by Susan Bibby

Fraudulent charities

Social development with ulterior motives

Fraudulent charity
Social development with ulterior motives

The cost of fraud is significant in the charity sector, with figures from the National Fraud Authority suggesting that fraudulent activity costs charities as much as R17490 billion a year.

This figure is likely to be even higher, with many other forms of charity fraud going unreported or undetected.

A recent conviction of a Wigan nurse, who defrauded an European national cancer charity of a total of £4,122 (approximately R55,450), has placed the spotlight on the issue of fraud in the third sector, with charities desperately working on ways to protect the revenue that they depend on to continue their vital work, as well as protecting the public that donates to their causes.

But if you are in the charity sector, just what can you do to ensure that you are protected from fraudulent activity, and ensure that every penny that is donated to your charity goes towards supporting your work?

Here are five key tips to minimising your charity’s exposure to fraud:


Be aware of the potential risks of fraud and what the impact is likely to be on your charity. Examine your operation for potential vulnerabilities and explore ways in which those vulnerabilities can be addressed, such as new systems or procedures. This could include changes in your auditing process, IT policy or financial controls.

Monitor cash donations closely

Charities that rely on cash donations are particularly vulnerable, due to the difficulties involved in tracking cash donations. In recent years, many charities have moved to reduce their reliance on cash donations and instead encourage electronic donations, such as direct debit and subscriptions.

Encourage dialogue with staff and volunteers

Many cases of fraud only come to light following a discussion between staff members, volunteers or fundraising partners, and many cases of fraud remain undetected until questions are asked between individuals.

It is important to encourage a culture of communication throughout all levels of your charity. By encouraging staff and stakeholders to share views, opinions and ideas, you create a culture of openness that anyone who is committing fraud is likely to find uncomfortable. Having an anonymous whistle-blowing policy is also beneficial in this regard, allowing staff to voice concerns over an issue that could affect the charity.

Lead by example

Ensure that there is clear leadership on fraud prevention and detection. This includes regular risk assessments to establish the risk of any fraudulent activity and the possible impact that this may have on the charity. Procedures for authorising certain activities, such as banking and cashing cheques, are also an effective way of preventing and deterring fraudulent activity.

Ensure that these processes are applied throughout all levels of the charity, including senior management, as senior staff are more likely to be aware of vulnerabilities in your existing systems.



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Issue 23


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