The Charity sector in the UK is one with a long history that extends back to the Dark Ages and beyond. The nature of the sector has changed throughout that history but 2 factors have remained constant.

- A desire to help those less fortunate, and

- A tendency for fraud, theft and downright bad behaviour

There seems to be something about the charity sector that brings out the worst in human nature (as well as the best). 

The risk of fraud operates across every aspect of a charity’s operations. For example:

- By staff and trustees misappropriating funds

- By suppliers inflating bills

- By beneficiaries (perhaps claiming to have needs that are not genuine)

- By donors (be very aware of donations with strings attached that give the donor the ability to directly distribute part of the funds provided – there have been recent cases where this was facilitating money laundering and terrorism)

The variety is staggering and, in all cases, as in everything charity connected, it is the responsibility of the trustees to ensure that fraud does not occur. The trustees’ responsibilities include protecting the assets of the charity – and that includes protecting those assets from fraud. 

Good governance is everything. It may not stop every fraud – but it at least can give you a fighting chance.

Some basic steps that can be taken include:

- Checking references for employees and trustees and ensuring that volunteers are supervised and checked as appropriate. The more involvement somebody has with money the more checks should be carried out.

- Do not assume that people are inherently honest. At least the same level of scepticism and supervision should be applied in charities as in business. 

- If you have concerns then always ask the question – and if the answer still seems insufficient then ask it again and obtain evidence to back up what you are being told.

- Carry out spot checks on financial matters. If an expense is a surprise (in amount or existence) then ask for the invoice. Trustees should make sure that they have sufficient understanding of financial matters to hold the treasurer or bookkeeper to account. Thomas Westcott can provide training in this area.

- Do not sign blank cheques (regardless how time pressured the treasurer might be). Internet payments are normally made on the authority of one individual – make sure that somebody else checks them as well

- Do not share passwords

- Consider using Thomas Westcott or other firm of reputable Chartered Accountants to carry out an audit or other review process for you (Chartered Accountants are regulated and are required to act with integrity at all times – not all “accountants” are the same).

The range of possible actions that can be taken to combat fraud is as wide as the possible types of fraud. No list will ever be complete so a useful reminder for trustees which, if followed, would significantly reduce the incidences of fraud, might be:

“How would I act if this was my own money?”

By Stuart Carrington, Partner

If you would like any advice on the matter, please do not hesitate to contact me.