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‘Insufficient financial controls’ enabled fraudster contractor to steal £2m from council

A report into the conviction for fraud of a contractor of Barnet Council has revealed how the authority failed to prevent a £2m theft case.

There were “insufficient financial controls” in place and not enough oversight to prevent the former employee of a Barnet Council contractor stealing £2m from the council, according to a Grant Thornton audit report.

Whilst working on a joint outsourcing venture with Capita, former council worker Trishul Shah diverted money for fake property transactions from Barnet Council between 2016 and 2017.

He was sent to jail for five years for fraud on 31 July 2018 at Harrow Crown Court, pleading guilty to two counts of fraud by abuse of position.

In the council-commissioned review, it said Shah used his “intimate knowledge” of the council’s financial processes to “perpetrate and conceal his fraud.”

The fraud came to light when Shah’s own bank sounded the alarm, and Capita has since pledged to underwrite the financial loss to the council.

The report said the council had “insufficient oversight” of the joint company which “gave the individual access to cost centres on the ledger for illegitimate purposes.”

The council was aware of its deficiencies and had started to address them, but this wasn’t completed in time to detect or prevent the fraud.

Barnet Council leader Richard Cornelius is now facing calls to resign from the Labour Party.

Andrew Gwynne, shadow communities secretary, said: “This is a textbook example of why outsourcing fails our public services. This mass-outsourcing experiment with our public services has failed.”

“In Tory-run Barnet, outsourcing has led to a litany of services problems, unstaffed library buildings, Ofsted ruling that the council is ‘failing vulnerable children,’ and now accusations of major fraud linked to a Capita contract.

“Internal processes and monitoring clearly failed in this case – we urgently need action from the government to ensure that this could not happen again.”

Councillor Richard Cornelius, leader of Barnet Council, said: “The most important thing to consider in all of this is that we have ensured that the money was recovered, with no loss to the public purse. Following an investigation by our fraud team, the individual responsible for this crime has been put in front of the courts and is now in prison, the correct place for him. Action was taken as soon as the issue was identified, we are holding our contractor to account and have made necessary changes.”

“Back in July, the council initiated the review of the Capita contract, which anticipates the finance team will return to the council’s employment.”

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