Trustees have an obligation to safeguard the assets of their charity and ensure these are used for the purpose they are intended. Ensuring that you have a robust system of financial controls will minimise the opportunity for Fraud.
Fraud is a criminal offence and must be reported to the Police. Trustees also need to report to the Charities Commission any actual or suspected serious incidents of fraud, theft, other financial crimes or other significant loss to the charity. As one would expect fraud can have a detrimental impact on the charity itself and on the charity sector as a whole.
A few examples of fraud are:
• Redirected resources from charity shops or trading activities.
• Intercepted donations and cheques being paid into personal accounts.
• Skimming money from charitable fundraising collections.
• Impersonating a charity and redirecting the income collected to a fraudulent or bogus body.
• False accounting.
• Claiming non-existent, over inflated or inappropriate expenses or overtime.
• Misusing charity credit or debit cards or internet banking for personal expenditure.
• Withdrawing cash directly from the charity’s bank account for personal use, by using cheques or issuing false direct debit or standing order instructions.
• Creating false invoices, purchase orders and supplier identities to obtain payment for goods or services that have not been supplied.
• Creating non-existent beneficiaries or employees or using a beneficiary’s identity for personal benefit.
Top Tips for the Prevention of Fraud
• The Charity’s trustees and management should receive regular reporting information, such as monthly management accounts, compared to prior year and budget. As trustees and managers you must ensure you understand the financial information presented and, if not, question until you do understand.
• Maintain a register of valuable fixed assets and key charity property. You should regularly inspect these to ensure they still exist and have not been misappropriated.
• Electronic and online banking arrangements should be secure with dual levels of authorisation.
• Segregation of duties is key. Ensure that the same person is not involved in the whole process from start to finish and checks should be performed on key elements of the process.
• Never weaken financial security for the sake of time saving. A key example would be to never pre-sign blank cheques, even if two signatures are required.
• When recruiting staff make appropriate background checks and take up references, especially those who will handle the Charity’s finances.
• Ensure that all elements of the financial records agree with each other. Bank accounts should be reconciled with receipts and invoices retained. No payments should be made without the relevant paperwork trail in place.
• Ensure you have documented processes and financial controls. These should be reviewed regularly to ensure they remain as up to date an appropriate.
For further information on any of the above, please do not hesitate to contact me.
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