Survey identifies low rate of fraud in schools

Despite the generally "clean" image of New Zealand's primary, intermediate and secondary education sector, an Office of the Auditor-general survey into fraud has found 8% of respondents were aware of at least one incident of fraud or corruption in their school within the past two years.

The survey was carried out by PricewaterhouseCoopers (PWC) for the Office of the Auditor-general between February 14 and June 3 last year.

It was sent to a broad sample of schools, from city to rural, in the North and South Islands, integrated and non-integrated, single-sex and co-educational, from primary to composite, intermediate and secondary schools, schools with boarding facilities, and special schools.

More than 480 people from the education sector, and more than 240 schools responded to the survey.

The survey response rate of 74% places the results among the most reliable information sources about perceptions and practices in detecting and preventing fraud in the public sector, the report said.

Those who knew of an incident in the past two years were asked for details of the most recent incident.

The value of the most recent fraud noted by respondents in schools was mostly low, with 92% for amounts of less than $10,000. However, 3% noted fraud for amounts between $10,001 and $50,000.

No school respondents identified frauds of more than $100,000, but about 8% of the respondents who answered this question did not know how much money was lost.

The report said it was not always possible to accurately establish how much money had been lost in a fraud, because sometimes the records and the investigation were incomplete.

The survey found about 75% of the fraud incidents in schools were committed by one internal person acting alone, typically at an operational staff level.

The most frequent types of fraud within schools were theft of property, plant, and equipment or inventory (25% combined); theft of cash (19%); and fraudulent expense claims (19%).

The most common reasons why fraud occurred were because 50% of the perpetrators did not think they would get caught, and because 28% of internal controls were not followed or were overridden.

Internal control systems were schools' most successful mechanisms for detecting fraud, with 46% of the frauds detected in this way.

Internal audit (17%) and internal tip-offs (other than through a formal whistleblower system) identified 15% of fraud incidents.

Respondents from schools said their schools had good anti-fraud frameworks, with policies, a code of conduct, high levels of confidence in the school leaders' awareness of their role and responsibilities, proactive approaches to fraud, and pre-employment checks.

Although the rate of fraud in schools was one of the lowest rates within the public sector, the survey showed fraud was now a fact of business life in New Zealand.

The Auditor-general warned about complacency in the fight against fraud.

"We cannot be complacent if we are to keep our good record of keeping fraud at bay," the report said.

"It is particularly important to be vigilant in the current global economic climate, because there is an increased risk of fraud when people struggle to make ends meet."

The Auditor-general commissioned the survey on fraud awareness, prevention, and detection to gain better insight into fraud in the public sector.

The results confirmed a strong commitment within the public sector to protecting public resources, the report said.



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