17-22 October this year marks Charity Fraud Awareness Week. Whilst we do not need a specific week of the year to spotlight this important topic, Charity Fraud Awareness Week serves as an important reminder to focus on, and raise awareness of, the risks of fraud in the charities and not-for-profit sectors. It is also a great time to pause and review your organisation’s ability to identify and respond to any active or developing risks of fraud.
Every charity and not-for-profit organisation is susceptible to fraud and the risk is ever-increasing in the current economic climate. Last year, the Charity Commission reported that £8.6 million of funds had been reported as lost by charities; a figure that makes it very clear that the sector must be alert to the risk of fraud within their organisations. The Charity Commission and the Fundraising Regulator have made public statements in recent months urging charities and the public to be vigilant to the risk of becoming victim to cyber-attacks and aware of illegitimate fundraising during increased times of giving.
But whilst many fraud risks come from outside an organisation, it is important to recognise that there may also be a risk of fraud from within a charity (e.g. from employees, volunteers or trustees) and it is necessary to treat both external and internal risks with equal importance.
At the heart of fraud awareness is good governance and strong financial controls since it is often the case that, had there been additional checks and balances implemented into a charity’s financial processes, the fraudulent actions and associated consequences for the charity may not have occurred at all. Indeed, the Charity Commission published a research report into insider fraud in April 2018 which showed that in 19 of 20 cases of confirmed insider fraud, the absence of appropriate controls was the primary enabling factor.
Charity trustees have a duty to manage their charity’s assets, ensuring they are protected and used for charitable purposes only. As such, it is vital that trustees consider their responsibilities and whether their charity is appropriately set up to deal with the risk of fraud.
At Anthony Collins Solicitors, we support lots of charities and not-for-profits in reviewing their governance process, which can be with the view to prevent a heightened level of fraud risk. This can include reviewing policy documents (such as fraud and anti-money laundering policies), training trustees to be aware of their responsibilities and providing general advice on how to improve your procedures to prevent loss of charitable funds or damage to your reputation. Should you require any support, we would be happy to hear from you. Please contact Amber Sutton, Catherine Gibbons or another member of the Charities Team who may be able to assist.
Every charity, NGO and not-for-profit is susceptible to fraud and cybercrime by criminals exploiting the current global crisis. Charities need to be aware of the risks and take steps to keep their money, people and data safe. Together, we can #StopCharityFraud