Denis MacShane: the dark side of public money

Once a country's main media outlets cosy up to their favourite ruling elite, the whole process has nothing to do with democracy any more

MacShane and the morality of public spending
Charles Crawford
On 8 November 2012 10:09

Having worked for the Foreign Office for nearly 30 years, mostly in countries going through difficult transitions toward some sort of pluralism, I have spent a lot of time applying myself to how precisely public money is spent overseas, and how appropriate checks and balances need to work in practice to keep things honest.

It turns out not to be quite as easy as you might think.

Every embassy overseas is sent money from London to pay for it running costs and any project work it may be doing. Every month the Ambassador has to send back a detailed return to London certifying that the account in good order.

This month (say) €700 has been spent on buying new winter tyres for the embassy cars. All the paperwork is in order. It looks as if the embassy did what it should have done and obtained three quotes before choosing the best deal.

The paper trail in fact tells nothing significant about what happened. Crucially, are the tyres on the embassy vehicles the new ones bought by the embassy? Unless someone plods out through the snow to the garage to check that too, there is no way of knowing whether the transaction was substantively honest or not. Embassies typically go to great lengths to make sure that the paperwork is in order, but the paperwork may not be attached to real life.

What about embassy curtains? They surely are easy to check? Not necessarily. Sooner or later curtains need replacing. The embassy management section brings in a local curtain expert. Fabrics are chosen. A price is agreed. The curtains appear and look nice. All fine?

On the face of it, yes. Every part of that transaction has been checked, and the new curtains themselves are there. Yet there is room for hank-panky. Maybe the curtain-provider and someone in the management section have quietly agreed that the embassy will buy more fabric than in fact is needed.

The embassy gets its new curtains, but the junior embassy official also quietly gets new curtains. Unless all the precise details and substance of the transaction have been cross-checked by someone else and then linked to what actually happened, there remains a margin for crafty cheating.

One famous FCO fraud concerned pension payments to local citizens who had served the UK during decades past. One day the ambassador happened to be far up-country and decided to call on one of these pensioners to salute him.

Imagine the ambassador's surprise when he discovered that the pensioner had long since died. Someone in the embassy management section for years had been quietly paying out pensions to himself and presenting forged receipts, relying on the likely unwillingness of the embassy to go forth and check whether these individual pensioners actually existed.

A different example from post-war Bosnia. The embassy opened a bank account with a local Bosnian bank once it seemed that a normal banking system was emerging. A year or so later this bank abruptly collapsed.

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