Rent and Service Charges

Forensic Accounting and Fraud Prevention

Over the last few months, I have really got into data analysis and forensic accounting. I completed a postgraduate level course in forensic accounting as a top up to qualifying shortly before within financial, management and public accounting as well as a technician.

The forensic accounting course was interesting and stimulating at the same time because the Post Office scandal enabled ease in providing examples. There were also other fraud/audit finding gurus I found useful which included as follows:

- Dan McCrum: the FT Journalist who took a lot of dangerous risks along with his colleagues in uncovering the Wirecard company fraud. Wirecard had an excellent reputation and were good at deceiving the world in what they were really doing, there is a Netflix film called “Skandal.” Having watched the film, I loved how it showed what Mr McCrum and the FT went through.

- Bharat Jeswani: a Chartered Accountant and Certified Forensic Accountant who wrote the book called “The Frauditor." His book outlines how fraud is carried out including at white collar level such as financial statement fraud. I am amazed in how he has trained some Indian anticorruption body officers known as the CBI (Central Bureau of Investigation).

- Cynthia Cooper: the former Internal Auditor who established how her company Worldcom were processing transactions that were concealing expenses in manipulating these through capitalisation techniques. I liked her podcast that she did with Auditboard.

- Baron Prem Sikka: Professor of Accounting and outspoken critic of the accounting profession, particularly with regards to its roles in auditing public corporations and helping transnational corporations avoid taxes. He has written about auditing failures, corporate governance issues, money laundering, insolvency and tax avoidance.

- David Malamed: another Forensic Accountant and Investigator in which his videos show examples in how to detect and uncover fraud especially via Excel, I really liked his story in how he became a Forensic Accountant from what he was doing before.

I wanted to complete the forensic accounting course as quickly as I could. This was because I booked myself for the Post Office event in Walton-on-Thames, Surrey for 3rd May 2024. This had the Forensic Accountant hero from Second Sight, Ian Henderson and was hosted by the excellent journalist Nick Wallis. I was glad to have watched bits of the Horizon IT scandal inquiry before this including to date excellent cross examination by Barristers Jason Beer KC and Julian Blake KC.

Specifically the two days before the 3rd May event were brilliant as online I was able watch former Sub Postmistress Seema Misra look right in the eye of Martin Smith who was the Barrister of Cartright King on behalf of the Post Office during the cross examinations over (non) disclosure issues.

Mrs Misra had been falsely convicted and went to prison whilst she was pregnant, she had been found falsely guilty on the exact day of her other son’s birthday.

Within my forensic accounting course, I reviewed three examples that I had known about of fraud within social housing. These included:

- Former Deputy Chief Executive Lakhbir Jaspal of Accord Housing where he had entered fraudulent transactions which he then used the funds to buy Subway Restaurant franchises. The fraud amounted to £325,000.

- Accord Housing in which a former senior financial manager Steven Halford stole £82,000 to fund his £1,000 a day drugs addiction.

- Lewisham Homes whereby a former Housing Officer Adeola Adenuga was jailed after eventually pleading guilty to fraud over four years between 2005 and 2009, this cost two councils more than £150,000.

It was Ms Adenuga’s fraud that enabled me to think hard about how she achieved this across the 4 years. As I went through the latter topics from my course, one module referred to CAATs (Computer Assisted Auditing Techniques). I was amazed in what I’d learnt about these skills and tried and tested these myself through online software and created some models on Excel.

CAAT enabled me to create my own mapping and fictitious analysis in how to establish what Ms Adenuga did such as via reconciliations, reviews and testing. It enabled me to explore further in how there were other fraud methods that can be used. For example, ghosting such as say within payroll due to there being fictitious employees, or fake suppliers in which fictitious invoices are then being paid to and in some instances being recharged back to customers.

In Ms Adenuga’s example, it was fake customers because sadly the former tenant had died and a fictitious tenancy had subsequently been created by her. This enabled her to pocket the difference in rent being charged. In effect she had sublet the property owned by Lewisham Homes herself.

There seemed to be a clear failure of any reviews, checks or oversight of Ms Adenuga’s fraud. I first became aware of this specific case in 2019 in which I always felt that because this had gone on for a long period of time, others must have been involved and would likely have got away with doing the same thing in other places. For example publicising sponsored charity events as a smokescreen to the fraud as well as to lifestyle in say having a villa in France.

The cabinet member for customer services at the time stated to the local press that “social housing is meant for people who need it, not those who are greedy and seek to make financial gain by depriving others.”

It has been enjoyable and interesting in learning more about the new UK “Failure to Prevent Fraud” offence which forms part of the Economic Crime and Corporate Transparency Act. This offence will be expected to significantly shift the landscape for organisations carrying on a business in the UK, in a similar way to the impact of the UK Bribery Act.

In particular, the act will shift the focus from organisations as victims of fraud (inward fraud) to making it easier for organisations to be prosecuted for fraud committed by employees or third parties that the organisations benefit from (outward fraud).

I have also been looking into financial statement fraud and have commenced reading a book called “Fraud Auditing and Forensic Accounting” by Tommie and Aaron Singleton, Jack Bologna and Robert Linquist. I found further a “Peer-Meta” webinar that was presented by Professor Jianqing Fan really useful. These have further helped me carry out advanced modelling via Excel, PowerBI and SQL.

Having sacrificed late nights, early mornings, evenings and weekends for the past few weeks to complete my forensic accounting course, it made the Post Office event further enjoyable and insightful. It was not surprising that the event was a sellout.

I even spoke to Ian Henderson at the end advising him I completed my course thanks to him whilst mentioning surnames like Misra, Castleton, Patel, Allen, and Bates. He wished me good luck after shaking hands.