Calling in the experts

Medway Council has called in forensic accountants following the launch of a fraud investigation into the activities of the council’s trading company.

According to the Council’s leader, some of the projects undertaken by Medway Commercial Group (MCG) were “a departure from its expertise” and were a key weakness according to a probe into its management and finances.

The forensic accountants were called in last year and the Council leader said that he was “very alarmed” at the feedback he received.

Subsequently, an MCG employee was suspended, and an interim Chief Executive appointed. In addition, more robust accounting records and working practices have now been put in place at MCG.

Meanwhile, last month, a report revealed that MCG made an actual loss of £667,000 in 2018/19 and is set for a projected loss of £400,000 in 2019/20.

The report also said that several additional projects “had been progressed which were outside the core business and had not provided an adequate return on investment”. These have now ceased trading or been transferred.

MCG began trading in April 2016 and was contracted to run four key business areas: CCTV, alarm systems, school services, and recruitment.

It was also asked by the Council to develop a new £25 million independent school for children with special educational needs in Gillingham but the authority has since taken this scheme out of its hands.

Forensic accountants are often called in to investigate cases of malpractice. The sooner these experts get to work, the less money is likely to be lost if criminality or mismanagement is going on.

Their work involves identifying, uncovering and preparing data and information to be used as evidence in court or presented to an organisation that is concerned about the management of part of their operations.

Roger Isaacs, Forensic Partner at Milsted Langdon, said: “Bringing in a forensic accountant can be the first step in uncovering criminality or poor management, as this case demonstrates.

“Acting early can limit the damage of fraud or mismanagement, so if you suspect that the poor performance of a department, office or subsidiary may be down to these factors it is worth instructing a forensic accountant.”
Author: Roger Isaacs 9 August 2019

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