Fraud and Whistleblowing

Like all sectors, charities are not immune to fraud.  This includes both internal fraud (committed by volunteers or employees) and external fraud (individuals falsely claiming to be affiliated with a charity and collecting donations, for example).

The impact of fraud on charities can be severe.  Fraud can deter donors and volunteers, diminish funds and in some cases prevents the charity from carrying out its objectives.

Fraud is known to be underreported.  In 2010, the total amount of fraud and theft reported to the Charity Commission was £21 million - a very small proportion of the sector's income.

In June 2013, the National Fraud Authority released their latest Annual Fraud Indicator.  The NFA has repeated its charity research to produce a more robust estimate of fraud in the charity sector.  They estimate that the cost of fraud to charities is £147.3 million.

2013 NFA Annual Fraud Indicator and Charity Commission press release.

CFG urges charities to use the NFA's estimate as a prompt to review their own fraud policy.  While the majority of charities have systems in place to help prevent fraud, some still underestimate the risks and leave themselves open to abuse.

The responsibility for protecting a charity from fraud and other abuse ultimately lies with its trustees.  Trustees should ensure adequate financial controls are in place and there is strong financial management.  The Charity Commission has a range of guidance in this area:
Internal Financial Controls for Charities (CC8)
Compliance Toolkit:  Protecting Charities from Harm - Fraud and financial crime

CHARITY FRAUD GUIDE AND GIVING SAFELY GUIDANCE FOR DONORS

CFG, as part of a group of 15 organisations including NCVO, the Charity Commission and the National Fraud Authority, has produced ‘Charity Fraud: A guide for the trustees and managers of charities’. The guide pulls together existing guidance and is intended to be an accessible, easy to read publication to help charities prevent, detect and report fraud.

The charity fraud guide is one of the outputs of the Charity Fraud Project which unites the charity sector with the aim of reducing fraud in charities.

Accompanying the guide for charities is a specialist guide for donors: 'Giving Safely:  A guide to making sure your charitable donations really count', produced by the Fraud Advisory Panel.  The guide provides simple, practical advice on how to avoid potential scams and how to ensure that your donations really do reach the good causes you wish to support.

Charity Fraud:  A guide for the trustees and managers of charities - full version 
Summary document (web version) 
Summary document (printable)

Giving Safely:  A guide to making sure your charitable donations really count

REPORTING FRAUD

If you believe your charity has been the victim of fraud, it should be reported to Action Fraud and if appropriate, the police.  Charity trustees also need to report serious instances, including any actual or suspected serious incidents, of fraud, theft or other financial crimes to the Charity Commission.  See their Reporting Serious Incidents - guidance for trustees.

Action Fraud is an online reporting service set up by the NFA.  It acts as a central point of contact for information about fraud and enables individuals, charities and businesses to report fraud and find help and support.

CFG is keen to hear from charities who have experienced fraud and their lessons learned, to help us better support others who are concerned about or have been the victim of fraud.  If you would like to share your experiences, on a confidential basis, please email policy@cfg.org.uk.  

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