Fraud and Financial Irregularity Policy - Keele University

University Policy on Fraud and Financial Irregularity
1.0 Introduction and Objectives
1.1 This policy supersedes previous policies on Fraud and Financial Irregularity ratified by the
University Council. It reflects amendments to the Higher Education Funding Council for
England (HEFCE) Financial Memorandum that came into force on 1 August 2010, including
responsibilities associated to HEFCE’s role as principal regulator for English institutions on
behalf of the Charity Commission.
1.2 The policy sets out a framework for the investigation and resolution of allegations of
financial irregularity and/or fraud made against students, employees, and others associated
with Keele University, and the framework for the investigation and resolution of incidents of
financial irregularity and fraud.
1.3 The Audit Code of Practice published as part of the HEFCE Financial Memorandum makes
it clear that each higher education institution's management is responsible for the
prevention, detection and investigation of irregularities, including fraud. In order to
discharge this responsibility the University endeavours to ensure that adequate systems of
internal control are operated. Additionally, internal auditors are appointed with a view to
reviewing the adequacy and effectiveness of internal control systems in order to assist in
the prevention and detection of fraud. The University’s appointed internal auditors are
UNIAC.
2.0 Recommendation
2.1 This Fraud and Financial Irregularity and Policy covers staff, students and the activities of
the University and its subsidiary companies. It is recommended that colleagues who deal
with, or are likely to deal with, financial irregularity or fraud familiarise themselves with this
policy.
3.0 Background
3.1 The University aims to demonstrate that all allegations of financial irregularity and/or fraud
affecting University funds are effectively and appropriately addressed.
3.2 The University's expectation on propriety and accountability is that students and members
of staff at all levels act with integrity and lead by example in ensuring adherence to rules
and that all procedures and practices are above reproach.
3.3 The University expects its governing body and senior leadership team to conduct
themselves in a manner appropriate to public office holders and to adhere to the seven
principles of public life which are set out by the Committee on Standards in Public Life for
the benefit of individuals who serve the public in any way.
3.2 The University is conscious of the high degree of external awareness of its affairs by a
variety of bodies and the need to act in all matters with probity and propriety. The
University is determined that the culture and tone of its organisation is one of honesty and
opposition to fraud and corruption.
1

3.3 The staff and students of the University are an important element in its stance on fraud and
corruption and they are positively encouraged to raise any concerns that they may have on
these issues where they are associated with University business or activity.
4.0 Definitions
4.1 There is currently no precise legal definition of fraud, but for the purposes of the
University's policy, the following definitions apply:
• Financial Irregularity - circumvention of controls which may or may not be fraudulent;
• Fraud - deception carried out in order to gain an unfair advantage or to disadvantage
another. The Fraud Act 2006 provides for a general criminal offence of fraud.
5.0 Responsibility to Report Suspected Financial Irregularity or Fraud
5.1 Effective preventative measures must, of necessity, rely upon the vigilance and awareness
of those staff whose work incorporates internal control features. It is the duty of all staff to
notify the Director of Finance or in their absence the Deputy Head (Governance), via their
Head of Department if appropriate. The duty of notification applies to any known or
suspected form of financial irregularity affecting the University’s assets, finances, or other
resources.
5.2 All notifications of suspected financial irregularity should be made in writing (in strict
confidence) to the Director of Finance & IT or the Deputy Head (Governance) in their
absence, providing a brief description of the alleged irregularity, the estimated scale of or
scope for loss, any evidence supporting the alleged irregularity, and details of the person
under suspicion (the respondent).
5.3 Staff should refer to the University’s Whistleblowing Policy and Procedure for detailed
information on how the University handles allegations concerning malpractice in the
administration and governance of the University.
6.0 Prevention
6.1 The University recognises the importance of prevention in its anti-fraud strategy and has in
place various measures including denial of opportunity, effective leadership, auditing and
employee screening. Fraud is minimised through usefully designed and consistently
operated management procedures which deny opportunities for fraud. In particular,
financial systems and procedures take into account the need for internal checks and
internal control, and staff are required to receive training in the operation of all
systems. Additionally, the possible misuse of information technology is prevented through
the management of physical access to terminals and protecting systems with electronic
access restrictions where appropriate.
6.2 The University's Audit Committee provides an independent and objective view of internal
controls by overseeing Internal and External Audit Services, reviewing reports and systems
and procedures and ensuring compliance with the University's Financial Regulations and
the requirements of HEFCE.
6.3 The External Auditor's reviews of financial checks and balances and validation testing
provide a further deterrent to fraud and advice about system development/good practice.
7.0 Detection
7.1 Whilst it is accepted that no systems of preventative measures can guarantee that frauds
will not occur, the University has in place detection measures to highlight irregular
transactions.
2

7.2 All internal management systems are designed with detective checks and balances in mind
and this approach is applied consistently utilising wherever possible the expertise and
advice of the University's Auditors. The approach includes the need for segregation of
duties, reconciliation procedures, the random checking of transactions and the review of
management accounting information including exception reports.
7.3 Concerns expressed by staff, students or others associated with the University which are
expressed in good faith will, as a matter of course, are looked into by the University without
adverse consequences for the complainant, maintaining confidentiality wherever possible.
7.4 The University views its preventative measures by management, coupled with sound
detective checks and balances as its first line of defence against fraud. Audit activity is
however an important defence mechanism also and Auditors may be required to use
special techniques on occasions to identify fraudulent transactions.
8.0 Internal Reporting and Fraud Response
8.1 The University recognises the unpredictability of financial irregularity and fraud and the
disruption which it may cause once identified. It recognises also the need to safeguard its
assets, recover losses and secure evidence for legal and disciplinary processes.
8.2 In order to meet these objectives and to clarify its approach when fraud is suspected, the
University has a Fraud Response Plan which addresses:-
a) prevention of further loss
b) establishing and securing evidence necessary for criminal, civil and disciplinary action
c) notifying the HEFCE where necessary
d) recovery of losses
e) sanctions against persons where fraud is proven, including prosecution
f ) policy on references for employees disciplined or prosecuted for fraud
g) reporting within the University and follow-up action
h) reporting lines
i) responsibility for timing and informing the police
j) responsibility for investigation and the need to conduct a thorough investigation
k) arrangements for the use of external specialists
l) establishing lines of communication with the police
9.0 External Reporting
9.1 The HEFCE Financial Memorandum defines a ‘serious incident’ as one which has resulted
in, or could result in, a significant loss of funds or a significant risk to a charity's property,
work, beneficiaries or reputation. HEIs must report serious incidents to HEFCE at the time
when they are identified.
9.2 The reporting of serious incidents relates to HEFCE’s role as both principal charity regulator
for institutions, but also as principal funding body. HEFCE encourages institutions to report
any incident it may deem to be serious even if it does not meet the criteria outlined below,
or in the HEFCE Financial Memorandum, which details all information that warrants
notification to HEFCE outside normal reporting procedures. If an institution is unsure
whether an incident merits reporting HEFCE recommends that it should be reported
anyway.
3

9.2 The Financial Memorandum also stipulates that the following specific serious incidents
should be investigated and reported to them:
(a) loss of assets through fraud, theft or other cause where the value of the loss is in
excess of £25,000
(b) donations of more than £25,000 from unknown donors, or where the source cannot
be verified
(c) abuse or mistreatment of a charitable beneficiary involved in activities of the HEI
(d) disqualification of a trustee
(e) known or alleged links (other than for bona fide academic reasons) with proscribed
organisations or terrorism; this applies to trustees, staff, students, or anyone else
associated with the HEI.
10.0 Policy Review
10.1 The University has in place a clear network of systems and procedures to assist it in
avoiding opportunities for fraud and corruption and for dealing with such cases if they
arise. It is determined that these internal arrangements will be regularly reviewed to keep
pace with future developments in both preventative and detection techniques and with
developments related to the introduction of new systems within the University. A
continuous overview of the arrangements and developments will be maintained by the Audit
Committee.
10.2 Additionally this policy and associated response plan and procedures will be reviewed
every three years. This Policy was reviewed by Audit Committee in March 2011 and
ratified by Council in April 2011.
4