Fraud Focus

When times are hard, financial fraud inevitably rears its ugly head.
Charities, sadly, can't escape this threat. Dishonesty among employees or volunteers is extremely rare. A volunteer giving up hours of their valuable time to help a good cause is highly unlikely to ever even consider taking advantage of the charity. But it does happen. To ensure your charity is properly protected, sensible financial management and common sense procedures are a must.


In 99 per cent of cases these measures are helping to run the charity better. They remove the opportunity for any kind of fraud before it can even be considered.


They are not an assumption that all staff and volunteers are under suspicion. Nor are they a sign of a lack of trust. If the precautions are reasonable, they are simply another way to help make the charity even more professional and well-run.
Broadly speaking, fraud can be any dishonest management of money. Someone transferring charity funds to their personal account is fraud. So too is someone taking a cut from the collection tin. Financial fraud can seriously damage your charity's finances, potentially threatening its existence if the dishonest is severe, But even a small incidence of fraud can shake confidence in your charity and tarnish its reputation. No type of fraud should be tolerated.


Smaller charities aren't necessarily more than larger charities, but they may have less formal procedures in place to protect them. Ultimately, it doesn't matter what size your charity is, or what it does, tackling potential fraud should be serious matter.
The Charity Commission's guidance on financial management is very clear and comprehensive. In the most part, it isn't rocket science either. First and foremost, you need to ensure that no one single person within your charity has too much responsibility or control. If somebody has too much to deal with, they could inadvertently mismanage funds for example. They could pay charity funds into their own account, or neglect to pay in fundraising. In these situations there may not be any malice, just a lack of support and proper procedures.


Formal procedures for making payments and transfers are also common sense. More than ne person should be involved in every process, so there is never room for error. Proper books and records, annual accounts and an annual report are ways to demonstrate good management. Clear lines of responsibility are critical and need to be documented so everyone is clear about their role. Simple budgeting and tracking of expenditure will keep finances under control.


Internet banking can help charities keep regular tabs on finances. Online banking is quick and easy to access. Trustees don't need to trudge to the bank, they can review finances from the comfort of their own home. Security is of course paramount and your bank should be aware of exactly who can access the account and who has the authority to make payments transfers.
With all these procedures in place, trustees can then oversee the charity's financial position through regular updates. They should see and formally approve accounts for example. They don't have to keep tract of every penny of course, just be aware of the procedures for running the charity's finances and oversee them.


Many charities aren't aware that insurance protection could help them manage the risk of fraud. Insurance cover for the loss of money or goods resulting from the dishonesty of employees or volunteers is called fidelity cover and most specialist insurers will offer it. How much cover you take out is of course a case of how much risk you are prepared to bear. If there are few opportunities for any financial mismanagement, then you might be content with a low level of cover.


Managing your charity's finances is really all about understanding risk. If for example you generate the vast majority of your funds through postal donations and legacies it is clear that the greatest potential risk concerns how the post is managed.
So you should direct your efforts at setting up simple procedures to make this operation well-organised. If a large portion of your funds are raised through street collections, it makes sense to focus on this.


An uncertain financial climate is a good prompt for you to ensure your charity's finances are being run and organized as well as they could be. Fraud is a terrible thing, and is in reality very rare in the charity sector. However, this doesn't mean charities can ignore it. If they do, it's more likely thy will experience it. Good procedures for financial management are completely common sense and can help your charity a great deal in its day-to-day running.

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