Tips for Tackling Charity Fraud

Charity Fraud Awareness

Tips for Tackling Charity Fraud

October sees the not-for-profit sector acknowledge Charity Fraud Awareness Week, an award-winning annual campaign by the Charity Commission.

Charity leaders must look at ways to protect their organisations from cybercrime and fraudulent activities after new figures show that £8.6million of funds were lost in the financial year 2020/21.

Action Fraud reported that 1,059 fraud incidents occurred between April 2020 and March 2021, although, the scale is likely higher as many fraud cases are underreported.

CAF Bank (Charities Aid Foundation) recent poll highlights that 41% of charities are concerned by fraud and, three in 10 charities have increased their protection measures against fraud since the start of the pandemic.

However, around a quarter of charity organisations have not implemented any preventative measure and, only 14% have any fraud awareness training in place.

David Clarke, Chair of the Fraud Advisory Panel, acknowledges that “fraud and cybercrime at record levels, it has never been more important for charities to be aware of the risks and how they might be affected.

As we emerge from the pandemic, charities need to recover and flourish without fear of fraud. Taking relatively simple measures can go a long way to protecting your charity and keeping it safe.”

Charlotte Willmore, Wilder Coe audit manager and charities advisor, shares her tips on how charities can tackle fraud.

Assess your risks

The risk of fraud to the charity should be assessed and reconsidered regularly to understand how the charity could become exposed.

This could be as simple as detailing the risks, their significance e.g. a traffic light system of significance and what actions could be taken against the risks.

Implement and improve your financial controls

For your charity to achieve its objectives, internal financial controls should be in place to protect assets and get the most out of resources.

Charities vary in complexity, size, and activities and, not all controls are relevant to all charities. Trustees should seek professional guidance on what financial controls and governance are appropriate to their charity.

Do you need an internal audit function or audit committee?

Depending on the size of your charity and the activities you conduct, you may need to implement a separate audit committee. The role of the internal audit is to look at the effectiveness of your charity financial controls and help identify and assess risks.

An audit committee’s role helps the trustees meet their responsibilities for risk management, implement efficient controls and effective use of funds. Therefore, an audit committee is a part of your charity financial governance arrangement and acts on the authority delegated by the trustees.

Define financial duties and responsibilities

Any employee that has financial responsibility must be competent and understand their role. Have clear written role descriptions that set out the expectations for your staff and establish clear delegation guidelines.

Introduce robust training procedures and policies 

When hiring employees or volunteers, ensure your recruitment process and any ongoing training promotes the culture of ethical behaviour and highlights fraud prevention measures.

Your staff and volunteers should understand the importance of reporting serious incidents including fraud or cybercrime and know your processes on whom to report to both internally and externally.

You should have an anti-fraud policy in place that identifies the steps your charity takes to prevent and respond to fraud. Also, consider appointing someone to be responsible for implementing and monitoring these measures.

All sectors of the economy are vulnerable to financial crime, and criminals exploit charities through fraud, theft, and money laundering. If you are concerned and think you may have been a victim of fraud or cybercrime, contact ActionFraud.

You can also find details and resources to #StopCharityFraud by following Wilder Coe Charities on Twitter.

If you have any questions and would like to speak with our Charities team, please get in touch.

Charlotte Willmore
Audit Manager at Wilder Coe
Charlotte has experience in the supervision and preparation of statutory accounts, management accounts including tailored client-specific analysis and service charge accounts as well as the audit of statutory accounts and preparation of Corporation tax returns for companies.