# 10 ways to prevent fraud in charities

- Link: https://fundraising.co.uk/2015/06/17/10-ways-to-prevent-fraud-in-charities/
- Published: 2015-06-17T07:21:14+01:00
- Author: Guest Blogger

**It’s sad to see so many reports of fraud in charities in the press – I suppose
the only good thing is that the fraud has been detected. The incidence of fraud 
has been increasing and charities are no exception. Charities are a target for fraudsters
in a number of ways.**

Large charities report regular cyber attacks and other sophisticated methods involving
hacking, credit cards, stealing bank details and more. Some of these attempts are
really not so sophisticated though. Take the example of the would-be thief who created
a standing order form using the bank details he found on a charity’s website. His
attempt to pay himself a regular amount was thwarted because he forgot to complete
the payee details.

Charities want to make it easy for volunteer fundraisers to give them funds, but
make sure you publish only the details of an account that is not used for expenditure.
That way, it will be obvious if unauthorised withdrawals are being made.

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Some frauds are quite audacious and yet quite simple. It is common for the building
company undertaking work on your premises to put up advertising hoarding to announce
their presence. Fraudsters have been contacting the client (often a school or university)
to advise them of a change in bank details for the building company. A neat way 
to divert funds that would probably not be detected for some months.

![Kate Sayer on avoiding fraud at charities](https://www.fundraising.co.uk/wp-content/
uploads/2015/06/kate-sayer-quote-fraud-201506.jpg)

Be careful which bank account details you publish, advises Kate Sayer

More often, however, fraud committed in charities is internal, just as it is for
any other organisation. The most common fraud is to create a bogus supplier (or 
two) and then slip a few invoices in for payment. This is most commonly perpetrated
by finance staff and it is apparently possible for this to go undetected for years.
It is a simple fraud that depends on managers not actually checking invoices when
they approve them but signing them off anyway.

So how strong are the controls in your organisation? Authorisation feels like it
ought to be a strong control but in practice it depends on the time and energy of
the individual charged with the responsibility. Ironically, this duty is likely 
to be discharged more diligently by a more junior member of staff.

Here are the top ten things to consider in terms of preventing fraud in your charity:

1. There is a lot of fraud in charities so don’t imagine your charity is immune –
it isn’t. You can reduce the risk of fraud, but you cannot eliminate it.2. Most 
fraud is not very sophisticated – it is often simple, and can be simply prevented
with good old-fashioned controls.3. The thing about controls is that you have to
implement them! For example, getting blank cheques signed is bypassing the control–
you are asking for fraud.4. A common fraud in charities is internal and perpetrated
by finance staff – false purchase invoices slipped into the system and paid as part
of the batch.5. Note that this fraud relies on a lack of attention by the manager
authorising the purchase invoice for payment. This is a good example of a control(
authorising) being ineffective because it is not implemented as it was designed.
If implemented properly, this should be a strong control.6. Don’t publish details
of your normal bank current account on your website – if you want donors to pay 
funds direct into your account, use a different account such as a deposit account
as that can only receive funds, not be used to pay expenditure.7. Don’t publish 
reports or accounts with scanned signatures – this can make forgery easy8. Do check
if you receive notice from a supplier that their bank details have changed – there
is a well-known scam used to divert funds to the thief’s bank account. Just phone
them to check that the change is genuine.9. Establish the principle that it is OK
to report any suspicious activity. Staff and volunteers need to feel confident that
this will be handled appropriately and that they are doing the right thing. It requires
a considerable effort by individuals to overcome the sense that they are telling
tales.10. The most important control your organisation can introduce is a strong
culture that fraud is not acceptable. A strong sense of values and commitment to
the cause will create the right culture. It is also important thought that the leadership
of the charity sets the right tone – trustees and senior staff must follow the rules
when it comes to claiming expenses and getting purchases authorised. If the leaders
of the charity go round the system, why shouldn’t others too?The most important 
control your organisation can introduce is a strong culture that fraud is not acceptable
and that it is OK to report any suspicious activity. Charities can play a strong
hand here – stealing from the charity means that the money is not going to a good
cause. A strong sense of values and commitment to the cause will create the right
culture. It is also important thought that the leadership of the charity sets the
right tone – trustees and senior staff must follow the rules when it comes to claiming
expenses and getting purchases authorised. If the leaders of the charity go round
the system, why shouldn’t others too?Sayer Vincent is leading a one-day training
course for [CFG ](http://www.cfg.org.uk)on “Good controls and preventing fraud” –
check the websites for dates and venues. ⌊Kate Sayer - Sayer Vincent⌉

_**Kate Sayer** is a partner at [Sayer Vincent](http://www.sayervincent.co.uk), 
specialist auditors and advisors to the charity and not-for-profit sector.  She 
has in-depth knowledge of the legal and financial frameworks within which charities
and social enterprises have to work, including taxation and VAT. She works to improve
the effectiveness of organisations through better ways of working, improved risk
management processes and better support functions._

_As well as being a qualified chartered accountant, Kate is a certified NLP master
practitioner, lecturer at Cass Business School on the charity MSc and other courses,
and a non-executive director of Charity Bank and Development Initiatives Poverty
Research. She is the author of a number of publications and guides on charity finance,
taxation and management.  _

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