Haringey Fraud – Where Was the “Procurement” Discipline?

The latest in a long line of frauds committed by employees was featured in the papers last week. In this disgraceful case, it was a finance officer at Haringey council who defrauded the borough between May 2010 and October 2012; here is the Guardian.

"A finance officer in one of London’s poorest boroughs has been jailed after she defrauded the council of almost £500,000, paying for a lavish wedding, a honeymoon in Dubai and extensive home renovations. Ceyda Elkatme, 34, channelled £446,073.23 from London’s Haringey council and into the accounts of friends and family as she processed payments to carers for disabled adults or those with learning disabilities, Southwark crown court heard".

So how did she do this? It appears that she simply persuaded managers to approve fraudulent payments into the bank accounts of individuals (her co-conspirators) who then took their cut and gave her most of the money. She entered the names of these other people into “the system” so they could be paid by the borough. The managers thought these were payments to the carers of vulnerable adults.

We chose the word “disgraceful” carefully in our first paragraph. It not only applies to the actions of Elkatme and her friends, but to the processes in place at Haringey. Surely someone should have checked that these recipients of the money were genuine? What due diligence was there when the payments were made? Were any of the “managers” who signed off these payments disciplined? All the money has been spent, so that’s half a million quid gone that should have been used to support vulnerable people.

But this also demonstrates a point we’ve made more than once, most recently in the case of Kids Company. There is a grey area in terms of how public money is spent, where substantial sums seem to sit in a sort of no-man’s land between “staff costs” and “procurement spend”. One common example of this is in the field of contingent labour (temporary staff) and indeed we have talked about that in our recent briefing paper. Here though, the apparent “carers” might not have been considered as “contingent labour” but they were, in some sense, people receiving public money for carrying out a service; just as Kids Company did.

Too often we see a lack of diligence and professionalism in these cases, with sloppy processes and poor governance over expenditure. The checks we in the procurement world would hopefully make on a new supplier; the monitoring of what the supplier delivers against the contract and the payment; those procurement disciplines seem to go out of the window in theses grey areas, whether it is carers in Haringey, or charitable “grants” to Kids Company.

All the money that is disappearing from the public purse to organisations or individuals who are not employees should be considered as “procurement” expenditure in our view, and treated accordingly. If Haringey had thought in that way, maybe they would not be half a million down now!

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Voices (2)

  1. Pete:

    I have seen many times organisations – not just public sector – too easily put some of they “grey areas” of spend outside the scope of Purchase to Pay and often because it seems that the procurement process for such spend is too remote from a “standard” process. This is especially common when the “standard” process is defined too simplistically in order to fit the way the P2P system works.

    I entirely agree with you Peter that ALL non-staff spend should be within the scope of proper procurement and P2P best practice and this case illustrates what can go wrong when it is not.

  2. Dan:

    In the public sector, there does seem to be the opinion in places that some spend is about ‘caring’ and doing good things (usually grant funding) and therefore it should not have anything to do with those nasty, money-driven procurement people whose sole remit is to run tenders.

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