Royal Academy of Music – a duet of senior management procurement-related frauds

Oh the opportunities for bad musical puns are virtually unlimited!  The Royal Academy of Music in London certainly won't want to blow their own trumpet about this, as they're involved in a second senior management fraud trial in quick succession.

In May this year, Janet Whitehouse, their ex-CFO was convicted after a range of deceptions and fraud. As the Independent reported:    

“…she embarked on four years of systematic deception, during which she cheated the charity of £236,000. She fabricated paperwork to increase her pension fund by £100,000, secured rent-free accommodation for her son and submitted false invoices for more than £100,000, Southwark Crown Court heard yesterday. Last night, she exchanged her penthouse flat by the River Thames for a cell as she was jailed for 20 months..”

It was in part the standard “fake invoice” fraud.

“Suppliers were contacted for help during the audit but one, Whiteley Associates, failed to respond. It was later revealed that Whitehouse was a director of the company, which had submitted a series of false invoices”.

Royal Academy of Music in London

But the reason suppliers were contacted in the first place was to investigate another alleged fraud, which has now come to trial. The organization’s ex Head of IT is in court for creating false invoices to his firm worth £437K which were paid by the Academy (as reported last week in the paper version of the Times).

We've written a series of articles about procurement fraud for Spend Matters PRO in the last couple of months. In them, we've pointed out that there are certain measures that can go a long, long way to eliminate much of the opportunity for fraud (not quite as easy if it’s the CFO mind you...). Establishing that any company to whom you're paying money is genuine is one. Having proper checks, and that means more than one person being involved, that invoices relate to goods or services that are actually delivered is another.

These incidents also suggest that organizations that are big enough to be handling fairly large amounts of money, yet small enough so there may well be a lack of a proper procurement department, or internal audit function, are particularly vulnerable. Let’s hope the Royal Academy now have some decent processes, policies and governance in place, and I suppose at least they did spot these problems.

Which leads us finally to wonder - in how many other organizations are payments being made to "dummy companies" by corrupt members of staff? Could it happen in yours? And if you confidently say that you’ve never had a procurement related fraud in your organization – that probably just means you haven’t looked hard enough.

 

 

Voices (4)

  1. Final Furlong:

    Oh dear. She was clearly on the fiddle.

    1. PlanBee:

      More than that, she orchestrated the whole thing. Hopefully they will pass the baton on to someone with more integrity

      1. Final Furlong:

        At least she didn’t steal the show…

        1. Dan:

          ba-dum-tish

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