What is fraud?
Fraud can be defined as obtaining, or attempting to obtain, personal or financial gain through wrongful or criminal deception.
Charities might find themselves the victims of fraud, or affected by attempts to defraud them. Fraudsters can be external to the charity or may be people employed by or volunteering with the charity. Fraud can be carried out to obtain:
- access to a charity’s money, assets or data
- a benefit by false association with the charity
- funds or resources intended for genuine beneficiaries of the charity, by people misrepresenting themselves as in need
Not all fraud is connected to cybersecurity and digital attacks. Be aware of, and vigilant to, all forms of fraud.
Why does fraud matter?
The impact of fraud or attempted fraud can be significant. Fraud could damage your charity’s good reputation, but it also has the potential to undermine public trust and confidence in the sector as a whole.
Whether fraud is successful or is attempted, taking steps to recover the charity’s position can be time consuming and divert much-needed resources away from the day-to-day operations and work towards strategic objectives.
If your charity has been the victim of fraud or attempted fraud, please report it. By reporting fraud and attempted fraud, you are helping the authorities understand the extent of fraud and fraudulent attacks on the sector as a whole.
You should report attempted or actual fraud to Action Fraud.
If you are a registered charity in England or Wales, attempted or actual fraud should be reported as a serious incident to the Charity Commission.
A serious incident is an adverse event, whether actual or alleged, which results in or risks significant:
- harm to your charity’s beneficiaries, staff, volunteers or others who come into contact with your charity through its work;
- loss of your charity’s money or assets;
- damage to your charity’s property; and/or
- harm to your charity’s work or reputation.
Who needs to know about fraud?
Everyone who works or volunteers at your charity needs to know about the risks and be aware of the signs that might indicate attempted or actual fraud.
Trustees have a duty to manage their charity’s resources responsibly and ensure that funds are protected, applied and accounted for. Trustees must ensure that suitable counter-fraud policies are in place and used, and that there is an effective anti-fraud culture.
Where do we start?
You could start by asking your trustees, staff and volunteers what they think fraud is, what the signs or indicators of fraud are, and if they know what to do if they believe they have identified attempted or actual fraud.
You should also consider whether your charity has an open culture in which people feel confident that they can raise concerns about attempted or actual fraud.
By making a baseline assessment of your anti-fraud culture, you can then look for training and support to develop the knowledge and confidence of your trustees, staff and volunteers.
Your trustees should look at your governance to see whether the policies and procedures you have in place are sufficient to protect your charity. They should also establish how they will have confidence that the policies and procedures are being followed.
Your trustees should have a clear procedure to follow if they are alerted to attempted or actual fraud. This should include filing a serious incident report with the Charity Commission (if your charity is registered in England or Wales).
If attempted or actual fraud involved the loss or potential loss of personal data or special category data your procedures must also include notification to the Information Commissioner’s Office.
Additional resources
#StopCharityFraud is an ongoing campaign led by the Charity Commission and the Fraud Advisory Panel, and supported by CFG. The campaign provides a one-stop-shop with information on how to prevent, detect and respond to fraud committed against charities and not-for-profits.
Charity Fraud Awareness Week is in October each year and is a great time to focus attention of your trustees, staff and volunteers on operating with an anti-fraud culture.
If you haven't already, sign up to the Charity Fraud Pledge that we developed in partnership with the Fraud Advisory Panel.
Charity Commission: Protect your charity from fraud and cyber crime
Charity Commission: Internal financial controls for charities
Charity Commission: How to report a serious incident in your charity
CFG: GDPR for Small Charities
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