Electricity procurement gives Kent County Council a shock

So what’s been going on down in Kent?

Kent County Council’s Head of Energy Procurement, Ross Knowles, was charged with counts of fraud by abuse of position and one count of money laundering at a court in Kent last month. He pleaded not guilty.

It is quite a complex situation, as Knowles was employed by Kent but ran the LASER energy buying group, which acts for many local authorities. It sits as part of Kent Commercial Services, the arm of the County Council which trades actively beyond the Council itself. I’ve previously done a bit of work for the County, so I won't say too much, but let’s just say the Commercial Services arm has caused some local controversy in the past for competing very actively with private sector firms in areas such as temporary staff, bus services and printing.

So Knowles and his organisation were buying energy on behalf of local authorities and other public bodies. But it is claimed that “management fees” from Centrica and Npower somehow found their way to him rather than to LASER or Kent CC. There’s no suggestion that the firms involved knew the money was allegedly going to him personally – so it will be interesting to see how the prosecution suggest that was organised, if the firms presumably thought their payments were going to a legitimate recipient.

It is well known and accepted that collaborative procurement organisations (including Government Procurement Service, and Buying Solutions as was) make money from management fees from suppliers. That is true of most of the local authority and health collaborative bodies in the UK public sector, and indeed I suspect in other parts of the world.  It is usually a percenatge of turnover through that agreement, and is an easier way of funding such bodies than getting fees out of buyers, or adding margin onto selling prices.

So another puzzle is, if LASER expected to get fees from the suppliers, how could anyone diverting those fees expect to get away with it for long? Wasn’t someone pretty soon going to say to the suppliers, “where are our management fees”? Perhaps that is indeed what happened.

It also makes David Shields’ drive at GPS to get better information back from suppliers look like an even smarter move! I’m sure he will want to know exactly how much work has been done under GPS agreements, how much those suppliers should be paying in management fees, and exactly where the money is going.

Back to LASER - it's a shame because I’ve heard good things about them and the work they've done in the sector. And given that this has at least come to light now, it seems a bit unfair for the Telegraph to say,

“However, questions are likely to be raised about the standard of governance at LASER if the allegations of fraud are proven”.

As economic times get tougher, and more people worry about their jobs, their pensions and their futures, I wonder whether we might see an increase in fraud and corruption - real or attempted? It wouldn't surprise me, so be vigilant, and it might be a good time to have a thorough look at how watertight your processes and procedures are.

And look out for a Spend Matters series on procurement fraud. We haven't written it yet, but I think we should.

Voices (2)

  1. Huhh?:

    With this and the ‘Welsh Laptops’ – this is probably the tip of the iceberg in terms of ‘creative’ accounting and revenue ‘directionality’.

    Stuffed full of scams!

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