If your answer is 'No', there is a strong possibility that you would be wrong.
The Charity Commission’s reporting on its compliance and investigations work, indicate that the largest proportion of the reports of serious incidents by charities related to fraud and theft.
Reports show that 44% of all serious incidents related to fraud or theft and this leads on from a number of worrying results of 2015 National Crime Survey, where the number of instance of fraud reported has risen 315% since 2010.
The latest fraud that the Charity Commission has warned about relates to mandate fraud.
This is where the fraudster tricks the charity into changing bank account details, in order to divert legitimate payments intended for a genuine entity, such as the charity’s supplier, to bank accounts controlled by fraudster.
Sometimes this involves the fraudster impersonating the charity supplier’s representative, either by email, post or phone and often uses credible supplier letterhead or logo.
What can you do about fraud?
Start by recognising that you could be vulnerable; that it could cost you and that amounts and sources of fraud vary. A mix of the right policies and procedures can help to minimise the risk.
Areas to consider include:
-Set the right tone: in which honesty and integrity are, from the top down, seen to be paramount and where dishonesty will be dealt with appropriately.
-Employment: recruitment policies should include reference checks and background screening.
-Increase the perception of detection: put in place sensible supervisory controls including segregation of duties (where practicable), proper authorisation processes and management review. Carry out surprise checks where possible and investigate when you suspect fraud.
-Maintain written procedures for validating and checking the authenticity of changes to supplier details
-Regularly review the financial performance of your charity and follow up unexpected variations: the lower than expected income and the above budget spending could be due to fraudulent activity.
-Staff policies: educate your employees about fraud, its impact on the charity and how they can help prevent it. Facilitate the internal reporting of fraud if it exists or is suspected. Enforce mandatory holidays and rotate jobs if practicable. Minimise employee pressures to behave badly.
At Alliotts we take the threat of fraud to our clients very seriously and have recently launched our Fraud Prevention and Detection Service to help our charity clients become aware of the issues; what they can do to mitigate the risks and to help them detect fraud if they suspect it occurs.
If you would like to find out more, please contact me or Peter Edwards FCA, CFE, our Head of Fraud Prevention and Detection Services.