The Charity Commission this week launched a new website designed to help charities fight fraud. The website, www.charitiesagainstfraud.org.uk, offers guidance on how to spot the warning signs of fraud, how to reduce risk, how to report fraud when it takes place, as well as the latest news on fraud and anti-fraud measures.
With a total annual income of over £69 billion, the charity sector is vulnerable to fraud and financial crime. Online fraud, or cyber crime, is a particular concern: roughly 70% of all fraud is now committed online.
Charity facilities managers routinely manage large contracts and purchase a wide range of services. Understanding how to prevent fraud is a key skill – and collaborating with trustees, as well as with finance and i.t. departments, is essential.
The Charity Commission has also published an overview of the serious incident reports they have received about fraud to identify wider learning points for the sector.
This analysis shows that during the financial year 2015/16, charities reported 178 serious incidents to the Commission which were classified as fraud. These incidents affected a broad range of charities – from small, local organisations such as school parent teacher associations to large well-known charities with thousands of staff and multi- million pound budgets – and included both internal and external frauds.
Key findings on fraud in charities
The Charity Commission’s review found that:
Over a third of the frauds sampled were 'internal', meaning frauds originating within the charity (i.e. perpetrated by trustees, staff or volunteers)
The highest single reported loss to fraud was over £1 million
Common identifiable trends in many fraud cases include weak governance and poor financial controls, often coupled with excessive trust placed in key individuals within the charity
Several cases related to frauds carried out by charities' overseas partners, where the legal and regulatory context can often be difficult to manage.
The Charity Commission sited a case in which a fraudster impersonated a major telecoms company to gain access to bank account information. The Commission reported:
“In another example, a charity was defrauded of £10,600 by a telephone and online scam. The charity treasurer received a telephone call from an individual claiming to be from a major telecoms company, offering a £400 inconvenience fee for the telephone problems supposedly suffered by the charity in the previous year, and to ’clean’ the charity computer for free. When the Treasurer agreed, despite not having previously had problems with the phone, the fraudster took control of the computer and subsequently made payments to the fraudster’s bank account. “
Five tips to reduce your charity’s vulnerability to fraud:
Develop a strong counter fraud culture where staff are encouraged to play their part in the fight against fraud.
Have in place and robustly apply internal financial controls.
Encourage staff to voice concerns.
Have a fraud response plan so that everyone knows what to do and when - stay calm but act quickly when incidents do occur.
The Charity Commission designed the website in collaboration with members of the Charity Sector Counter Fraud Group. Its launch was timed to coincide with a new Charity Fraud Awareness week, which runs from 24-28 October.