6 ways to guard against charity fraud

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6 ways to guard against charity fraud


Fraud is costing charities millions every year. What can be done internally to stop your organisation falling victim to it? Heather McLoughlin sets out the key action points


With another incident of a charity falling victim to fraud it is important that charities start to look seriously at preventing it.


Fraud is costing charities millions every year and a time when resources are tight, we can’t afford to have money not going to the frontline. It can also have a damaging impact on the reputation of an organisation.


Here are some tips to help charities improve their fraud resilience:


Understand what fraud is


There are many aspects to fraud – including new risks such as cyber crime and mandate fraud – and there may be parts of your organisation at risk that you may not have previously considered. So, spend some time identifying and understanding where in your organisation you could be at a greater risk. The Charity Commission Checklist is a good place to start when looking at areas that might expose your organisation to high risk.


Put a counter-fraud strategy in place


Having a strong counter-fraud strategy is important in mitigating both internal and external fraud. Prevention is always better than cure, so check the current steps you are taking to reduce fraud, and who is responsible. Then consider updating your counter-fraud strategy to plug any gaps. You can find advice on writing your strategy in the latest Charity Commission guide to tackling fraud and the CFG fraud guide. You could also consult a professionally accredited counter-fraud specialist.


Articulate the cost of fraud to your organisation


Tackling fraud requires a strong counter-fraud culture across your organisation. You’ll need to get buy-in from all your stakeholders, internal and external. If you’re having trouble convincing people within your organisation that investing in fraud prevention is worthwhile, looking at the potential or actual cost of fraud to your organisation can be a great incentive.

Make sure that your colleagues understand all the benefits of being tough on fraud (having strong counter-fraud policies in place has the potential to reassure funders, for example).


Tailor your counter-fraud measures


There is no ‘one size fits all’ method for tackling fraud, so you’ll need to find the method that works best based on the size of your organisation and the kind of activities that you undertake. Your response to fraud risks need to be appropriate and proportionate, so consider whether the actions you are taking go far enough to protect your organisation.


Performance manage counter-fraud work like any other area of work


Fraud is a business cost that can be measured, managed and minimised. Counter-fraud work should be integrated into your standard performance indicators. This will also ensure that everyone can see the benefits of a strong counter-fraud culture.


Report all instances of fraud


If your charity has suffered a fraud, then you must report it to the Police (via Action Fraud) and the Charity Commission, as a serious incident.


Encouraging fraud reporting will give people the responsibility to change behaviour to tackle it. Ensure your employees feel confident that reporting suspected fraud will be treated seriously and professionally by senior leaders and trustees. Consider getting a trustee to be a designated lead on fraud, and make sure that reporting mechanisms are clearly understood by all staff.


Heather McLoughlin is a policy and public affairs officer for Charity Finance Group. Heather is working with PFK Littlejohn to produce a fraud guide for the charity sector for more details contact kelly.ventress@cfg.org.uk

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