Fraud and the 3 C’s

September 25, 2017 at 09:57

Throughout CFG’s Counter Fraud Campaign we have talked a lot about establishing controls, culture and communications, or the 3 C’s. It is important to also think about how these 3 C’s link together to support each other. So this blog is going to discuss how you can ensure that the 3 C’’s are working together.

Fraud 3 Cs

So you’ve reviewed your risks, updated or created new controls to address them and put them into a fraud policy, you’ve communicated this policy to your staff, volunteers and Trustees and now you’re working on building your counter-fraud culture.

So how do you ensure that they all link and support each other, and why should this be the case?

The simplest response is if you remove one, the other two will not be as effective. Let’s look at what happens when you try and reduce the 3’Cs.

If you remove culture what happens to the controls you’ve so carefully thought through and how will people respond to this when you try and communicate with them to develop a fraud policy?

We’re always saying at CFG that to build culture within your organisation you need buy in from the top. But it’s equally important that those at all levels, whether that’s the CEO or volunteers of the organisation know their responsibilities and why they should be proactively working to tackle fraud. Different positions within the a charity will also be more susceptible to different types of fraud, for example if your charity receives or gives grants, then the grant managers could have more of an awareness of where the risks are and what controls are needed than the finance team.

So what happens if you remove the controls? Controls are vital to a charity and Charity Commission Guidance on Internal Financial Controls (CC8)  highlights these reasons why. They help charities to meet their legal duty (and it is a legal duty of Trustees to protect their charities assets from fraud), allows you to identify and manage financial risk and ensures the good quality of financial reporting.

Controls are critical but they are only as good as the people that staff them. This is why culture and communication are so important. Culture reinforces the need to maintain effective controls and communication is required to make sure that everyone is aware of their responsibilities.

So this now brings us on to our final C – communication. While your charity might have an excellent counter fraud policy it isn’t useful if no one knows about it. Policies should not just be boilerplates that sit on the shelf and get dusted down once a year to be submitted to a tick box exercise at a Trustee meeting.

The risks that your charity will face from fraud will change, and how a charity can respond will also change as well. These changes need to be communicated out with necessary frequency to the appropriate stakeholders.

You also need to reinforce success. If you prevent a fraud, you need to tell people about it internally. If you have suffered a fraud, make sure that staff understand how it happened and what can be done to stop it in future.

It is often tempting when it comes to fraud to keep everything under wraps. But actually, communication is vital in making sure that people don’t forget about the risk of fraud. They also need to know that the controls are effective, and highlighting successes and failures (even if they are not in your charity but others you know or media reports) can be helpful in keeping momentum behind your counter-fraud work.

See more on CFG’s Counter Fraud Campaign and join over 70 charities in taking the Counter Fraud Pledge at cfg.org.uk/fraudpledge.