Charities need to be prepared to take tougher action against employees who are found to be committing fraud, according to Pesh Framjee, head of not-for-profit at the auditors Crowe Clark Whitehill.
Speaking this morning at the Fraud Advisory Panel’s conference on tackling fraud in the charity sector, Framjee, who is also a special adviser to the Charity Finance Group, said charities were too often unwilling to take legal action against fraudulent employees.
This in turn, was creating an environment in which fraud could more easily happen, he said.
"In the recipe for fraud, one of the ingredients is motive, one is opportunity, and then you’ve also got awareness of whether things are sanctioned," he said.
"If people think that they’re going to be sanctioned and there’s going to be some comeback then they’re less likely to carry out fraud. In the charity sector, we seem to be reluctant to operate the sanction properly."
International charities in particular, he said, often found it difficult to prosecute, so simply dismissed perpetrators, who would then move on to another charity.
"Follow it through," he said. "Don’t just sweep things under the carpet – there’s sometimes a tendency to think that we should bury bad news."
Dave Carter, head of counter-fraud management at the culture charity the British Council, agreed. He warned that a culture of failing to punish fraudsters could leave staff less willing to report their colleagues if they witnessed fraud, and increase the temptation for them to do it themselves.
"The majority of people who commit fraud don’t come to a charity just to commit fraud, but they will exploit an opportunity" he said. "These are the people who can be dissuaded from committing crime if they know there will be sanction."
A third of people found to have committed fraud had been at their organisation for more than 10 years, and 96 per cent of offenders had carried out fraud more than once, said Carter.
"Time and time again, we see people who’ve been there for years, everybody loves them and trusts them, and it turns out they’ve had their fingers in the till for years, committing fraud on an industrial scale."
Framjee said management must keep reinforcing the message that whistle- blowing would be taken seriously. "There must be good systems," he said. "People must know who they can call, when they can call them, how they’re protected and so on," he said.
"In some organisations I’ve worked with, there’ll be a very strong policy at head office all written up but when you get out into the field, people don’t know about it at all."
Carter said charities must also make staff and the wider public aware of frauds that had been discovered, and the action charities had taken. "We need to drag fraud out of the dark where it thrives, into the light of transparency," he said.