The annual audit and assessing fraud risk

Fraudsters target weaknesses in an organisation, they know how to make a plausible approach and how to manipulate people and situations. Academies have access to significant sums of money, and not only could this attract the attention of people who target such organisations remotely, it may also pose a temptation to a range of people who engage with the trust on a daily basis.

Although instances of major fraud are rare, the risk should not be underestimated, and the only protection a trust has is to maintain strong internal controls and implement clear policies and procedures. This means regularly updating the fraud risk assessment and considering new threats as they emerge.

The audit team considers ways in which fraud might occur in the trust and identifies the key controls which will prevent targeted fraud from happening, such as segregation of duties, background checks on suppliers, physical security of valuable assets etc.

We review relevant trust policies, for example related parties and gifts and hospitality, and assess if those policies have been followed or whether they lack clarity and are open to misinterpretation. 

However, the most important feature we look for is evidence that the trust has an active anti-fraud culture and employs a zero-tolerance approach. Is there a good awareness within the trust of the risk of fraud and the associated responsibilities of the senior leadership team? Is there regular training for the wider staff to disseminate information about current risks and the ways in which the trust may be targeted? Is there a whistleblowing process to follow in the case of suspicions of fraud, and is that communicated regularly?

The ESFA publishes reports about its investigations at academy trusts and they are a useful source of information about how things can go wrong. Armed with this knowledge and an effective fraud risk management strategy, most trusts should protect themselves and ensure the resources at their disposal are employed for the benefit of their communities.

The next step

For further information please contact Liz Searby, or your usual UHY advisor. 

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