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In lots of the system and process Critical Friend work I regularly get involved with, I see plenty of wide open goals, which could easily enable internal fraud.
Early on, here in this blog, I must declare my honesty, you can of course trust a boyhood good Catholic and altar boy. I can assure you that I have never had to confess to breaking the eight commandment.
However, a father of one of my primary school friends (a senior in the St Vincent De Paul Society too), was hauled off for a six month stretch at HM's Pleasure, for swapping his gas meter connections around a few weeks each quarter. He was only caught when British Gas found one quarter he (accidently) supplied more gas to them than he had from them (apparently). As with all criminal dodges, it was sussed in the end when mistakes were made and they asked for three years of similar crimes to be also taken into account too.
Who knew that swapping your gas meter pipes around, would run an analogue meter backwards? Maybe that’s why suppliers are almost falling over themselves, to tempt us over to Smart Meters?
I don’t think I have a particularly criminal mind, but in one of my early jobs in retail ICT at Littlewoods Liverpool, I did a lot of work with the internal auditor, particularly with the payroll packages. We did have a payroll of over 32,000 staff, so it was an area that got attention pretty much every other month. His name (strangely) was Gerry Myers. I learn't a lot through the questions he asked, bespoke reports he wanted etc, It was a real insight into how a criminal mind might work, or a detective. He kind of had the charisma of Columbo, without the cigar, (just when you think you have seen the back of him, he would ask, “Just one more thing….”).
System and project reviews for me often identify numerous security holes that I recognise, like those in a 16 month matured Swiss cheese. For example, obsessive system control of responsive repairs budget is common. If a kitchen repair SOR cost escalates from £85 to £365, the repairs team experience a grilling like the Spanish Inquisition. There is generally a tight audit trail of authorisation for a DLO or key partnering contractor. It's very rare these are not tightly linked to the finance purchase ledger too. Trying to embezzle here, is as crazy as trying to gemmy open an ATM cash machine.
However, where external contractors are used with manual replication of documents in the finance purchase ledger, or fed from a hefty (multi-million pound) capital/cyclical budget, there is often rich pickings, even if just a few % can be creamed off, there’s a few hundred grand per annum for the taking. Unbelievably easily stolen in plain sight.
One project I was involved in for a large Midlands based landlord, involved automating asbestos surveys and any follow-on work, updating Asset register and leaving a good audit trail. While we had rolled this out for reactive and voids work, the planned/capital/cyclical team, said, “we can't work like that”. The reason was that team were not actually in control of ordering asbestos surveys. They just added a PO to the value of the monthly invoices when they came in. The budget was over £600k for asbestos annually. I explained how between three of us, we could pocket 3 x £20k each annually, by just starting a convenient arrangement to raise £60k of bogus orders, which would always just be paid. For all I knew it might already have been happened by accident now and again!
Its tempting to put specialist compliance/cyclical contractors totally in charge of doing the work, with few checks & audit etc. Gas service & LGSR is a very common situation for this. Where there are few controls, poor/missing integration to finance, apart from the staff cost of waste due to double-handling, it’s an open goal to the unscrupulous.
There have been plenty of cases that have come to court, the latest being one at Greenwich Council, where last month two Council workers were jailed, over a £1.5m false repair contracts fraud. A nice little earner for using the technique I have outlined above, this time by arranging bogus lift works and servicing. Nice little earner, read more on it here.
This is one of many.
When I was at one of the HMS system suppliers in a past life, there was a case in 2005 where a two handed social housing DLO con of over £330k was perpetrated over just 7 months. Read about that one here - There were plenty of integration, checks and balances in the supplied solution, however few were implemented and audited, by the landlord. You can bet they certainly were put in, after that court case.
Internally audit must remain vigilant, it should not and cannot be just a tick-box exercise. Trust your audits or system reviews, think like a thief and be sure to prioritise plugging any gaps found. While improving organisation security, internal efficiency will also be improved, opening the door to effective transformation.
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Related Post: How can landlords manage repair complaints better for everyone
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New Order - Thieves Like Us.
(c) Tony Smith, Acutance Consulting www.acutanceconsulting.co.uk 07854-655009
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