Jamie De Souza, Partner, Trowers & Hamlins LLP and Emily Sharples, Associate, Trowers & Hamlins LLP
During Charity Fraud Awareness Week 2022 (which took place between 17-21 October 2022) we heard about the ongoing fraud and cyber risks that charities are facing. Alarmingly, recent findings from surveys by the Charity Commission for England and Wales and the National Cyber Security Centre and Third Sector include:
The key to preventing fraud is ensuring your organisation is not putting itself in a situation where the risk of fraud is higher than would otherwise be the case if basic controls were in place and applied. In fraud cases we have dealt with, particularly involving charities, it has been easy to identify the underlying vulnerabilities in the organisation which have led to the fraud or exacerbated its impact and which, with hindsight, could have been mitigated.
Top tips for fraud prevention include:
Good governance / segregation of duties
It is not uncommon, particularly in smaller charities, for several key roles to be held by one individual. This can cause an imbalance of influence and control and ultimately increase the threat of fraudulent activity which an individual can more readily conceal.
Policies and procedures
The importance of fraud and cybercrime policies and procedures cannot be overstated.
Training is also a crucial part of fraud prevention and is an often forgotten ‘easy win’. Staff, trustees and volunteers play an integral role in preventing fraud in your organisation.
As part of fraud procedures, charities need to consider their response plans so that if the worst does happen, you know how to manage the situation effectively.
Sadly, there is no failsafe to stop frauds from occurring. However, with appropriate planning the impact of a fraud incident can be controlled, responded to and where appropriate proceedings commenced to seek recovery of losses suffered.