We do seem to cover fraud and corruption fairly regularly here, but that is for a number of reasons. Firstly, it is usually an interesting story; frankly, it is more interesting to read than some detail around EU directive 265/89 and precisely what paragraph 14 means. Secondly, it is a vitally important issue – we only have to look corruption, fraud and pure crime and how it continues to affect the economies of many countries to see that it does matter.
Anyway, there seems to be a number of issues affecting the Australian higher education sector at the moment. As itnews reported: “ Just one month after wrapping up its investigation into Brett Roberts, who was found to have defrauded several state universities of more than $114,000, ICAC (the New South Wales corruption watchdog) has turned its gaze to the TAFE sector”.
TAFE stands for “technical and further education” by the way. This case involves Ronald Cordoba, who was ICT manager at the Macquarie Fields TAFE campus. He allegedly used his position to register his own company as an authorised supplier, to the college and then approve work and invoices from his “firm” to his own benefit. The watchdog reckons he channelled some $1.7 million (Australian) into his own bank account, much of which was over-charging or for non-existent products.
This case would be quite funny in places if it was not large amounts of public money involved. The fact that the accused ran a “cloud storage service” using two servers in his own home for which he charged the institution large sums of money is quite amusing in some ways. Then there is the creation of the imaginary Alicia in his company with whom he exchanged emails. I see her as a stunningly attractive Aussie blond – in an imaginary way of course…
But joking aside, this is one of the more complex frauds we have seen, in that he had to overcome processes which were not perfect (clearly), but were not as bad as we still see in many organisations. So for instance, there was a “three way match” approval system governing procurement, which is good. And prior to securing work, vendors need to be registered in the state Department of Education’s SAP finance system, and have a procurement order approved by another staff member with the appropriate financial delegation. Before an invoice was authorised and payment made, a senior manager had to certify that the work has been completed.
But, “ICAC claims Cordoba was able to get around these rules by instructing a member of his staff to register his company, ITD Pty Ltd, into the finance system, and to generate work orders which he then used his acting position as IT manager – on a $150,000 salary – to approve”.
So basically he got some probably innocent junior colleague to collude with him and make it appear that the process was being followed. The other clever aspect of the fraud was that in most cases, goods or services were actually delivered – but his firm grossly overcharged for them. So for example he bought two Dropbox licences for a little over $70,000, but then sold them on for $150,000.
He has been suspended on full pay by NSW TAFE since August 2014 as investigations into his conduct proceed, which does seem extraordinary. Surely there is enough evidence to suspend him without pay! He also “told ICAC counsel he intended to pay back the roughly $1.1 million profit he made … He said he hadn’t yet discussed the issue of repayments with his employer, but said he would “have to come to an arrangement” with the institute”.
I suspect he will be in prison rather than doing that, but we will see. But what can we learn from this case? Well, it shows that even reasonably good processes can be manipulated if people are clever and determined enough. It shows that people involved in signing off on purchases, payments and other key parts of the procurement process really need to be involved and carry out some sort of checking – not just sign because the boss tells them too. On that note, it would be interesting to know if there was a “whistle blowing” process in place. That might have encouraged staff to raise any alarms they might have had. Finally, it just points out that even if we have good processes, we must be vigilant and continually ask – “how could someone get round our systems”?
And the other really big question is this. Where was the organisation’s procurement team whilst this money was being spent?