A proactive anti-fraud culture could save your charity

Fraud costs the charity sector around £2.3bn a year, according to estimates, and is only going to get worse.

From employee or trustee theft, to cyber crimes such as phishing scams or ransomware, any charity can fall victim to fraud, and the damage to finances and reputation can be fatal. But there are steps you can take to improve your vigilance and boost your defences against fraudsters. Embedding an anti-fraud culture throughout the organisation, so that all people, policies and procedures are tuned to resist and deter fraud is important. The biggest single influence on any organisation’s culture is the wider realm in which it does business – “the way things are done around here”.

I recently delivered a session at Civil Society’s Charity People & Culture conference on what charities should be doing to create and embed an anti-fraud culture in order to reduce their risks of fraud. Advocating a ‘cradle to grave’ approach, I gave examples as to the actions that should be taken – from a strategic fraud risk assessment of the charity’s capability to tackle fraud, through to operational assessment of controls and policies, and the design and use of fraud risk registers.

Having robust policies in place that map with each other is an easy and effective way of increasing the deterrence and prevention of fraud. Polling the audience, it was apparent that whilst many charities have an anti-fraud policy, few had dovetailed it into other related policies such as ‘Gifts & Hospitality’, ‘Expenses’ and ‘Conflicts of Interests’. The risk of fraud needs to be given the proper attention and priority across the charity in all areas. 

I also highlighted the importance of training staff to spot and report suspicions of fraud. Recent Charity Commission research revealed particularly frightening figures when it came to insider fraud. Training your staff to spot the ‘red flags’ can go a long way in helping you reduce the likelihood of fraud before it takes place. Would your staff know the signs of fraud and know how to report it if they did spot something?

As well as training staff to spot the flags and how to report their concerns, charities then need to be able to respond to allegations and pursue criminal, civil, disciplinary and regulatory sanctions. If a staff member did report a suspicion, would you know how to and have the procedures in place to respond and investigate the matter appropriately?

Proactive not reactive
Ultimately, as I told the audience of charity senior leaders, it’s about being proactive, not reactive in your approach to tackling fraud – trust is not a control. We’re supporting the Charities Against Fraud Awards, which aim to recognise those charities doing just that. With a focus on proactive prevention and deterrence the awards recognise an individual, team or charity that has demonstrated an innovative approach in tackling fraud. Nominate your charity or join us on 22 October for the drinks reception at which the winners will be announced and best practice will be shared for all in the sector to learn and benefit from.

For more information about how we can help you create and embed a counter fraud culture, contact your usual Moore Stephens adviser or our counter fraud specialist, John Baker.

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