Identifying and preventing fraud

Sadly, we’ve all seen storied in the media regarding fraud in schools. Perpetrators range from school business managers to heads and other staff. Millions of pounds have been stolen, exam results altered, and reputations tainted.

SBMs, heads and governors should take every action to prevent fraud in schools (as stated in the SFVS assessment, D21).

All staff need to receive training and be required to read fraud policies. There must be a culture and ethos of fraud prevention in school – openness, honesty, respect, with a robust whistleblowing policy and protection from recriminations.

Fraud: what and why?

Fraud is wrongful or criminal deception intended to result in financial or personal gain. There are a range of reasons it happens, including:

• human nature and greed
• complaceny – ‘none of our staff would do such a thing’
• poor financial procedures
• lack of controls and reporting
• lack of technical knowledge
• opportunities to find ways round controls. 

Fraud uncovered

There are various ways that fraud can take place in school – and it isn’t always about money. The following table highlights examples of fraudulent situations and how they can be avoided or resolved. 

What could make you suspicious of potential fraud?

• Improper paperwork, such as invoices or receipts missing, or no countersigning. Absence of a key member of finance staff resulting in checks not being carried out.
• Asking for signatures on the fly. For example, finding signatory when they are busy; invoices or orders covered up when signature asked for.
• Changes of lifestyle: has someone started having expensive holidays, new cars, new clothes? Or needing more resources for department, or not taking holidays in order to be there to cover the fraud?
• Lack of counter checks – procedures are lax and paperwork is chaotic. Hard to have segregation of duties in small schools with few staff to carry out counter checks.
• Remarks made in SLT or line management meetings around staff being absent or leaving but still being paid; requests for further payments for a similar or duplicate resource; requesting a change to a standard procedure to make it easier to order or pay for resources. 
• Reordering same resources. Why have 40 computer mice been ordered again this month?

What can you do if you suspect fraud has taken place?

• Staff need to know how to apply the whistleblowing policy and report to the appropriate person. For all staff under suspicion, other than the headteacher, concerns should be reported to the headteacher and SBM.
• If the headteacher is suspected of acting fraudulently, the chair of governors should be informed.
• Don’t confront. Gather evidence, keep it safe and then use your whistleblowing policy.
• Advise relevant bodies e.g. local authority, governors or trustees, external auditors.
• Once the issue has been dealt with, assess how it happened and review procedures, reporting to governors the action taken or lessons learned.
• It is better to report a suspicion, even if investigation finds there is no issue.

Strategies for reducing the risk

• Do you have risk assessment procedures in place? Each governing body, as far as possible, will ensure that the principles of internal check and segregation of duties operate in their school. (For example, that the duty of checking and certifying payments is separate from the ordering and receipt of goods and services.)
• What are your accountability measures and who sets/reviews them and how often? Are they appropriate for the number of finance staff in your school?
• Who countersigns for what? Are Bacs payments examined alongside the invoices? Who does this? It shouldn’t be the person who sends the payment or who ordered the resources!
• Do you have a responsible officer who delves into procedures and transactions? While it’s not mandatory, it is good practice. Spot checks often highlight an issue or problem with procedure. See them as your friend and protector.
• External audit: how often is this carried out and who receives the report? Who supplies the information and files to the auditor? The action plan should be written and presented to governors then checked and monitored by them.
• Check procurement methods. Are budget holders able to order to a certain level without checks? Does their SLT line manager countersign invoices over a certain amount and really look at the resources ordered?
• Train your staff. See below...

Prevention is better than cure. See the academy trust guide to reducing fraud for further useful questions and resources.

Whole staff and governor training

Staff and governors must know the financial processes and procedures, even if they are not budget holders, so they can understand if someone is not following the rules. This should be part of induction.

All the relevant policies must be made available to staff. They should feel confident that reporting their suspicions will not result in action being taken against them.

Staff should also be comfortable being investigated, even if they have done nothing wrong. If someone gets the process wrong it doesn’t necessarily mean they are committing fraud but may need a refresher in the procedures!

• Outline some cases to staff and demonstrate how they were dealt with both in reporting and procedures.
• Provide policies in an easy to find place for them to read and understand.
• Explain processes such as petty cash, ordering, signing and invoices process.
• Stress the importance of being honest with public funding.
• Ensure staff are reassured by the policies in place.
• Ask for cooperation rather than suspicious snooping!

Revisit your policies, particlarly those around whistleblowing, financial procedures and risk assessment (see school model policy templates for a full list). Keep track of updates with the policy tracker.