Fraud in charities - fraud awareness week 2016

David Foley

Fraud in charities is a fact of life. We are seeing some sophisticated trends such as cyber enabled frauds (including email scams, supplier bank account change requests) but most are relatively simple and can be prevented. The challenge for individual charities is understanding your fraud and bribery risk profile. This is essential if you are attempting to implement any form of programme of measures to increase fraud resilience. 

Some charities are reliant on volunteers and have limited resources or funds to dedicate to support functions. This is particularly pertinent to charities with a UK and international profile. As a result there is no one solution that a charity can implement to effectively deter, prevent and detect incidents of fraud and bribery. 

Despite this, and given the increase of cases where charities are falling victim to scams and incidents of fraud by their own staff, there is a basic measure that all charities must follow. By encouraging staff to understand the risks of fraud in their own area, including details of current scams and key fraud indicators, you empower your workforce to proactively try to prevent fraud. Investing in people can be one of the most efficient and cost effective measures you can follow. Most fraud incidents get identified after the losses have occurred by staff, not by auditors, the fraud team (if you are fortunate to be of a size that has dedicated resource).

Consider the potential financial implications of falling victim to a single instance of a supplier bank account change fraud, or the prevalent CEO payment request email fraud. These sums could be material, with instances across the sector and wider industry of organisations loosing several hundreds of thousands of pounds in a single event. 

Deploying fraud prevention measures is a reputational benefit. As a fit and proper custodian of funds, you will encourage donors and funding streams to engage with your charity. 

The key message here is that training for your staff and volunteers can be delivered in many forms but if you don’t educate and keep your staff appraised of issues, then how can you expect them to be your first line of defence? 

The Fraud Advisory Panel along with the Charity Commission are hosting a fraud awareness week of events starting on 24 October 2016, with lots of useful information, hints and tips to assist you in building your fraud resilience.