Like any business, schools need to be vigilant in order to ensure that they do not fall victim to fraudsters.
According to the Times Educational Supplement (TES), the academy chain United Learning paid what they believed to be a ‘valid, appropriately approved’ construction invoice of £240,800 into a bank account which was later found to be fraudulent.
Although they were fortunate to recover the majority of the sum the multi academy trust is still working to recover around £19,000. In the trust’s annual report, it admitted that at the time of the incident “internal controls in place were insufficient “although it has since tightened security.”
A similar fraud incident befell Bright Futures Educational Trust who also paid a “valid, appropriately approved invoice for £15,999 into a fraudulent bank account”. It too has been forced to review its security and has since introduced additional controls, whilst working to recover a balance of around £5,000 of the funds.
Griffin Schools Trust became a victim of fraud when it changed a supplier’s bank details, paying £10,734 into a false account.
Fraud attacks from external conmen are not the only type of activity schools need to protect themselves against.
The National Association of School Business Management (NASBM), warns that schools should also be vigilant to the risks of internal fraud. Such incidents are categorised as acts committed by a connected party – this does not have to be an employee but can be any person who has access to the financial systems or assets.
Research by the Association of Certified Fraud Examiners suggests that in 92% of the nearly 1,500 cases of fraud they reviewed in 2014, at least one common and detectable behavioural ‘red flag’ was present prior to making the discovery.
The research also highlighted in financial terms the importance of early detection, as the average loss is significantly smaller in cases where fraud is detected within the first 6 months.
Luke Morgan, a partner with Palmers, who leads the team specialising in debt advice for the education sector, said: “Schools are already struggling to balance their books and the cost of falling victim to fraud could put enormous strain on the finances of schools at a time when, arguably, they can least afford it.”
Luke added: “If cash flow becomes an issue, it is crucial to get advice at an early stage. Seeking that advice from a legal professional who understands the education sector is particularly important.”
To find out how we can help you with all aspects of debt or fraud advice, please contact us.