Fraud poses a serious risk to valuable funds that could be used to greatly benefit your charity’s mission, as well as sensitive data, and can also damage the good reputation of charities, affecting public trust and confidence in the sector as a whole. It’s vital that all money given to charities is used for legitimate and lawful purposes.
1. Fraud will always happen – simply being a charity is no defence. Even the best-prepared organisations cannot prevent all fraud. Charities are no less likely to be targeted than organisations in the private or public sector. Fraudsters do not give a free pass to charitable activities.
2. Fraud threats change constantly. Fraud evolves continually, and faster, thanks to digital technology. Charities need to be alert, agile and able to adapt their defences quickly and appropriately.
3. Prevention is (far) better than cure. Financial loss and reputational damage can be reduced by effective prevention. It is far more cost-effective to prevent fraud than to investigate it and remedy the damage done.
4. Trust is exploited by fraudsters. Charities rely on trust and goodwill, which fraudsters try to exploit. A strong counter-fraud culture should be developed to encourage the robust use of fraud prevention controls and a willingness to challenge unusual activities and behaviour.
5. Discovering fraud is a good thing. The first step in fighting fraud is to find it. This requires charities to talk openly and honestly about fraud. When charities do not do this, the only people who benefit are the fraudsters themselves.
6. Report every individual fraud. The timely reporting of fraud to police, regulators and other agencies is fundamental to strengthening the resilience of individual charities and the sector as a whole.
7. Anti-fraud responses should be proportionate to the charity’s size, activities and fraud risks. The vital first step in fighting fraud is to implement robust financial controls and get everyone in the charity to sign up to them.
8. Fighting fraud is a job for everyone. Everybody involved – trustees, managers, employees, volunteers, beneficiaries – has a part to play in fighting fraud. Trustees in particular should manage fraud risks actively to satisfy themselves that the necessary counter-fraud arrangements are in place and working properly.
Counter-fraud questions trustees should ask, do we:
– understand what fraud is and what our responsibilities are?
– understand our financial systems and data, and what ‘normal’ looks like?
– encourage staff and volunteers to voice concerns?
– run process test checks and observe jobs in action?
– promote fraud awareness and understanding?
– conduct an annual fraud risk review?
– conduct pre-employment screening and in-service checks on staff?
– have regular and frank conversations with delivery partners?
– have a response plan ready so that everyone knows what to do?