FEATURE FOCUS: SCHOOL FINANCE
Fraud prevention in academies
billion of this figure relates to procurement fraud, grant fraud or payroll fraud – all of which could be targeted at an academy trust. Within the not for profit sector the annual cost
of fraud was estimated at £2.5 billion for 2018, £200 million more than in 2017. Academy trusts can be seen to sit within both
of these groups, funded by the public sector and structured and governed as a charity. Furthermore, we should be in no doubt that those seeking to gain from fraudulent activity do not feel bad about targeting organisations commonly perceived as doing good within our society.
Activity Procurement fraud I
n our first feature this month looking at school finances, Robin Evans, Partner and
Head of Academies at MHA Carpenter Box, offers advice on identifying and preventing internal and external fraud in academies.
The scale of fraud in the UK Being an accountant, I’d like to start this article with a couple of big numbers. It is estimated that fraud in the UK costs public services £21 billion every year. Well over half of that figure relates to tax fraud, whether VAT, income tax, vehicle excise duty (car tax) or others. However, more than £2
Internal
Abuse of credit card Fake invoice creation
Diversion of income Creation of “shadow” accounts Payroll fraud Creating fictitious employees
What is fraud? Fraud is defined by the Fraud Act 2006 and is essentially wrongful and dishonest behaviour undertaken for personal gain. The Act targets not
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www.education-today.co.uk Before considering what can be done to
mitigate against some of these activities, let’s consider a well-known case study. It’s an extreme case but illustrates just how serious and
November 2019
just the consequences of the fraudster’s actions but their behaviour, so there is a need to establish an element of dishonesty and evidence of an intention to make a gain (or cause a loss). The Act identifies three types of fraud: • False representation • Failing to disclose information • Abusing a position of trust
Fraudulent activity may arise from within an
organisation (internal) or from an outside attack (external). The following gives examples of some common frauds to which an academy trust may be vulnerable:
External Hijacking the bank account
Supplier bank details fraudulently changed
False fundraising in name of academy Cheques / cash / donated goods stolen
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