Institute of Criminal Justice Studies

Fraud in HE sector could exceed £1 billion per annum

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Thu, 11 Aug 2011 14:14:00 BST

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Fraud in HE sector could exceed £1 billion per annum
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Thu, Aug 4, 2011

Higher Education Institutions (HEIs) need to protect themselves more effectively against fraud, claims a new report, which found that the total cost of fraud in the sector could exceed £1 billion per annum.

 

The report was produced by the University of Portsmouth Centre for Counter Fraud Studies, PKF Accountants and business advisors. It claims that HEIs perform poorly on a number of key measures and are the worst performers amongst public sector bodies.

‘The Resilience to Fraud of the UK Higher Education Sector survey’ is the most comprehensive study of its type ever undertaken. It uses a 50 point scale to assess the fraud resilience of HEIs.

The survey found that the sector achieved an average score of 28.9 points, compared with 44.1 points among NHS bodies, 38.1 points for local authorities and 36.7 for central government departments.

Jim Gee, Chair of the Centre for Counter Fraud Studies at the University, Director of Counter Fraud Services at PKF (UK) LLP and co-author of the report, said: “Fraud can be hugely damaging to any organisation, but especially to HEIs at a time when the Government is making serious reductions in expenditure and students are facing annual tuition fees of up to £9,000. Fraud in the HE sector has a long-term negative impact on the quality of education and thus on the life chances of students.

“It is particularly worrying that less than 10% of HEIs accurately estimate the cost of fraud.  This needs to be addressed as a top priority because loss estimates are important in developing a proportionate, properly resourced counter fraud strategy.  After all, if you do not know the nature and scale of the problem, how can you set about implementing the right solution?

“Accurately estimating the cost of fraud requires sophisticated statistical analysis.  It is not unusual for an organisation to save up to 12 times the cost of work to measure and reduce losses so, in many ways, the decision should be a relatively straightforward one for Vice-Chancellors.”

The report identifies a number of areas where HEIs could improve their pre-emptive counter fraud activities:

  • Fewer than 10% of HEIs accurately estimated the cost of fraud – this makes it difficult for such organisations to devise appropriate and adequately resourced counter strategies;
  • 89% of HEIs do not use fraud loss estimates to make judgements about how much to invest in countering fraud – implying that the driver to do something to counter fraud is currently reputational and regulatory rather than financial, considering the financial benefits to be derived in this area;
  • In more than 60% of HEIs, counter fraud staff do not receive any professional training – despite such training providing greater assurance about the quality of the work undertaken;
  • Less than half of HEIs insist on proprietary checks for new staff beyond simple references – detailed checks can ensure that staff with a history of dishonesty or deception are not employed in positions where this would make them a risk.

Dr Mark Button, Director of the University’s Centre for Counter Fraud Studies and co-author of the report, said: “The development of the fraud profession over the past decade has enabled organisations to treat fraud as a business issue like any other – something to be quantified and assessed, with clear metrics showing the speed of progress in reducing its cost and impact.”

A copy of the report can be downloaded The Resilience to Fraud of UK Higher Education