Shine a light and sign the Fraud Pledge!
Caron Bradshaw OBE, CEO, Charity Finance Group
Close your eyes. Imagine a fraudster. What do they look like? A shadowy figure, deeply suspicious and clearly criminal, working outside of the organisation and planning sophisticated ways to get around your safeguards?
Well, they might be.
But they may also be your trusted volunteer, staff member, supplier or other stakeholder.
They may be a seasoned criminal or an opportunist and everything in between. Fraudsters come in all shapes and sizes and we can fall victim to fraud as charities in any manner of ways.
Charities are not especially extra vulnerable to fraud than those in other sectors. Of course, our reliance on trust and the assumptions we can make around positive motive for social good can sometimes steer us wrongly; causing us to be exploited.
But over my many years in the sector, I have never seen evidence that shows we are any more at risk than any other. A family-run business can rely just as much on trust and established relationships. A large private company can just as easily be undone by human frailty.
We all need to be on our guard.
So what should charities do?
Don’t be paralysed by fear. Fraudsters will always be able to find new ways to defraud, however well we think we are protected. We cannot guarantee that we can stay one step ahead.
We can, however, work to collectively reduce the amount lost to good causes. The Charity Commission’s most recent figures estimate some £8.6 million income was lost between April 2020 and March 2021: At a time when we are all financially stretched, reducing this figure must be in everyone’s interests.
If you do one thing, make it signing and applying the Fraud Pledge! The Fraud Pledge was an initiative started by CFG and is now supported and driven by the Fraud Advisory Panel.
In summary, this is a commitment to some simple steps which will help reduce the risks of fraud:
- Appoint someone to champion counter fraud
- Ensure trustees know about their duties to protect charity assets
- Consult with staff, volunteers and trustees about the types of fraud risk and the mechanisms for prevention
- Create a written fraud policy
- Perform a check on individuals with whom the charity has a financial relationship
- Assess how well its going, building in ways to improve with any lessons you learn along the way.
Recognise that to be successful, fraudsters need to have the motivation and the opportunity. As we emerge from the pandemic there may be some who feel let down by us. Whether that is an employee who has gone the extra mile to support beneficiaries but feels undervalued, or someone external to the charity who is struggling financially.
This can increase motivation to commit fraud. That is not to say that all disgruntled staff will be fraudsters, or people in poverty will automatically turn to crime, I hasten to add!
Opportunity may have been increased by remote working, use of technology to communicate with our stakeholders and the willingness of our supporters to address the disadvantage exacerbated by Covid.
All these factors raise the risks.
Finally, remember that fraud can be internal or external, directly removing funds from your charity or riding on your charity’s brand and reputation to divert money from unsuspecting victims. We cannot stop all fraud. But we can reduce the incidence and level of loss suffered. By working together, sharing our experiences and shining light into the dark, unsavoury corners, we can tackle this scourge on society.