A trust failed to spot that one of its managers was making money by buying and selling stamps - even though it put most of its mail through a franking machine.

A report circulated this week by the NHS Executive says the fraud at an unnamed trust remained undetected until Royal Mail asked why it had not been paid for some of the stamps.

The manager was sentenced to two years in prison for theft, while the losses were written off by the Executive. The case is one of two summarised in Lessons to be Learnt from Losses and Fraud Cases, which identifies the trust's failure 'to properly use management accounts' to alert senior management to the excess costs as a key lesson.

It says using monthly accounts is a good way to identify unusually high postal activity and 'take appropriate action'.

The second case involved a legal wrangle over a number of claims and variations for payment on a contract to build a hospital which was completed six months late.

Auditors identified 'serious failings in the control, management and reporting arrangements operating on the project'.

The guidance says there was a 33 per cent increase in reported cases of theft across all government departments in 1997-98.

Increasing use of portable equipment such as laptops and mobile phones 'accessible to the opportunistic thief' are blamed.

Lessons to be Learnt from Losses and Fraud Cases http://tap.ccta.gov.uk/doh/coin4.nsf