Fraud prevention in schools and trusts | National Governance Association

Focusing on fraud prevention: protecting school funds

This International Fraud Awareness Week, we're examining the risk of fraud in schools and trusts and how to protect precious funds.

Blog

21/11/2024

We all work hard to make sure that school funds are well spent. Our 2024 annual governance survey highlights just how laser-focused governors and trustees are when it comes to finance. ‘Balancing the budget’ was reported as the number one challenge for boards this year – no surprise given the pressures on staffing costs, energy bills and provision for pupils with SEND.

But how often do we think about protecting precious funds from the risk of fraud? It can be all too easy to think “it won’t happen here” but fraud can and does happen in schools and trusts. The Education and Skills Funding Agency’s (ESFA’s) most recent annual report revealed that £91 million of fraud was prevented and detected in 2023-24; £32.4 million more than the previous year.

This week is International Fraud Awareness Week – a global effort to minimise the impact of fraud. Effective governance offers a crucial line of defence: ensuring transparency and calling out wrongdoing. So how can we manage the risk of fraud in schools and trusts to protect public money? And what should we do if there are signs that something is amiss?

Be aware

Fraud is deception carried out in order to gain an unfair advantage or to disadvantage another. It may involve the misuse of funds or other resources, or the supply of false information.

Fraud comes in many forms but common types in the UK include theft, fictitious and falsification of invoices, and credit card fraud. In schools and trusts, fraud can be internal (such as a breach of procurement regulations or false reporting) or external (including cyber crime).

We all need to be particularly vigilant and alert to potential cyber attacks in our schools and trusts. Recent cases, including one trust scammed out of more than £385,000 by cyber attackers posing as a construction company, serve as an alarming reminder of the risks.

NGA’s cyber security monitoring tool sets out steps to take to build cyber security awareness and make sure the right controls are in place.

Be proactive

Given the huge influence that Ofsted has, it’s sometimes forgotten that governing boards are the accountable body in schools and trusts. We provide the most immediate, responsive and continuous line of accountability, we understand the local context and we’re answerable to stakeholders.

Key to holding school/trust leaders to account is making sure that robust financial controls are in place: a crucial safeguard against fraud. To do so, we must understand the fundamentals of how school/trust finance works. The Department for Education (DfE) is clear that everyone on the governing board should have at least a basic understanding of the financial cycle and legal requirements on accountability and spending, together with oversight of spending and an understanding of the school’s/trust’s financial position.

Completing the Schools financial value standard (SFVS) in maintained schools and School resource management self-assessment checklist (SRMSAC) in academy trusts is an important annual task for governing boards. These checks make sure that the organisation is meeting the right standards for good financial health and resource management.

And of course, risk management is a fundamental part of governance. This involves identifying, assessing and evaluating (through a risk register) which financial and other risks could stop the school/trust from reaching its goals.

Be courageous

NGA has always emphasised the need for governors and trustees to have courageous conversations. After all, how can we hold school leaders to account if we’re unable to ask challenging questions when an issue is causing concern?

None of us should be afraid to question the information we’re provided with, and we should expect to receive clear answers. Providing effective challenge should be assertive but never aggressive and focus on getting answers that lead to a way forward. Thankfully, instances of fraud are rare and so in most cases, where challenges arise, this type of discussion should give the board confidence that the right action is being taken.

If concerns remain, suspected fraud or financial irregularity should be reported to the DfE.

Governing boards also have important responsibilities to ensure school/trust staff can speak up about suspected wrongdoing, risk or malpractice. Your school/trust whistleblowing procedure should clearly set out how staff can make a disclosure about a criminal offence (such as fraud) as well as other types of wrongdoing if they feel they may be exposed to victimisation or other unfair treatment.

By staying informed, being vigilant, and taking proactive steps, governors and trustees can play a vital role in protecting school funds from fraud. Remember, your vigilance and courage are crucial in ensuring the financial integrity of your school or trust.