6 simple steps your charity can take to help protect themselves from fundraising fraud

September 25, 2017 at 09:58

Fundraising fraud is where a fraudster (who might be known) collects money on behalf of the charity but keeps some or all of the money and can be difficult for a charity to track.

All areas of your organisation will have fraud that is unique and complex and fundraising is not alone in this. Fundraising fraud can be both internal and/or external.

Examples of internal fundraising fraud:
• Diversion of fundraising funds by fundraisers
• Diversion of fundraising funds by managers/finance/treasurer
• Misuse of ‘restricted’ fundraising funds in a way not intended by the donor
• Fictitious costs or expenses

Examples of external fundraising fraud:
• Impersonation of your charity
• Fake buckets
• Fake websites
• Scam donations
• Promising to give your charity £10,000 if you promise to send £5,000 to another organisation.
• Fundraising third parties siphoning funds

So what 6 steps can your charity take?

1. Review your risks
Charities fundraise in different ways and there is not a one size fits all approach what risks your charity might face. It is important that you assess the risks that YOUR charity is affected by, whether that is from false door-2-door collections or fake websites.

2. Consider what controls are necessary to mitigate those risks (e.g. monitoring volunteers when they fundraise etc.)
Once you know what risks your charities take it is important to put in controls to mitigate this. One example could be when you know that your charity suffers from fraudsters fundraising in parts of the country that your charity isn’t active in. One way of mitigating this risk is to highlight to donors where you do fundraise and provide a contact for donors to report suspicious activity.

3. Codify these controls and expectations into a ‘fraud policy’
A fraud policy allows everyone, from staff, trustees, to volunteers to see and understand your organisations approach to risk. A fraud policy should clearly show what risks your charity faces, how you will mitigate those risks, what you will do when fraud has occurred and how someone can report suspected fraud.

4. Communicate with all volunteers, staff and trustees

It’s important to remember that though the finance team will know and understand CC8 and other guidance on internal controls; this will often not be the case for the rest of your charity.

5. Get trustees and senior leaders to act as ‘champions’ for combating fraud

Getting buy-in from senior leaders and trustees will help to embed within your organisation that fraud is considered a serious risk, and that your charity has put in place processes to deal with this risk. Creating a strong counter-fraud culture will encourage the honest majority, and discourage the dishonest minority.

6. Review and repeat step 1!

Different types of fundraisers

Your charity might rely on different types of fundraisers, from expert in house fundraisers, to third-parities, to volunteers. Nearly half of all frauds occur through internal methods so it is important that you put in place controls that can reduce your chance of this risk:

  • Conduct basic screening of new staff and volunteers, whether that’s by checking original identity documents, qualifications etc., and asking for references.
  • Check on staff and volunteers periodically during their time with your organisation. If staff and volunteers are being given more financial responsibility as they spend more time with your organisation, it is important that you review the risks and controls when new responsibilities are given.
  • Treat staff and volunteers well and consider ways to help support them if it appears they are struggling, especially if they appear to be in financial difficulty.
  • If you use a third-party fundraiser ensure firstly that you are complying with the Fundraising Regulator’s Code . Make sure that the third-party is aware of your fraud policy and what steps you expect them to take to reduce the risk of fundraising fraud.

A word about volunteer fundraisers

Some charities can be reluctant to give volunteers the formal training needed to prevent and manage fraud. There’s a belief among many that charities should be grateful to all volunteers for the time and value they add to their organisation.
While it is important to recognise this value, that should not stop a charity from putting in a strong counter-fraud culture among your volunteers who fundraise. Not doing so risks losing your charities reputation and trust, and most importantly, losing funds for your charity that should go to your beneficiaries. Again, the Fundraising Regulator Code outlines what a charity needs to do if they use volunteers to fundraise.

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