Counter-fraud failings could cost £1bn a year

Higher education is the worst at protecting against fraud of all publicly funded sectors, with the annual cost potentially exceeding £1 billion, a new report suggests.

August 4, 2011

The study, by the University of Portsmouth and accountancy firm PKF, found that the sector performed less well than NHS bodies, local councils and central government.

According to the report, The Resilience to Fraud of the UK Higher Education Sector, which surveyed the strategies of 28 institutions, less than 10 per cent of universities accurately estimate the costs of fraud.

It also says that in more than 60 per cent of institutions, specialist counter-fraud staff do not receive professional training, while less than half of universities put those applying for sensitive posts through full "propriety" checks.

Jim Gee, director of counter-fraud services at PKF, said: "This needs to be addressed as a top priority because loss estimates are important in developing a proportionate, properly resourced counter-fraud strategy."

He said universities were particularly at risk of data being manipulated to secure public funding.

"It is easy not to focus on the issue until you are confronted with a big individual incident of fraud or with the reality of the financial losses that are taking place," he said.

The survey asked about 30 questions on counter-fraud policies.

It found that universities had good systems for reporting fraud and had established guidance on how to investigate cases.

However, they were weak on estimating the costs of fraud, on training staff, on developing an anti-fraud culture and on using sophisticated systems to tackle the issue.

On a 50-point scale assessing resilience to fraud, universities scored an average of 28.9, NHS organisations 44.1, local councils 38.1 and private businesses 30.6.

Portsmouth's Centre for Counter Fraud Studies has estimated that organisations lose an average of 4.6 per cent of expenditure a year to fraud, which would amount to more than £1 billion for the UK university sector.

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