Preventing Charity fraud – new Charity Commission guidance

The Charity Commission has recently issues important new guidance on preventing charity fraud which should be incorporated by all schools into their fraud action plan. The Charity Commission’s strategy is as follows.

5 tactics to fight back against charity fraud

  1. Recognise the Risk:
    Schools make very tempting targets and the Charity Commission are keen that governors recognise the risk of fraud – both to their bank balance and, more importantly, their reputation! Recently, the Charity Commission reported that 69% of charities think fraud is a major risk to the sector and 33% think fraud is more of a risk to the charity sector than other sectors. It is important that schools remain vigilant to the risk of fraud.
  2. Focus on Prevention (rather than Cure):
    It is far more cost effective (financial and reputational) to prevent fraud rather than to investigate and remedy damage already done.
    Governors should, having recognised the risk of fraud, initiate and roll out proportionate anti-fraud measures as a matter of priority.
    Methods used by fraudsters are constantly evolving and these anti-fraud measures should be kept under regular review to ensure that they are as robust as possible.
  3. Identify and Report Fraud:
    Even with the best-anti fraud prevention measures in place, your school will almost certainly experience fraud at some point. Therefore, it is important to ensure that, in addition to having preventative measures, you have a clear policies in place, setting out how cases of fraud should be reported and escalated to the appropriate personnel.

    The Charity Commission found that once fraud had been uncovered: only 89% of cases were reported to the trustees, 42% were reported to the police, 29% were reported to the Charity Commission, and 33% did not report the fraud to any external organisation.

    It is concerning that reporting levels remain quite low. This is likely to be because of the fear of blame or damage to reputation. However, the Charity Commission are keen to emphasise that the sector needs to talk openly and honestly about fraud in order to encourage better awareness and deter potential fraudsters.

    As with any potentially serious incident, it is far better to proactively manage a situation and report incidents as they arise – rather than run the reputational risk of embarrassing leaks later on or a third-party (for example a parent) reporting their concerns first.
  4. Be careful who you Trust:
    It is an uncomfortable truth that the majority of fraudsters are known and connected to the organisations they defraud.

    The Charity Commission identified that of the 53% charities who knew who had committed the fraud against them: 29% were by paid members of staff, 18% were by volunteers, 13% were by beneficiaries, and 10% were by trustees. Only 14% of identified fraudsters had no prior connection with the organisation.

    Schools already take great care in carrying our proper pre-employment checks before recruiting staff but it is clear that thought also needs to be given to the risk of fraud as well as other well-known concerns. New joiners need to be trained in fraud prevention measures so they see the risks are taken seriously.
  5. Take Collective Responsibility:
    Governors and senior management should create an open and transparent culture in which it is clear that fraud risks will not be tolerated. All staff and volunteers should be instilled with the confidence (and know how) to speak up if something looks or feels wrong.

If we can help in any way in relation to what to do if your school experiences fraud, or if you are concerned that you have had a data breach, please contact Gordon Reid.