Becci Goodchild summarises the most common types of criminality in the education sector

Over the past few years, fraud has become an increasing area of concern for schools, with threats coming from both internal and external sources. The increased sophistication of cyber and digital fraud, cost of living pressures and political influences have all contributed to the rise in fraud attempts.

Historically, as most are charities, independent schools have considered themselves immune from sophisticated fraud attempts. However, recent high-profile instances, such as the British Library cyberattack, have challenged this assumption.

Common fraud types

Donation fraud – charitable foundations and development office

Donation fraud occurs when fraudulent activities are carried out in the name of a school or its separate fundraising arm, to solicit donations from parents, alumni and other donors. This can include fake fundraising campaigns, phishing emails and fraudulent websites that mimic legitimate charities. Donors are tricked into giving money to fraudsters, believing they are supporting a genuine cause. The increase of financial-based digital fraud and social media has contributed to this type of fraud.

Expense fraud

This is one of the most widespread types of fraud, often involving relatively small amounts over a period of time, which go undetected. This can include claiming for non-existent expenses, personal expenses disguised as business costs or exaggerating the cost of legitimate expenses. Expense fraud can be particularly damaging as it directly affects the school’s financial resources.

Procurement fraud

Procurement fraud involves corrupt practices in the purchasing process. A recent case in the sector involved a failure to declare a connection to a company, where kickbacks were being supplied in exchange for contracts. Related practices of bid rigging, where the procurement process is manipulated to favour a particular supplier, may also occur.

Payroll fraud

Payroll fraud occurs when employees manipulate the payroll system for personal gain. This can include creating fake employees (ghost employees), inflating hours worked or unauthorised salary increases.

Cyber fraud

With the increasing reliance on digital platforms, cyber fraud has become a significant threat to charities. This includes hacking, phishing and ransomware attacks that target sensitive data and financial information. Cyber fraud can lead to substantial financial losses and damage to the organisation’s reputation, as we have seen with the outages and disruption in the British Library attack.

Artificial intelligence fraud

Artificial intelligence fraud in schools is an ever-evolving risk area and can relate to the increasing misuse of AI intelligence tools used by pupils to write essays, answers exam questions or even impersonate pupils using false identities during exams. This makes it extremely difficult for teachers to have a true and accurate view of the pupil’s development and can lead to broader concerns around academic credentials.

Preventing fraud in the education sector

To protect against these types of fraud, schools should implement robust internal controls and foster a culture of transparency and accountability. Here are some key approaches to help minimise the risk and impact of fraud:

• Regular audits: conduct regular internal audits to detect and prevent fraudulent activities and identify areas for improvement in the control frameworks.
• Training and awareness: educate staff and volunteers about the signs of fraud and the importance of reporting suspicious activities.
• Strong governance: establish clear policies and procedures for financial management, procurement and expense claims.
• Cybersecurity measures: implement strong cybersecurity practices, including regular software updates, secure passwords and employee training on cyber threats.
• Whistleblower policies: encourage a culture where employees feel safe to report fraudulent activities without fear of retaliation.
• Develop a fraud response plan: implement a clear action plan for dealing with fraud, including how investigations are undertaken.
• Fraud trends: stay up to date with local and national fraud trends/emerging risks that are targeting the sector.

Fraud in the education sector can have devastating effects, not only financially but also on the trust and support of parents, staff and other stakeholders. By understanding the common types of fraud and implementing effective prevention strategies, schools can safeguard their resources and continue to make a positive impact.

Becci Goodchild is a managing consultant at audit, tax, and consulting advisor RSM.

Becci Goodchild