Reducing the risk of fraud

Jo Fox

The Charity Commission has highlighted concerns over the level of fraud and mismanagement in the charity sector.

Trustees have overall responsibility for governance and for safeguarding the charity’s assets. Trustees should therefore be alert to fraud, understand what it is and how it may affect the organisation.

Establishing a robust anti-fraud environment

There are three steps you should follow:

  1. Make sure your anti-fraud policies are reviewed regularly and are easily accessed by everyone in the organisation. This particularly applies to whistle-blowing policies, which is still one of the most effective ways of fraud being identified.
  2. Establish good systems and controls, and document them formally such as in a financial procedures manual.
  3. Review your key systems and controls regularly and in a structured way (see our recent blog on reviewing internal controls.

With MHA, we have created Keeping Your Charity on the Right Track, a 12 month programme to help you improve your organisational governance in a stepped and measured way. Each month’s article covers an area of charity governance. The article for month nine covers fraud, and provides real life examples of fraud experienced by charities. It also includes a checklist of items all charities should do which is set out below:

  • Make sure that your charity is alert to the risks of fraud, and you are responding accordingly, as the direct and indirect costs can be significant.
  • Be aware of new and emerging areas, for example, at present, cyber-risks are becoming ever greater.
  • Speak to your professional advisers regularly as they’ll be aware of current fraud risks in the sector and what could be done about them.
  • Monitor the guidance issued by the Charity Commission and Charity Sector Counter Fraud Group, so you understand their expectations.

Should you have any queries please contact a member of the Larking Gowen Not for Profit team on 0330 024 0888 or charities@larking-gowen.co.uk.