An anti-fraud solution for charities

Like most sectors, charities are vulnerable to fraud and can be easy targets for criminals. With an annual UK income in excess of £69 billion it is no surprise that there are significant threats to charities involving fraud and other forms of financial criminality.

According to statistics from the 2016 Annual Fraud Indicator report fraud, is estimated to cost the charity sector over 2 billion pounds a year.

There are a variety of common scams that are targeted against charities such as donation scams, cash theft, false expense claims and embezzlement. The common theme in many of these types of frauds is that they are committed against charities internally. This is reflected in figures published by the Charity Commission last year which showed that one third of frauds committed against charities were carried out by charity staff, trustees and volunteers. An examination into these frauds by the commission found that placing excessive trust in key charity personnel exposed the charities to fraud and abuse.

Internal frauds committed against charities share common characteristics such as weak governance and poor financial management. However, more worryingly, a recent report produced from the Third Sector suggests that charities may be vulnerable to fraud because staff have a basic lack of awareness of how to report fraud in their workplace.

The report, based on a survey of 382 charity trustees and executives, showed that almost a quarter of charities do not have whistleblowing policies in place, and only a third of charities actively promote such policies to their employees.

The need to develop an anti-fraud culture within a charity is vital if it is to identify the red flags that could cause irreparable harm to their organisation. They can achieve this by following some key recommendations:

• Produce a whistleblowing policy whereby the charity’s expectations about speaking up and reporting fraud should be made clear to staff, contractors and associated third parties.
• Provide regular fraud awareness training to all employees and ensure that they have fully understood the process for raising concerns.
• Ensure there is comprehensive information about how to raise whistleblowing concerns at the induction stage for new employees.
• Posters and literature should be widely advertised in communal areas and on notice boards.
• Information on how to raise concerns should be easily accessible on the charities intranet.
• Provide a safe and supportive environment for raising concerns. Many employees may not feel comfortable raising concerns with their internal line-management. Charities should therefore include both internal and external reporting avenues for staff to raise their concerns.
• Have allegations of fraud investigated promptly by anti-fraud specialists therefore helping charities prevent similar types of fraud re-occurring.

External whistleblowing service providers who combine their whistleblowing service with anti-fraud specialists will optimise fraud protection for their charities and get to the root cause of the fraud. If you would like further information about implementation of an independent external whistleblowing and investigation service to enhance your charities fight against the dangers of fraud please follow this link, or alternatively, please contact Sean McAuley, the SeeHearSpeakUp whistleblowing manager by dialing direct on +44 (0) 1224 049449.