Fraud
Stories in the press about charity fraud can be a bit alarmist and feel irrelevant to your experience, but even in a small friendly charity you need to be aware of the risk factors relating to fraud and take steps to protect your organisation.
Whether from inside or outside the organisation, the risk of fraud occurs when there is a combination of three factors:
- Pressure – eg if someone is struggling financially
- Opportunity – if the systems make it easy, if there are no checks and balances
- Rationalisation – this often arises if there is a perceived unfairness in the organisation, differentials in pay, or someone feels they have been badly treated, or perhaps if they can justify it as not really doing any harm.
What you need
- A good system of financial controls set up to counter the risk of errors
- Controls that are applied to all staff and trustees – seen to be fair
- A leadership that promotes a culture of honesty and integrity
It can be difficult to introduce more formal systems when you are all volunteers and have always just trusted each other. Some people take it personally and resent being checked up on, others don’t take it seriously. You might think about asking your independent examiner to make recommendations to the board – people hear things differently from an outsider.
Further guidance
- The Charity Finance Group is running a Counter Fraud Campaign and has issued a Small Charities Guide to Preventing Fraud and the Charities Counter Fraud Checklist
- The Charity Commission Guidance is straightforward and helpful
- The National Cyber Security Centre (a part of GCHQ) has issued a guide on Cyber security for small charities
- Preventing charity fraud: insights and action: A research report about fraud committed against UK charities.
Last reviewed: 26 February 2021
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