The commercial manager of a New Zealand Diocesan school (the School) has been charged with seven fraud related offences. During her 14-month tenure at the School, Ms Tessa Grant (Ms G) transferred NZD$795,000 into her personal accounts to fund purchases that included a $40,000 diamond ring and a $285,000 horse coach. Ms G pleaded guilty to the charges and will be sentenced in March. She has paid full reparation plus interest to the School.

Fraudulent activity

Over a nine month period, Ms G forged or altered invoices to transfer the money to personal accounts or to friends. One example of her spending the School’s money included her forging half of the invoices relating to a construction project within the School which had a value of $514,000. As the School’s commercial manager Ms G had the authority to approve the invoices for payment and she organised for them to be paid to herself.

The fraudulent activity was identified when a receipt for return flights to Christchurch came to the attention of the School’s principal Vicky McLennan (Ms M). The $1500 flights were purportedly a gift from the board to Ms M and her husband, but in reality Stuff.co.nz reports that they were used by Ms G and her husband. A further investigation then revealed the full extent of Ms G’s fraud.

In a statement, Ms M praised the diligence and vigilance of the School’s staff and the board, stating that the robust financial systems put in place by the School enabled the early detection of the fraud.

What can your school do to prevent fraud?

Fraud poses a serious threat to schools, not only for financial reasons but also due to the reputational damage that can be caused by a serious fraud incident. Given the high volume of financial transactions that take place within schools, there is a clear potential for an abuse of power and trust by internal perpetrators if there is a lack of oversight or accountability.

Several high-profile incidents of school fraud demonstrate the real risk of inappropriate behaviour occurring at schools. See our previous articles: “Fraud & Corruption – What can your school do to prevent it?” and “Ex-principal pleads guilty to fraud”.

Schools should have clear policies and procedures in place as part of a fraud and corruption program to create checks and balances in the management of school funds. As demonstrated by the NZ case, an independent and thorough audit can also reveal discrepancies that can then be scrutinised to reveal whether they are a result of error or fraud.

In the event of an incident occurring, a school should have a business continuity management program in place to manage the situation. An example of this is a plan to manage media attention during an investigation or sentencing period. For example, Ms G entered into a confidentiality agreement with the School, which helped the School to maintain control over the spread of information relating to the incident. However, the validity of such an agreement may be subject to court processes and procedures.

Governance requirements and fraud prevention

Although the implementation and operation of accountability mechanisms to prevent, detect and respond to an incident of fraud may seem to just add more paperwork or require more record keeping by schools, the risks and harms of fraudulent activity more than justify the implementation of such checks and balances. It is in both the long and short term interests of schools to have appropriate measures in place. For example, a school could implement the following:

• a Fraud and Corruption Control Program;
• a Whistleblower Program;
• an Organisational Code of Conduct; and
• a Human Resources program.

Furthermore, the increasing governance requirements that apply to non-government schools as part of their government funding requirements means that schools are now legally required to improve their risk management and governance frameworks to meet compliance requirements. For example, in NSW there have been recent amendments to the Education Act 1990 and the Minister for Education has introduced Guidelines to explain the compliance requirements that must be met by not-for-profit non-government schools, including that schools develop appropriate procurement policies and practices.