Fraud Awareness - Birmingham City Council

SFPM: Fraud Awareness

FRAUD AWARENESS

Key Contacts

Name Birmingham Audit

Postal Address

Birmingham Audit PO Box 16587 Birmingham B2 2HW

Email BirminghamAudit@.uk

Suspected fraud can also be reported via the Birmingham City Council Website

Report fraud | Birmingham City Council

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SFPM: Fraud Awareness

Fraud Awareness

1 Introduction 2 Fraud and Corruption: Definitions and Types 3 The Fraud Environment 4 Fraud Prevention and Detection 5 Staff Conduct 6 Procedure for Reporting Fraud 7 Internal Audit Investigations

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SFPM: Fraud Awareness

1 Introduction

1.1 Birmingham City Council wants to create a culture where fraud is not acceptable. This commitment is outlined in the City Council's Anti-Fraud & Corruption Policy. The objective of this section of the Schools Financial Procedures Manual is to provide brief guidance for all staff and governors to help: -

? Recognise fraud when it occurs and be alert to the high-risk areas where fraud could arise.

? Recognise factors that encourage fraud and factors that can be used to deter fraud.

? Understand that the governing body of the school regulates the conduct and discipline of all staff in accordance with the Staff Code of Conduct which demands a very high standard of integrity.

? Know what to do if a fraud is discovered. To be aware of the use of the Anti-Fraud & Corruption Policy, the Fraud and Corruption Response Plan and the Whistleblowing Policy, further details of which can be found at To report whistleblowing

1.2 This section is concerned with the prevention and detection of fraud, and not with the procedures to be followed in investigating fraud. The Birmingham City Council Financial Regulations require that the Corporate Fraud Team, within Birmingham Audit, is informed as soon as an actual or suspected fraud, or other financial irregularity, comes to light so that they can determine whether an audit investigation should be undertaken. They will be happy to discuss issues and provide advice and can be contacted by email at BirminghamAudit@.uk.

1.3 The Local Authority is committed to the principles of Corporate Governance ? the system by which officers carry out their responsibility for ensuring that effective management systems have been put in place, including financial monitoring and control. School staff and governors have a responsibility for complying with the principles of corporate governance.

1.4 The guidance contained in the Schools Financial Procedures Manual has a key role in preventing and detecting fraud and must be complied with by all schools covered by the Birmingham Fair Funding Scheme for Financing Schools, including Community Schools, Voluntary Controlled Schools, Voluntary Aided Schools, Community Special Schools, Foundation Schools, Foundation Special Schools and Pupil Referral Units. It sets out guidelines to be followed, states roles and responsibilities, and provides a framework for sound financial control and compliance

1.5 Birmingham City Council is responsible for raising awareness of fraud and does this in a number of ways. Fraud awareness training can be given by the Corporate Fraud Team and tailored to the needs of a particular group. Also,

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SFPM: Fraud Awareness

the team, bi-annually, issue Fraud Spotlight, a newsletter dealing with fraudrelated topics. It is distributed electronically to Birmingham Schools via the Schools Noticeboard. In addition, fraud alerts are sometimes issued though the Schools Noticeboard to warn schools of particular issues. If you would like to discuss any of the topics covered, please contact the team.

2 Fraud and Corruption: Definitions and Types

2.1 Fraud can be defined as an intentional misrepresentation for the purpose of deceiving another for financial gain.

Corruption can be defined as the abuse of entrusted power for the purpose of financial gain. In cases of corruption there has been evidence, not only that any employee has acted differently from what might be expected, given the circumstances, but that the employee (or someone connected or associated with them) has received some form of personal `benefit', for instance, cash inducement; improved purchase terms such as extended credit or interest free loans; `free' or discounted goods or services; achievement of targets, which may result in improved pay, promotion, or a secured position.

2.2 In practice, and for the purpose of this chapter, both terms are loosely used to describe a multitude of misdemeanours relating to financial crime, including theft, misappropriation, embezzlement, collusion and bribery.

2.3 The Fraud Act 2006, which can be viewed at the government website , defines the offences of fraud.

The three main offences are as follows:

? Fraud by False Representation ? e.g. a person, who uses a school order to obtain goods for their own use, would be guilty of this offence.

? Fraud by Failing to Disclose Information - e.g. a person, who fails to declare details of their income and savings when applying for City Council means tested services, would be guilty of this offence.

? Fraud by Abuse of Position e.g. a member of school staff, who uses their position to obtain funds would be guilty of this offence.

If found guilty of a fraud offence, an individual can be sentenced to an unlimited fine and/or imprisonment up to a maximum of 10 years.

2.4 The following are some of the common risks which staff and governors should be alert to and how these may impact on the school.

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SFPM: Fraud Awareness

Key Fraud Risks Within Schools Recruitment

Job applications

Inappropriate pay awards Off payroll payments

Staff sickness Collusion/corruption in supplier selection

Payments for goods and services

Example of Risk

Recruiting family members or friends and not adhering to the recruitment procedures

Applicants making false declarations about their experience, qualifications, right to work, criminal past etc.

Checks on teaching and nonteaching staff not being undertaken Paying staff outside of the standard pay and conditions Payments made to individuals via petty cash or invoice to avoid the individual's and the school's duty to pay Income Tax or National Insurance Staff reporting themselves sick and then working elsewhere Awarding contracts where there is a conflict of interest and not following procurement procedures, often in return for some form of inducement

Using the school's ordering and payments systems to purchase items for personal use

Impact on School

? Person may be either not fit, or the best person to do the job

? Accusations of nepotism and lack of objectivity in future decision making

? Person may be either not fit, or the best person, to do the job.

? Child safety could be put at risk

? School being liable to fines

? Inequality and financial loss

? School could be made liable for any unpaid tax or National Insurance along with any fines imposed by HMRC

? Financial loss to cover absence

? Not receiving value for money

? Potential for legal action by other contractors

? Financial loss to rectify poor quality work

? Financial loss

Cheques being used to pay for

non-school

related

expenditure or being

intercepted, altered and

negotiated fraudulently

Bogus invoicing

Suppliers putting on pressure ? Financial loss to pay invoices for goods not ordered or received

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