Countering fraud in the sector

Attempted procurement fraud - change to supplier bank details

A change of supplier bank details was made based on information that was believed to be a genuine notification from the supplier (that is, on headed supplier stationery, included the university's customer reference number and was supposedly signed by the supplier's Director of Finance). These new details were fraudulent and the university unwittingly paid two invoices totalling £270,000. However, luckily these payments were stopped by the bank before any losses were suffered by the university. Internal controls around the changes to purchase ledger supplier bank details have been strengthened.

Notified: 4 October 2011

Conference payment

An institution received £60,850 in respect of a conference which did not go ahead, for which the quoted price was £26,350 plus VAT. A refund of £60,850 was made to a bank account in Abu Dhabi, after which it was discovered that the income came by a cheque which bounced.

Notified: 24 May 2011

Forged changes to suppliers bank account details

We have been notified of a small but increasing number of frauds and attempted frauds involving forged changes to suppliers' bank account details documentation. The sums of money involved have been quite significant and institutions from across the country have been targeted. Although we are not aware that the frauds are linked, a number have involved construction companies presumably because payments to such suppliers tend to be larger.

We ask all institutions to be alert to this fraud risk and briefly review the controls that they have over changes to supplier details, and ensure that mitigating action is taken where necessary to minimise any fraud risk (for example, by independently verifying with the supplier the change to supplier details before it is actioned).

Notified: May 2011

Payments for services and equipment not delivered

A breach of trust involving a senior manager at an institution was reported by the Chair of Governing Body and the Accounting Officer at the end of March 2011. The fraud involved inappropriate payments to a consultancy owned by the senior manager and the employment of family members. The institution has recovered the circa £300,000 that was involved and the senior manager has been dismissed.

A second unrelated fraud was also notified by the institution involving payments for IT equipment that was never delivered. While some irregularity had been identified in the Autumn 2010 and a member of staff dismissed, the full scale was not discovered until February 2011 and totalled approximately £450,000. Investigations are under way and the police have been notified and are investigating.

Notified: March 2011

Fraudulent claim for student finance support

The Student Loans Company (SLC) identified a suspicious pattern of applications for student finance support. Upon further investigation it transpired that an individual had made multiple claims for student support totalling £32,000 while allegedly attending two higher education institutions. Although the individual was creative in his fraudulent activities, the conduit to these frauds was the institutions' failure to notify the SLC of non-attendance in a timely manner. The individual enrolled on six different courses over a period of four years, but never attended any of them. Criminal proceedings were taken against the individual who was subsequently sentenced to serve three years.

Notified: October 2010

Misuse of funds for expenses and overseas travel

A higher education institution identified that the leader of a project using grant funding (non-HEFCE), had misused approximately £15,000 of the funds for their personal benefit through expenses and overseas travel claims. The university enacted their fraud response plan, by carrying out a full investigation with frequent reporting to their audit committee and their internal and external auditors.

Notified: August 2010

Private use of university equipment

A university discovered staff who were conducting private work with university-owned laboratories, equipment and consumables. An individual at the university was preparing scientific samples for outside organisations and invoicing the organisations personally. The individual also appears to have paid other staff in cash to assist.

The matter was identified when an outside body made a BACS payment to the university which could not be matched to an invoice. The investigation has identified a trail of evidence going back to 1988 and approximately £76,000 in total. There is no evidence that funds were misappropriated from university bank accounts.

Notified: September 2010

Theft of cash

A university has reported that approximately £43,000 has been taken from the cash of the front of house sales of its theatre. This arose due to failures in the cash handling process. Two members of staff have been dismissed for gross negligence and the university has notified the police. The university is putting procedures in place to address the control weaknesses and internal audit will undertake a full review of the theatre.

Notified: May 2010

Use of funds for personal expenditure

A university has reported collusion between senior staff in a small academic unit that enabled approximately £33,000 of institution funds to be claimed in respect of personal expenditure by a member of staff. The institution has summarily dismissed one member of staff and another has resigned. The university is reviewing control arrangements in the small number of similar sized units at the institution and is reviewing guidance on the use of discretionary funds.

Notified: February 2010

Consultancy payments

A university has reported a fraud that related to consultancy payments. A form was presented for payment but payroll staff were suspicious because of the size of the payment and the lack of details were provided as to the nature of the work. The approver confirmed that his signature had been forged. A review of other payments to the same 'consultant' revealed 34 small payments over four years totalling £107,000. The university identified the person responsible from a log that recorded who had been issued the batch of payment forms. The matter is being dealt with by police.

Notified: November 2009

Funds for foreign students

A university recruited students from Nigeria who were to be sponsored by one of the country's regional governments. An agent was involved but the agreements were clear that the agent was not to be involved in the financial aspects of the relationship. In the event the regional government chose to pay the agent who then passed on funds to the university. Although the first instalment was made without incident, the agent directed the second stream of funding back to Nigeria to support the regional governor's personal political aspirations.

The state government would not pay the university (having paid the agent) and the agent, despite many promises to do so, has not made any payments to the university. Solicitors advise that the only route to remedy the situation based on the agreements in place is for the university to take legal action against the Nigerian state. However the likelihood of success is remote. On that basis the university has written off the outstanding debt.

Notified: October 2009

Unsupported cash withdrawals

A university has reported a senior member of staff made cash withdrawals which could not be supported by appropriately authorised documentation. The member of staff was dismissed following a disciplinary procedure. The university has commissioned internal audit to investigate this matter to determine how these issues arose.

Notified: July 2009

Fake award certificates

A university informed us in May 2009 of a police investigation into an ex-member of staff who had also worked at another university accused of issuing fake award certificates in return for favours. The Head of Internal Audit conducted a full investigation and controls have been improved. No evidence of any financial loss or erroneous data entries was found. The ex-employee had already been dismissed from the university in relation to an unrelated disciplinary matter. The defendant was found guilty in December 2009.

Notified: May 2009

Diversion of payments

The Director of an Institute informed HEFCE that they had uncovered a fraud whereby a person had issued invoices containing private bank account details for payment. This was identified through normal credit control procedures. The value of the fraud is believed to be around £70, 000. The staff member has resigned and the police are investigating further. Internal Audit is carrying out a review of the controls and the Director will forward their report to us on completion.

Notified: June 2009

Application for finance

An application for loan finance, supposedly for the purchase of printers, was made in the institution's name by persons unconnected with the institution. The signature of the head of the institution had been forged and the institution's logo had been used on the application. This was identified when the finance company contacted the institution, and before any payments had been made. The matter is being dealt with by police.

Notified April 2009

Theft of cash and cheques

Approximately £900 in cash and cheques from the sale of CDs at a jazz summer school was stolen. Internal audit investigation established that there had been inadequate controls in place, and the person responsible for this resigned. The police were informed.

Notified December 2008

Misdirected research funds

£25,000 of research funds were incorrectly paid to an academic staff member of a university. When this was detected and pointed out, the funds were returned. Internal audit investigated this. Dishonest intent was not established.

Notified November 2008

Altered cheques

An employee of a university subsidiary company intercepted cheques made out to the company and altered them to become payable to himself. Internal audit investigated this and the police were informed. The employee was dismissed, charged and convicted. Losses were estimated at £45,000. Fraud controls have since been updated.

Notified November 2008

Goods obtained at university's expense then sold on

A member of a university's staff ordered low-value electronic goods through the university's procurement system then sold them on e-bay, pocketing the proceeds. Internal audit investigated and the police were informed. It was established that the fraud had gone on since 2001 and losses were estimated at between £150,000 and £225,000. An insurance claim was lodged. The member of staff was dismissed and charged. Procedures have since been tightened up.

Notified November 2008

Bogus invoices from an overseas intermediary

A university received bogus invoices from a Kuwait intermediary. Two invoices, totalling between £20,000 and £50,000, were paid before the university realised. The university managed the situation and employed an investigative company (Control Risks) to pursue the matter.

Notified November 2008

Cloned cheques

A bank reconciliation in August 2008 revealed six cloned cheques charged to a university bank account. By September 2008, 13 such cheques, totalling £65,000, had been passed. The bank (NatWest) reimbursed the university. This was reported to the police.

Notified November 2008

Collusion to defraud

During 2007-08 two external organisations colluded to defraud a university. This was identified and prevented. The police were informed.

Notified November 2008

False charges raised and intercepted

During the period 2004 to 2008 an employee in a university department raised false charges for medical sample analysis and took the money. The department transferred to the NHS in 2004 and the NHS Counter Fraud Service and the university's internal auditors investigated the matter.

Notified September 2008

Collusive tendering and overcharging for building work

A university maintenance officer took advantage of poor controls and ignored procedures over a number of years, allowing a small local building firm to repeatedly win tenders for small capital works. The unsuccessful tenderers were the same on each occasion, and were either fictitious or acting in collusion. Internal audit discovered and investigated this and the police and Office of Fair Trading were informed. Overcharging was estimated at £87,000 for recent work, with a possible total of £900,000 overcharged for work carried out since 2001. Action was taken against the university employee.

Notified July 2008

Bogus research grant

A principal investigator (PI) obtained a research grant from a charity. Salaries, travel and other expenses were paid by the university, and charged against the research grant. The initial installment of grant was paid over to the university, but subsequent ones were not, delaying tactics being employed in response to queries. Eventually credit controllers alerted management, the research project was cancelled, and the relevant research staff made redundant. On investigation it emerged that the charity was bogus and the PI appeared to be linked with the charity. Approximately £125,000 was misappropriated.

Notified January 2008

Telephone account hijacked

A university telephone system was hacked into, from or via an overseas location, and used to make 8,000 international calls over a seven-week period in late 2006, before BT alerted the university to the unusual call pattern. The system loophole was fixed. The university recovered losses of £145,000 through insurance and the telephone service supplier.

Notified September 2007

Irregular payroll payments

A temporary staff member in a university payroll department, acquired via a staff agency, made a number of irregular payments. Upon discovery and investigation, it emerged that the references, and probably also the identity of the temporary staff member - who had left - were fake. Losses were estimated at £10,500.

Notified September 2007

Embezzlement

The Chief Executive, and the book keeper, of a university subsidiary company colluded to make bogus patent charges and to divert patent fees amounting to £8 million over a period of 12 years up to July 2007 when this was discovered. £2 million of this may be recoverable.

Notified July 2007