….. I’d been contacted about fraudulent payments for overtime at PHSO by whistleblowers and after asking a FOI I’d discovered that PHSO don’t keep any records regarding overtime and bonus pay on a monthly basis.  Which effectively meant they could not defend against allegations as they did not store the data. Even without actual fraud this is sloppy behaviour from a public body spending tax payer money.

To get up to speed on all the details read part 1 of Fraud, what fraud?   I’ll wait for you.

Right, moving forward, I contacted the National Audit Office (NAO) by email straight after threatening to do so.  I sent them all the information I received from the whistleblowers and the FOI request which revealed the dire lack of record keeping at PHSO. This alone should be of concern to the NAO. With an annual budget of £64.5m their motto is  ‘Helping the nation spend wisely’.  

This would not be the first time that the NAO had investigated the spending of public money by PHSO.  In 2013 the NAO carried out a Procurement Investigation.  Being most efficient at their job the NAO realised that an in depth investigation was required following a routine review of a PHSO Internal Audit.  Good to see these guys are on the ball and not just rubber stamping this stuff through.  (Extract from their Procurement Investigation Report.)

The Audit Committee, as part of its programme of work for 2013-14, asked the Internal Audit provider to review the costs associated with the change programme. Internal Audit performed this work in the Autumn of 2013, focusing on a small number of procurements specific to the change programme. The National Audit Office (NAO) reviews the work of Internal Audit in order to increase our knowledge of the business and to identify any previously unknown risks that need to be addressed as part of our audit approach. In reviewing Internal Audit’s work, we noted their concerns regarding the management of conflicts of interest in procuring services during this transitional period. We judged that these concerns gave rise to the risk that procurements had been unduly influenced. We determined that in order to discharge our responsibilities to conclude on the regular and proper use of public funds by PHSO, we needed to investigate those procurements in more depth.

Looking through the procurement investigation report which was published in September 2014 it can be seen that the NAO focused on 4 key contracts worth over £1 million. (£1,038,867)

The suppliers reviewed

    1. PA Consulting was contracted to help develop the Strategic Plan and design the associated architecture and governance at a cost of £426,332. They provided further services to assist with implementing the Plan at a cost of £390,082.
    2. Rosemary Jackson Consulting Limited was contracted to provide coaching to the senior leadership in PHSO, and subsequently to assist with development of the new Board. Costs to December 2013 are £70,035.
    3. BritainThinks Limited performed a Diagnostic Project supporting the Strategy Refresh with a cost to PHSO of £46,560 and a Deliberative Research Project into complaints handling in the NHS with a cost of £61,572.
    4. Conroy Consulting Limited was contracted to provide specific assessment support for the recruitment of senior management within PHSO. The total costs were £44,286.

A conflict of interests would arise where a company or individual were given preference due to a previous working relationship or where there was insufficient competition – as in a single tender contract.  Turns out that Dame Julie Mellor, the Ombudsman had previous working relationships with all the successful organisations and two of the four contracts were agreed by single tender.

Interests of the Ombudsman were seen in each of the procurements identified. Her former employer PwC bid for the Strategic Plan contract. She identified several suppliers for the Diagnostic Project contract, with one of the lead consultants from the successful firm, BritainThinks, a former colleague from when they were directors in two organisations. The senior leadership coaching contract was awarded to Rosemary Jackson Consulting Limited a company run by a business colleague with whom the Ombudsman had briefly incorporated a company in the late 1990s. This company never traded. HR was consulted and agreed that this could be done under single tender action. The Behavioural Event Analysis element of the recruitment assessment contract was also awarded through single tender, to Conroy Consulting Limited; a company run by a former colleague from a previous employment.

This may look very much like a conflict of interests to you and I, especially as much was not declared during the recruitment process, but those experts at the NAO know differently and concluded that;

Our work has enabled us to conclude that there was no evidence of actual conflicts of interests. W e also did not observe any instances where a competitive procurement decision appeared to have been unduly influenced. We would note though that this conclusion could only be made after our detailed examination, and that on the basis of the actions taken and the decisions documented by the PHSO that it would find it difficult to robustly defend itself against the charge that interests played a part in decision making.

You see these guys look beyond the actions taken and the decisions documented, the kinds of things we would think of as evidence, and are able to determine is was only a ‘perceived’ conflict of interest when Dame Julie Mellor awarded over a million pounds worth of contracts to previous colleagues.

With such thorough investigations the National Audit Office were definitely the ones to find the missing data on the fraudulent payment issue but for some reason they failed to respond to my email.  I realised that I would need to send a letter by recorded delivery next time. The only problem was that due to on-going building work my house was in turmoil and I had no idea where my printer was. So it wasn’t until the 16th November that I could get that letter sent off and this is what I said.

16th November 2018

Request to the National Audit Office for an independent review

of The Parliamentary and Health Service Ombudsman

My name is Della Reynolds and I am the coordinator of PHSOtheFACTS.  In April 2018 I was contacted by members of PHSO staff. They were very concerned about the misappropriation of funds and what they saw as management condoned fraud at PHSO.  The first concern here must be that the members of staff were unable to raise their concerns internally to any effect as confirmed in this statement. 

“As a last resort, we are writing to you as management are ignoring serious fraud issues and are actually promoting it. We hope you can apply pressure by asking for relevant info relating to the fraud and by highlighting it to parliament.”

PHSO recently released a peer-review report which served as an external audit to consider whether PHSO was ‘good value for money’.  The report concluded at point 5.2. that PHSO had sound financial strategies in place.  Value for money report

      • Financial monitoring and governance arrangements have been improved, with enhanced financial literacy in key roles and a governance framework that supports better decision-making;

The content of the correspondence from PHSO staff, which is printed in full below, plus my further inquiries using FOI would suggest that this is in fact not the case.  It would appear that the outsourcing system in place at PHSO prevents this organisation from accounting accurately for the spending of public money in regard to overtime and bonus payments.  They would therefore have great difficulty defending themselves against the claim of fraud highlighted below. During a time of austerity and cuts to public services ‘value for money’ is essential, as is a mechanism to accurately monitor money spent.  Both appear to be absent in this case.

Here is the full transcript from PHSO staff regarding the misuse of funds prior to the end of the financial year 2017/2018. 

                  [At this point I put in all the facts which can be seen in Fraud, what fraud? part 1. ]

I am aware that PACAC have limited powers to investigate and given that sound financial management is essential in the current environment I am requesting that the National Audit Office carry out an independent review of PHSO in order to establish the facts and place a report of such in the public domain. 

I am sending this correspondence by recorded delivery and look forward to hearing from you in the near future.

Yours sincerely.

On the 6th December I got a response from the NAO Director no less. So they were clearly taking this seriously.


Given that the NAO were able to initiate an investigation into procurement I was surprised to find that they could not investigate PHSO as it was a body ‘audited under agreement’ and consequently beyond their remit. Now that did surprise me. It would appear that PHSO would have to invite in the inspectors and why would they do that if senior management had condoned fraudulent overtime payments in the first place?  On the same basis PHSO must have agreed to the previous ‘procurement’ investigation which just goes to show how confident they must have been that nothing untoward would be found despite the apparently contentious actions taken and decisions documented. I hate to be picky but the whole ‘agreement’ thingy does seem to be something of a loophole.

Not to worry though as I had been given another lead by the NAO and as a good citizen I took the time to pursue truth and justice via Action Fraud.  Good to know that there are so many publicly funded organisations protecting us.

In Fraud, what fraud part 3 I will tell you how the select committee PACAC reacted to the whistleblowers account of fraud at PHSO.