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1 Case 6 Bulletin 19 Corruption Published May 2013 For archived bulletins, learning reports and related background documents please visit learning@ipcc.gsi.gov.uk This document is classified as NOT PROTECTIVELY MARKED in accordance with the IPCC s protective marking scheme Reconciling expenditure Investigation into credit card use, raising issues about: Auditing of credit card use Responsibility for reconciling payments and cash withdra wals Managing petty cash Changing combination codes on secure cabinets Overview of incident Ms A was responsible for managing a team of handlers who dealt with covert human intelligence sources. The unit that Ms A worked in used credit cards, issued in a covert identity to prevent a direct link to the police force, to pay accommodation or travel costs for meetings with intelligence sources and to pay for incidental expenses i ncurred during these meetings. The cards were also used to withdraw money to top-up the petty cash float which was held in the office. Covert credit cards had been issued to all the staff in the unit, except for the senior officer, as there was no operational need for him to have one, and the two newest members of the team. This meant that there were occasions when the cards were not used by the person they had been assigned to. A booking-out process was in place for both the credit cards and money from the petty-cash float. This required the removal of either to be counter-signed, preferably by a supervising officer, and the details recorded in the relevant log. Mr B, a handler based within the unit managed by Ms A, had responsibility for reconciling the credit card statement against receipts. As the credit cards were issued in a covert identity, the bank statements were sent by post to a central location and then forwarded to the unit. This meant the statements were often received several months after they had been sent out. As part of his role Mr B was required to access the credit card statement online to prevent any late payment charges or interest being incurred. Money from a separate bank account was used to pay off the credit card balances. When he was attempting to reconcile the accounts he noticed that the debit balance for the card assigned to Ms A was unusually high. Mr B showed Ms A the statement, and she said she had made a number of payments to an informant, as well as making a number of withdrawals to topup the petty cash float. Independent Police Complaints Commission. All Rights Reserved. Page 1 of 5

2 Mr B then spent some time away from the office. When he returned some physical statements had arrived for the previous months, so he was able to conduct the reconciliation. Ms A then informed Mr B that she had been using credit cards assigned to other people, so the use on the cards would be more realistic, mirroring the level of transactions that would be seen on a normal credit card. As a controller, she had access to all the credit cards which were kept in a locked cupboard in the senior officer s room Again, Ms A claimed that some of the larger debit-balances on some of the cards would have been payments to an informant. Ms A then went on to suggest that Mr B should just pay off the cards as new cards were being issued to the unit. The expenditure was nearly 10,000 and the majority originated from cards directly assigned to Ms A. Mr B was concerned by the suggestion that he should just pay off the credit card bills, and decided to speak to Mr C, the other controller working within the unit. Mr C asked Mr B to create a list detailing the un-receipted expenditure that could not be accounted for. Mr B then gave this list to Ms A, but she informed him that she was too busy to look at it but would review it the following week. The next week Ms A was again provided with a copy of the un-receipted transactions. Ms A informed Mr B that she did have receipts for some of the transactions and had made a note of some of the payments in her diary, and had made a note of these on the printed copies of the list. When Mr B challenged her about the withdrawals that she had not marked she advised him to pay them and treat them as payments to the informant or to the petty-cash float and that she would sign them off. When the log book for the petty-cash float was checked the deposits did not match those detailed by Ms A. Mr B remained concerned and took the annotated list to Mr C. Mr C was not happy with the explanation given, as he knew that the informant mentioned had previously been paid money, but not for some time. Mr C promised to raise the issue with Mr D, the senior officer in the unit. The next day Ms A informed Mr B that she had been able to attribute more of the transactions to the informant and the petty-cash float. She challenged him about why he had totalled the payments to the informant saying that it was nothing to do with him how much the informant had been paid. Ms A claimed that there was a decision log in the informant s file relating to the payment. She then asked when another payment would be made to pay off the balances. When Mr D checked the informant s file he found that a policy decision had been recorded in the informant s file to send occasional financial assistance if needed by post to his dependants while he remained in prison, with a maximum amount of 100. However, there were no documents to indicate that any money had been sent. No evidence was found to suggest that a policy decision ever existed in which it was agreed that the informant would receive any financial remuneration upon release from prison. This thereby contradicted evidence from Ms A that she had been authorised to make payments to the informant on his release. The next day Ms A was suspended from work. Independent Police Complaints Commission. All Rights Reserved. Page 2 of 5

3 Subsequent investigation found that Ms A had not been given any authority to make payments to the informant and that he had not received any cash payments since he was de-authorised as a covert human intelligence source eight years before the matter came to light. Type of investigation IPCC independent investigation. Recommendations Finding 1 Use of credit cards 1. While the use of a credit card at the time may not have been easily identifiable, the fact that a covert credit card was used at the frequency identified for at least 12 months is a cause for concern. Recommendation 1 2. Robust financial audit processes and intrusive management must be put in place to enable the police force to detect abuse of credit cards at an early stage. Finding 2 Reconciliation of payments 3. The practice whereby a single member of staff, Mr B, was given responsibility for reconciling all payments or cash withdrawals against the credit card statements was flawed, exacerbated by the fact that this person was not in a management position and was therefore checking the credit card statements of his peers and supervising officers. 4. As a handler, Mr B was not in a position to identify whether expenditure had been made for legitimate purposes, and no checks were made against any operational paperwork or against the petty cash book. It was only because the value and volume of the expenditures on Ms A s credit card were noted to be unusually high that the suspicious cash withdrawals eventually came to light. 5. Subsequent investigation identified that this practice was specific to the unit involved and was not replicated across the police force. 6. As the police force took action to address this issue prior to the completion of the investigation no recommendation was made relating to this issue. Finding 3 Managing petty cash 7. The petty cash book showed there had been approximately 11 checks of the money contained in the float against the balance shown in the book over a two-year period. 8. The petty cash book was found to be disorganised with information missing for some of the transactions. 9. No evidence was found to suggest that receipts, which were bundled together in an envelope, had been checked against purported expenditure to ensure the expense was Independent Police Complaints Commission. All Rights Reserved. Page 3 of 5

4 justified. Nor did it appear that a monthly petty cash spreadsheet had been produced in accordance with policy. Recommendation The senior officer must ensure that they are able to demonstrate clear accountable audit processes in relation to financial accounting. Finding 4 Access to secure cabinets 11. Neither the combination code for the senior officer s room or the cabinet where the credit cards and petty cash float were held were changed on a regular basis, or when a member of staff temporarily promoted to the role of controller returned to his role as a handler. Recommendation Codes to the room and the cabinet should be changed on at least a six monthly basis and whenever there is a change in staff due to the sensitive nature of the information which is being stored. Finding 5 Breaches of standard operating procedures 13. During the investigation it was identified that a number of actions by s taff working within the unit fell outside of standard operating procedures. This included the withdrawal of cash on credit cards and the handling of petty cash. Recommendation The police force was asked to look at these issues in order to prevent a recurrence of similar incidents. Force response Recommendation 1 1. The police force accepted this recommendation. All Source Management Unit (SMU) managers have been reminded of the requirement to comply with standard operating procedures in respect of the audit of the issue and use of credit cards. Finding 2 2. The police force had already taken steps to address this finding prior to the completion of the investigation. An immediate inspection across all its SMUs established that only one was operating in accordance with anything other than best practice. Recommendation 2 3. The police force accepted this recommendation. All senior officers have been reminded that it is part of prescribed management assurance checks and standard operating procedures to regularly check that their staff understand and comply with financial accounting instructions. Independent Police Complaints Commission. All Rights Reserved. Page 4 of 5

5 Recommendation 3 4. The police force accepted this recommendation. SMU managers have been reminded of the security instructions relating to changing the codes to the room and security cabinets used to store credit cards and the petty cash float. Recommendation 4 5. The police force accepted this recommendation. Following a comprehensive audit, breaches of standard operating procedures in respect of credit cards and financial accounting were only discovered in one SMU. The inspection of petty cash records has now been incorporated into the assurance programme undertaken by the operational security officer across all SMUs. Outcomes for officers and staff Ms A 1. Ms A was dismissed following a disciplinary hearing. ALL SMU MANAGERS 2. All managers of SMUs have been reminded of the need to follow the police force s standard operating procedures in relation to the issue, use, security, and audit of credit cards and cash. If you need more information about this case, please learning@ipcc.gsi.gov.uk Independent Police Complaints Commission. All Rights Reserved. Page 5 of 5