How a fake supplier gets paid, and how a school stops it
How someone inside a school could set up a supplier that exists only on paper and get it paid, and the checks on suppliers and invoices that stop it.
By Achekam · · 5 min read · For Education businesses in South Africa, Nigeria, Kenya
A school spends money on a long list of suppliers: textbooks, stationery, cleaning, catering, security, sports kit, building repairs, transport for tours. Many of the invoices are routine and come from companies everyone has heard of. A few come from small local businesses the bursar has never met, recommended by a head of department.
That long tail of small suppliers is where a fictitious supplier hides. Someone inside the school registers a "supplier" that exists only on paper, submits invoices for work never done, and approves or pays them, or persuades someone else to. Each amount can be small enough not to raise eyebrows on its own. This article explains how such a scheme works and which checks stop it.
The billing scheme: a supplier that exists only on paper
ACCA describes fraudulent disbursements, a form of asset misappropriation, as using company funds to make fraudulent payments. Its common examples are billing schemes, in which a fictitious supplier is paid, and payroll schemes, in which fictitious or "ghost" employees are paid. ACCA states that asset misappropriation frauds are by far the most common kind.
A billing scheme at a school might look like this, in words:
- A staff member with access to the supplier list creates a supplier with a plausible name, say a grounds maintenance business, with a bank account that is actually their own or a relative's.
- Over the following months, invoices arrive for grass cutting, gutter clearing or pest control: services the school does buy, from a real contractor, so nobody questions the category.
- The invoices are captured, approved in a busy week, and paid.
- Nobody checks whether the grass was actually cut twice that month.
The scheme depends on one person controlling, or influencing, several steps: setting up the supplier, getting invoices approved and getting them paid.
Who sets up suppliers, who approves invoices, who pays
ICAEW recommends that businesses prevent fake invoice fraud by separating who sets up suppliers, who approves invoices and who makes payments. AccountingTools makes the same point from the capturing side: the employee who enters supplier invoices into the accounting system should not be the person who authorises or processes payments, so that no one can create a fake invoice and approve it themselves.
For a school, a workable split:
| Step | Who does it |
|---|---|
| Adding a new supplier or changing bank details | Bursar, after independent verification |
| Requesting a purchase | Head of department or facilities manager |
| Approving the purchase order or bill | Someone other than the requester, within an approval limit |
| Capturing the supplier's invoice | Bursary clerk |
| Releasing the payment | Bursar or principal, with a second signatory above a limit |
In a small bursary not every step can go to a different person. When two steps must sit with the same person, make sure the next step does not.
Checks on a new supplier before the first order
ICAEW lists supplier red flags for fake invoices: a newly created business with little or no trading history, unexplained changes to bank account details, and suppliers that cannot be independently verified through trusted channels. Its guidance on how to identify and deal with fake invoices also recommends tightening supplier onboarding and verification, independently checking any bank detail changes, and using three-way matching, duplicate invoice checks and limits on manual overrides.
Before a new supplier's first order, the bursar should:
- confirm the business exists, through its registration details and a phone number found independently, not the one on its letterhead;
- confirm the bank account is in the supplier's own name, with a bank confirmation letter;
- ask the requesting staff member how they know the supplier, and record the answer;
- check that the supplier's address and bank details do not match any staff member's.
Treat any later request to change a supplier's bank details as a red flag until it has been confirmed by phone with a contact the school already knows.
Duplicate checks on the supplier list
A fictitious supplier is sometimes a near-copy of a real one, with a slightly different name or a different bank account. In Achekam, a business keeps one supplier list with duplicate checks by name or VAT number, and quotations, orders and bills pick suppliers from it. Because every purchase draws from the same list, a second "version" of an existing supplier is easier to catch when it is created. Tidying a list that already has duplicates is covered in duplicate supplier records.
Two further steps in Achekam put the separation of duties into the system:
- A purchase order is raised from the selected quotation of an approved requisition, and the person who raised the order cannot approve it.
- Supplier bills are recorded line by line with VAT, and a bill without a purchase order waits for approval before it posts. It can then be paid in full or in parts from a chosen bank account.
Warning patterns the integrity review looks for
Achekam also offers a procurement integrity review, sold as its own add-on. It raises questions about warning patterns such as competing quotes that share contact or bank details, or a supplier being paid into an employee's bank account, which is exactly the trail a fictitious supplier leaves. Its check for purchases split under a threshold does nothing until a threshold is set, and the app cannot set one, so that pattern still relies on people. The review raises questions; a person investigates them. The procurement integrity review explains how it works.
Spot checks the bursar can run each term
Controls on paper work best alongside a few unannounced checks:
- pick several recent payments to small suppliers and confirm the goods or service with the person who received them;
- sort suppliers by date created and look hard at the newest;
- compare supplier bank accounts with the payroll bank accounts;
- look for invoices just below an approval limit from the same supplier.
Pick one of these checks for this term, run it before the holidays, and record what you found, even if the answer is nothing.
General guidance only, not advice on your own circumstances. Tax and payroll rules change: check the current position with the authority or your adviser.
