destroyed documents.

"Your committee noted the inability of certain staff to appropriately handle the accounting functions. Even with the outsourcing of some projects, the result was still inadequate. Your committee also noted that the Accountant General had taken the necessary steps to advise the Ministry of Finance regarding the problems, and the resulting denial of opinion on the financial statements.

"Your committee expressed serious concern that performance bonuses were paid to the former executive director. Given the state of the accounts and the other apparent financial misappropriations, your committee believes that these performance bonuses were entirely inappropriate and should be carefully reviewed and reclaimed by Government if necessary."

Asked whether the NDC had been cleared of any wrongdoing by the Police investigation, Social Rehabilitation Minister Dale Butler said: "We have read the Auditor's report about the old Commission. If they have anything to report, we await their report. The staff have completely changed."

Police repeatedly refused to respond when asked for any details on the investigation.

The committee says total unapproved expenditure for public bodies was $17.7 million for 2005 and $10.7 million for 2006, continuing a trend in which $48 million was spent without Parliamentary oversight from 1998 to 2004.

It states: "Your committee recommends that the Ministry of Finance makes a greater effort to properly budget expenditure in the statement of Revenue and Expenditure. The experience of the last few years suggests a fundamental weakness in the budgetary process."

Most audit schedules for 2005 were not available when promised and, when they were submitted, there were problems with accuracy or completeness, according to the PAC.

Problems with accuracy became worse for 2006, when many schedules were materially inaccurate.

Nine out of 36 Government entities had submitted timely annual financial statements for audit, a decrease on the previous year. The worst offenders were the Hospital Insurance Fund which was in arrears by five years, GEHI and Mutual Reinsurance both of which were in arrears by four years. Pembroke Parish Council, St. George's and Whitney Educational Trust Middle School Capitation Account were also named for late reporting.

Progress in reducing the backlog was made by Bermuda Hospitals Board, Bermuda Housing Corporation, Bermuda Land Development Company, CedarBridge Academy, Pension Commission, Trustees of the National Sports Centre, the Consolidated Fund, Government Borrowing Sinking Fund and the St. George's Preparatory School Capitation Account.