This feels like the latest in a long-running series titled “how to extract money from the public sector dishonestly, unfairly or fraudulently – but not via procurement spend”.
Our point is that public procurement fraud is not very easy in many European countries, including the UK. It does happen of course, but you need to have a complex structure of collaborators (other bidders to put in fake bids and carve up the markets) or people on the inside to skew the evaluation process or push through some sort of single-tender or otherwise unfair process.There is invoice fraud of course where you might just submit fake invoices or try and divert payment to your bank account, but in most of the real procurement related cases, you also need to be a credible supplier of some sort.
But it seems to us that it is much easier to extract fraudulent payments from governments where money is available but the process is not seen as a formal procurement, and EU or national regulations don’t apply. Examples include grants for various purposes: payments to charities; foreign aid payments; or even funding for independent but state supported schools.
We wrote extensively about the collapse of Kid’s Company charity in the UK a year or so back. The charity, driven by their charismatic funder, was given large sums of public money despite the concerns of public officials. But the politicians loved the publicity they got for supporting this apparently good cause. It turned out the charity was failing to maintain financial reserves and was helping far fewer kids than claimed, whilst money was spent in some dubious ways.
Now we have the case of an “academy” school in Bradford, England, where the founder and his associates apparently treated the funds as part of their own resources. In court last week, he was found guilty of four counts of fraud, three counts of false accounting and two counts of obtaining money by deception. Two of his colleagues were found guilty of some charges too related to the school funds.
One common theme is that these charismatic people always look to get politicians to support, so they can ride over the mere public employees who might raise objections or ask difficult questions. It was the same here – the Prime Minister visited the school, and the founder was rude to civil servants in the Department of Education who questioned him and he threatened to go straight to the Minister if they didn’t give him what they wanted.
It’s not just the UK. In Denmark, Mogens Amdi Petersen founded the Teachers Group, which got funding from the government for schools. As the BBC reports; “but in 2001 the Danish authorities raided its offices and charged Petersen with fraud. Found not guilty in 2006, he and some of his associates immediately left the country, but prosecutors appealed and the group are now wanted by Interpol. It’s thought they may have taken refuge in a massive luxury compound, worth an estimated £20m ($26m), on the Pacific coast in Mexico”
That same organisation now operates charities in in Africa, and a recent BBC investigation found that Dapp Malawi – the Malawian branch of a charity, Development Aid from People to People – was linked to the same people. Funded by aid payments from countries like the UK, the BBC claim it is in effect a “cult” that demands money from its employees.
So, what can we do to make it harder for the unscrupulous, criminal or just incompetent to take money from the state in this sort of manner? Well, politicians need to be sensitive to those who cultivate them and look to bypass the normal checks and controls applied by officials. And perhaps officials should tell Spend Matters (or other media outlets) when they have suspicions but the politicians are not listening – as in the case of the Bradford Academy.
Then, we should apply more in the way of sound procurement processes to giving money in these other cases. So there should be more competition and analysis of proposals when money is given to charities, or for the foundation of schools. We should apply the principles of good contract management, ensuring deliverables are clear, with transparency and open reporting.
Finally, we should be much tougher on conflicts of interest. For instance, the owners of schools simply should not be able to do commercial deals with associated people and companies – or it should go through a very tough approval process at the very least. In the UK, we should not allow “academy schools” to buy anything (from facilities management services to curriculum IP) from their own bosses. Recipients of foreign aid should be checked out as diligently as we would check a new critical supplier of key services in the procurement world.
None of this will categorically, 100% stop the really determined from committing fraud. But it would make it much more difficult. At the moment, it seems a little too easy to extract money from the government, even in these supposed times of austerity and reduced government spend in many countries.