Charity Fraud Awareness Week

23 October 2019

• A guest post from Gemma Higginson, Associate Director, RSM UK, for Charity Fraud Awareness Week 2019 (21-25 October)

Last month, an employee at a London-based charity was sentenced to serve five years in prison. This sentence was for diverting over half a million pounds, intended to support vulnerable people in the local community, to his own bank accounts.

A recent study conducted at the University of Portsmouth identified that the costs of fraud are greater in the charity sector than any other. Given that the sector reported fraud losses of almost £8m in 2018/19, and that it is estimated that only 1 in 6 fraud offences are reported, the true impact on the sector is astounding and unknown.

Unsurprisingly, the study found that the best and most cost-effective solution for any sector is to prevent fraud. Charities therefore should be asking themselves if it is still enough to simply rely on the good nature of staff and volunteers to protect their much-needed donations and reputations.

Preventing fraud need not be arduous or expensive, nor does it need to expose a charity as a risky beneficiary. It can be achieved by addressing a few simple questions:

• Is there a robust anti-fraud and bribery policy, setting out a zero-tolerance response to such activity?

A good policy will not stifle fundraising or grants, but it should ensure that all staff work to the same set of rules. This should theoretically highlight any rogue practice and more importantly will support the charity in managing an incident to the extent that will reassure supporters that their donations are not at risk.

• Is there a good understand of which business processes, systems and even particular personnel are most at risk of fraud or bribery?

Completion of an organisation-wide fraud risk assessment will help this understanding. It will allow the recording, managing and monitoring of fraud risks in the same way that other risks are managed. This will ensure that controls and assurances are sufficient to protect the organisation and to direct work intelligently and efficiently to mitigate risks where they may be found to be lacking.

• Do staff and volunteers understand what fraud and bribery are, how they might present themselves in the operating environment and what they should do if they spot it?

Staff may be unaware of how fraud may affect a charity, or may assume it would never happen to their organisation. Staff often do not realise that some departments are much more susceptible to fraud than others. A charity needs to be confident that its finance team would recognise a mandate fraud and that its recruitment teams would recognise a forged or counterfeit identity document.

The 21^st to 25^th October is International Charity Fraud Awareness Week - an award-winning campaign led by a coalition of over 40 charities, regulators, law enforcers, representative bodies and other not-for-profit stakeholders from across the globe, designed to encourage and empower charities to talk about fraud risks affecting the sector and share best practice in preventing them. Charities can use this opportunity to think about these questions, to promote openness and honesty amongst staff and to seek advice from peers and professional advisors to protect their organisation.

We are stronger when we work together to keep #CharityFraudOut.

External Fraud - The Trust Cost, University of Portsmouth