In July news emerged of an investigation into an alleged fraud at a London academy after £4million of school funds disappeared. The case
was kept under wraps for two years while parents were asked not to speak to
reporters although hawk-eyed readers of the Department for Education’s annual
accounts for 2012/13 might have noticed oblique references to an “irregularity”
at the Haberdashers Aske’s academy trust. The case is believed to be largest
school fraud in British education history.
While school managers might expect to notice and stop
millions of pounds being siphoned off, schools are at risk from fraud
perpetrated by those on the inside and the outside. Complacency - “it could
never happen here” – worsens that vulnerability.
A perusal of Google news over a month or two will unearth
cases of schools falling victim to managers signing off fake timesheets,
finance assistants using cards to pay for holidays and heads appointing friends
and family without due process. There are many more con artists outside trying
to defraud schools – last year a solicitor was jailed for his part in tricking
a sixth form college into paying over £730,000 intended for a genuine
contractor into a bogus bank account.
While fraud risks cannot be eliminated, schools can mitigate
them. A few simple steps can help:
1. Get the tone from the top right
School leaders need to lead by example and
emphasise probity. That means a fraud policy with zero tolerance of
irregularity. There should be a register of interests for governors, senior
managers and other staff with significant financial authority or influence.
Similarly there should be a policy on gift and hospitality. Everyone should
know about these policies – where to find them and what they require.
2. Assess risks and mitigate them
The identification, assessment and management
of fraud risks should be covered by school risk registers – particularly in the
risky area of purchasing. There is plenty
of free guidance available online including fraud risk self-assessments. The
Chartered Institute of Public Finance and Accountancy recently published a Schools Fraud Health Check. Simple
checks and balances with segregation of duties and independent review of
transactions are effective in mitigating risks. This is more challenging for
smaller schools, particularly primaries. However, there is normally a second
pair of eyes, even if it is a governor, who can ensure that there is never too
much reliance upon one member of staff.
3. Look out for risk indicators
Both the Education Funding Agency and the
Audit Commission have published advice on fraud risk indicators. The
Commission’s list of behavioural warning signs included: reluctance to take
holiday entitlement; poor work practices such as “bending rules”; a lifestyle
not equal to income. There may be innocent reasons for strange behaviour but
sometimes these can be indications of a staff member with something to
hide.
4. Use data
While there are software packages to
highlight strange patterns in financial data, a spreadsheet is sometimes enough
to spot anomalies. A key check to perform is looking at the top dozen or so
suppliers over the last year compared with previous years – does it make sense?
There may be nothing untoward about using the same suppliers or contractors
again and again. But, on the other hand, it may be a sign of an overly cosy or
even inappropriate relationship with a supplier. (Aside from fraud risks, this
simple review of spend patterns may identify value-for-money opportunities.)
5. Welcome whistleblowing
Appropriate arrangements for confidential
reporting are not only a legal must-have, whistleblowing is vital defence
against fraud and other wrong-doing. Staff must know where to find the
whistleblowing policy. The policy itself should link into the governance
framework, including those elements perceived as most independent e.g. the
audit committee, the internal and external auditors.
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