Avoiding Fraud in Schools: Top Tips from Keystone Knowledge

At Keystone Knowledge, we understand the critical importance of safeguarding educational institutions against fraud. To help schools navigate this complex issue, we've compiled essential tips from the UK Government's guidance on potential fraud. Our National Assurance Director, Matthew Clements-Wheeler, shares his insights on the best practices for preventing fraud in educational settings.

Recognise Personal Motives
Be aware of staff experiencing financial difficulties or lifestyle inconsistencies. Matthew Clements-Wheeler points out, "Personal financial stress can often lead to fraudulent behaviour if proper controls aren't in place. Good leadership depends on understanding what's going on in the personal lives of colleagues. That way, you can look after them and keep them safe from temptation."
Top tip: Establish a simple, confidential process for line managers to flag when a budget holder is going through difficulties.

Identify Organisational Pressures
Schools under financial strain are at higher risk of fraud. Matthew highlights, "Organisational stress can create environments where fraud is more likely to occur." Pressure can lead to misstatement of income or expenditure in order to meet targets or, when staff are under operational pressure, they might sign off expense claims without thorough checks or fail to spot unjustified overtime claims.
Top tip: Identify critical performance measures that could lead to fraud and implement specific checks.

Strengthen Internal Controls
Transparency in procedures and strong management oversight are key. "Clear and enforced internal controls are the first line of defence against fraud," says Matthew. He stresses that a disconnect between policy and practice shouldn't be tolerated. "When people get the idea it's okay not to follow rules, rule-breaking becomes a habit."
Top tip: Make sure all forms and procedures contain only relevant information to prevent errors or shortcuts.

Enhance Transaction Monitoring
Regular transaction reviews can help identify anomalies. Matthew advises, "Regular checks ensure that small issues don't snowball into significant problems."
Top tip: Conduct spot checks to ensure overtime claims align with attendance records.

Audit Regularly
Conducting regular audits can spot discrepancies early. "Regular audits are essential for maintaining financial integrity," adds Matthew. He goes on to say that "it should be different members of staff who compile asset registers and reconcile them for better control".
Top tip: Use impartial methods to randomly select samples for audit to ensure fairness.

Segregate Duties
Divide responsibilities to ensure no single person controls all aspects of financial transactions. "Segregation of duties is a fundamental principle in fraud prevention," Matthew explains, noting that taking away opportunity reduces fraud risk.
Top tip: Design segregation of duties into roles and processes from the outset and account for absence cover.

Maintain Accurate Records
Keeping detailed and up-to-date records is crucial. Matthew notes, "Accurate records are key to tracking financial activities."
Top tip: Delayed or incomplete reports should raise immediate concern and require prompt follow-up.

Monitor Employee Behaviour
Behavioural red flags, such as reluctance to take leave, can indicate fraudulent activities. "Be aware of unusual behaviour patterns," says Matthew.
Top tip: Evaluate if staff working across multiple sites may be masking fraud or theft.

Implement Robust IT Controls
Strong IT controls are vital in today's digital age. Matthew stresses, "IT controls help prevent data breaches and fraud."
Top tip: Use multi-factor authentication and ensure access is revoked promptly when employees change roles.

Establish a Fraud Response Plan
Having a predefined response plan ensures quick and effective action when fraud is detected. "It's important to have a calm, non-judgemental protocol in place to respond to fraud," Matthew concludes.
Top tip: Conduct practice investigations to familiarise staff with the fraud procedure.

By following these tips, schools can create a safer financial environment and focus on their primary mission: educating the next generation. At Keystone Knowledge, we're committed to helping educational institutions maintain integrity and trust through proactive fraud prevention measures.