How charities can prevent fraud

There have been many fraud incidents reported by charities that were committed externally, but also committed by staff, trustees or volunteers.

Charities provide essential social services that benefit communities and their members. Unfortunately, just as with any other organisation, charities are susceptible to fraud, which is defined as dishonesty, involving the following:

  • False representation
  • Failing to disclose information
  • Abuse of position to make a gain or cause loss to another

Fraud is the most reported crime in the United Kingdom and the charity sector annually loses at least £150 million to it, according to the Office for National Statistics.

Even though the threat of fraud seems to be pervasive, there are actions that your organisation can take in order to reduce your risk. The Charity Commission recommends that you adopt the following practices:

  • Establish strong financial management.
  • Institute and enforce financial controls.
  • Report attempted or actual fraud to Action Fraud at 0300 123 2040.

The impact of fraud and financial crime on charities, particularly smaller charities, can be significant and often go beyond problems associated with financial loss. Crime can cause distress, and may damage the reputation of the charity, and therefore fundraising prospects. Ensure that you receive and consider regular reporting information about your charity’s finances, and if you suspect or become aware of fraud, make sure you know what to do and who to inform as prompt action will limit any damage. You can also protect against charity sector-specific risks, like fraud, with charity insurance.

Source: Zywave. Charity Commercial Insurance Profile 1st Quarter 2018, December 2017