Fraud and financial irregularity in academy trusts

The Department for Education recently released an update on how to report fraud or financial irregularity in academies. This shows the government's continued emphasis on transparency, integrity and risk management in public sectors. The new Academies Trust Handbook 2025 also outlines requirements regarding fraud, including cybersecurity.

Fraud and financial irregularity are still high-risk areas for academy trusts. Trustees and finance teams should see this as a good time, ahead of the external audit process, to review anti-fraud frameworks, provide training and promote a culture of vigilance and accountability throughout the trust.

Trust handbook requirements

The DfE, via the Academy Trust Handbook stipulate that academy trusts must ensure they are aware of the risk of fraud, theft and irregularity and ensure they have mitigated the risks by putting in place proportionate controls.

Trusts must always take appropriate action where fraud, theft or irregularity is suspected or identified. In case of the latter, the board must notify DfE as soon as possible of all instances of fraud, theft or irregularity exceeding £5,000 individually, or £5,000 cumulatively in any financial year. Unusual or systematic fraud, regardless of value, must also be reported.

What is meant by unusual and systematic fraud?

Unusual fraud refers to incidents that fall outside of routine or expected scenarios and must be reported due to its potential to expose weaknesses in governance or indicate a broader threat.

Systematic fraud refers to situations where fraudulent activity is planned, repeated, and embedded in the academy trust’s operations or processes. It may involve multiple individuals, ongoing abuse of systems, or deliberate circumvention of controls. For example, a long-running scheme where staff claim unworked overtime with collusion from approvers. Systematic fraud indicates that the trust may lack effective oversight, segregation of duties, or internal controls. It often reveals cultural and structural weaknesses and therefore requires urgent reporting and review.

What should an academy trust do?

Read the schedule of typical warning signs produced by the DfE, which provides detailed examples, categorised under the following areas:
- personal motives
- organisational motives
- weaknesses in internal controls
- transactional indicators
- possible methods used to commit or conceal fraud
- recordkeeping, banking and other
Understand what to report and when, as set out in the DfE reporting procedures.
Ensure there are relevant policies in place and that staff have received them (eg. fraud policy and whistle‑blowing protocols) and strong internal controls embedded and that internal and external audit recommendations are implemented in a timely manner.
Implement regular training on fraud awareness and emerging cyber risks.

Key resources

To support trusts in understanding and managing fraud risks, the Department for Education has published the following helpful resources:

Reporting fraud or financial irregularity – Guidance on how to report actual or suspected cases to the DfE
Indicators of potential fraud – A comprehensive list of red flags and warning signs, grouped into categories such as personal motives, internal control weaknesses, and transactional irregularities
Academy Trust Handbook – The latest 2025 edition, which sets out financial management, governance and reporting requirements for academy trusts, including updated fraud and cybersecurity expectations.