Labour blasts ‘damning’ £2m Capita fraud report

Labour leader Councillor Barry Rawlings said the report revealed “incompetence of scandalous proportions” after five financial safety nets that could have prevented the fraud failed to do so.

Labour has called for the contracts with Capita to be scrapped and for the outsourced services to be brought back in house.

Former council contractor Trishul Shah was jailed for five years at a hearing at Harrow Crown Court on July 31 after pleading guilty to two counts of fraud by abuse of position.

He admitted making 62 fraudulent payments into his own bank account while employed as a contractor with outsourcing firm Capita on the council’s Regional Enterprise (Re) deal.

The report, published by accounting and consultancy group Grant Thornton, reveals the fraud only came to light when Mr Shah’s own bank sounded the alarm.

Labour also called on deputy council leader Dan Thomas to step down.

Cllr Rawlings said: “The council are clearly not able to manage this kind of commercial relationship, and Capita have demonstrated they are not able to run key services to a basic standard.

“Cllrs Cornelius and Thomas must also take responsibility for what is ultimately a failure of their ideology-driven policy.

“Their misplaced faith in Capita has ensured that the council has insufficient financial oversight of outsourced services.

“And as they are responsible for the council’s finances and regeneration schemes, this fraud happened directly under their noses.”

Labour leader Cllr Barry Rawlings

The council has two outsourcing deals with Capita – Re and Customer Support Group (CSG) – worth around £500 million in total.

Among the failings identified by the report are “an insufficient oversight by the council to ensure that financial controls and budget management were sufficiently robust”.

The lack of controls meant Mr Shah was given inappropriate access to financial systems and was able to cover up the fraudulent transactions.

The report says the council was aware of weaknesses in the oversight of the Capita contracts but did not have time to address the issues before the fraud began.

Once Mr Shah’s bank alerted the council’s anti-fraud team, it began an immediate criminal investigation and Mr Shah was suspended by Capita within 24 hours.

The report states: “The council, CSG and Re acted promptly to mitigate the risk that had been identified and took appropriate action to understand and remedy the issues that had been raised as a result of the fraud.”

It adds that Mr Shah was “a longstanding and trusted former employee of the council and CSG…who had intimate knowledge of the financial processes and used this to perpetrate and conceal the fraud”.

Grant Thornton has drawn up an action plan aimed at shoring up the council’s fraud defences.

It said the council had already taken steps to improve its anti-fraud measures.

Cllr 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.”

A Capita spokesperson said: "Following the discovery of this fraud, Barnet Council and Capita have worked closely to review and improve financial controls.

"We accept the case highlighted the need for improvements in financial and governance controls across the Council, Re and CSG, however we believe the report presents a limited and highly caveated review."