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Academies and Fraud Prevention

Posted by David Butler on August 14, 2017

Academies and Fraud Prevention

As an Academy Trust, along with all other businesses, you must be vigilant to the threat of frauds and have appropriate controls and policies in place to limit your exposure.

The Academies Financial Handbook states you MUST be aware of the risk of fraud, and as far as possible, address this risk. Additionally you MUST notify the ESFA as soon as practical of any instances of fraud, theft and/or irregularity where they exceed £5,000 individually or cumulatively in one financial year (AFH 2017 4.8).

Many academy clients will say that they have not suffered any instances of attempted or actual frauds when we talk to them, but given the national statistics it is likely that nearly all trusts have been subject to at least an attempted fraud of some form. Hopefully the controls in place have prevented a large number of these attempts so there is no actual loss, such that when we discuss fraud with our clients it does not warrant a detailed discussion.

A worthwhile exercise that should be undertaken at least annually, is a review of your fraud prevention policy, in conjunction with your finance procedures to ensure that it is still fit for purpose. Whilst undertaking your review we would recommend that you also review the Action Fraud website. This website is run by the UK’s national reporting centre for fraud, and is a very useful resource for identifying any recent cases of fraud, but also examples of fraud to look out for. The main website can be found here.

A few examples of fraud that an Academy Trust may be susceptible to include:

  • Cheque overpayment fraud – where a customer overpays an amount owed to you via cheque which you then repay to them. This results in what appears to be a legitimate receipt in their bank account.
  • Exploiting assets and information –  Fraud relating to exploiting assets and information can include those who supply information to outsiders for personal gain or use Trust assets for personal gain.
  • Payment fraud – where false payments can be made to bogus suppliers, or money diverted from genuine suppliers
  • False accounting – the manipulation of accounts to show accounts that are not true and fair – examples such as hiding losses, reporting a different position to key regulators (ESFA) etc
  • Personnel management – examples such as staff on sick leaving working elsewhere, abuse of flexible working arrangements, misuse of official time etc.
  • Receipt fraud – It could happen when incoming cash or cheques are stolen, or when the records of the amounts owed by customers are adjusted in return for cash rewards or other incentives.

There are many more examples in the Corporate Fraud section of the website.

Once you have identified how you may be at risk to fraud, it will be easier to design controls, systems and policies to mitigate these risks.

As an example of the scale of frauds being reported to Action Fraud, in the last 5 months there have been over 1,500 frauds reported in Devon 1,800 in Gloucestershire, 850 in Dorset and 650 in Cornwall. It is also likely that that this is just a small proportion of actual and attempted frauds and that a large number have not been reported.

We would remind you also that if there have been any actual frauds identified in the year, the Accounting Officer’s Statement on Regularity, Propriety and Compliance in the annual financial statements would need to be modified to make reference to this, along with the auditors Assurance Report on Regularity. It is essential therefore that the auditor is aware of any frauds and that consistent messages are reported.

If you have any queries on this or any other matters please contact your usual Bishop Fleming contact.