A lack of financial oversight by London Borough of Barnet over a regeneration joint venture with Capita allowed an employee to divert £2m of compulsory purchase order payments to his own bank account.
Trishul Shah, an employee of the vehicle, Re, was jailed for five years in July for diverting compulsory purchase order payments into his personal account between 2016 and 2017.
A report by accountancy firm Grant Thornton released last week has identified a number of problems with financial oversight at the council, Re and Customer Support Group (CSG) an outsourced company run by Capita to provide back office services to the council.
The report said: “Lack of control over delegated financial authority in the areas reviewed within Re, managed by CSG and overseen by the council gave the individual access to cost centres on the ledger for illegitimate purposes.”
It said a lack of effective review controls in Re and the council’s outsourced customer support group (CSG) allowed Shah to request 62 inappropriate payments to personal bank accounts.
The fraud was only picked up when Shah’s bank contacted CSG to query an unusual transaction.
In addition, a lack of effective review of journal amendments by CSG requested by Shah enabled fraudulent costs to be concealed on the ledger.
The report said that: “The overall financial control environment around the regeneration service within Re, supported by CSG, was not sufficiently robust to ensure that financial control weaknesses were actively identified and mitigated as part of business as usual.
“In our view, in addition to inadequate controls put in place by Re and CSG, there was also insufficient oversight by the council to ensure that financial controls and budget management were sufficiently robust.
The report said that the council had already identified deficiencies and initiated work to address the problems, but it was too late to detect or prevent the fraud from occurring.
A statement from the council said: “The council has been working with Capita to ensure that immediate actions have been taken to increase financial controls through revised procedures and processes; these have included increased controls of payments and revised schemes of delegation.
“In addition to the report there is a detailed action plan. Our focus is now on working with Capita to deliver these actions quickly and in the agreed timescales. Progress will be reported to audit committee.”
In July, the council approved proposals to bring 11 services back in-house — including finance and accounting — in a move that could spell an end to its “easy council” approach.
