Markel

Insider fraud in the charity sector

Charity Commission reveals that almost half of insider fraud cases in the third sector are not reported.

Insider fraud poses a huge risk to charities; the sector generates an annual income of nearly £76 billion, making it an attractive target for crime. In its latest study, the Charity Commission has found that 43% of insider fraud cases committed in the last five years were not reported.

The report, published last month, looks at how insider fraud affects charities. Although not proven, it has been argued that there are certain factors which make the charity sector more susceptible to this type of crime than others.

The findings show that the vast majority of insider fraud cases (nearly 70%), occur because too much responsibility is placed on one individual. In almost half of cases (43%) this individual is an employee of the organisation, and in over a third (33%) it is a trustee.

The main reason why fraud is able to take place is due to a lack of oversight from the organisation. The second most common cause is either the absence or poor application of controls.

The biggest impact of insider fraud is on beneficiaries who receive reduced services as a result. Loss of income was the second highest impact, followed by negative effects on an organisation’s reputation. Insider fraud  can also damage company morale and in the worst case, charity’s can be forced to close.

Advice on how to tackle insider fraud varies depending on the size of charity and where the risk may be greater. However, generally the same rule applies that no one person should have unsupervised control of a charity’s finances.

In terms of financial controls there is no one-size-fits-all. Policies should be fixed according to a charity’s size and income,  once in place staff, volunteers and trustees should be trained across the organisation. Regular reviews must be held to ensure the policies are being followed correctly and are up to date.

Larger charities could consider appointing a trustee with specific responsibility for risk management and preferably knowledge of counter fraud, which would prioritise the issue at Board level.

All trustees and staff should have an awareness and be responsible for implementing fraud policies. The Charity Commision report identifies that where there is a limited number of trustees or staff, fraud awareness is likely to be low, and a charity is at its most vulnerable. In this case the Commission recommends organisations adopt a strong counter fraud culture, which is established at the top and filtered down. This should empower staff and volunteers to raise their concerns about fraud and take the right steps to report any incidents to the authorities such as Action Fraud, the Police and the Charity Commission.

Having risk management strategies in place and a transparent recruitment process will help to protect a charity’s reputation and keep levels of fraud down.

Have you registered with us yet?

Register now to enjoy more articles and free email bulletins

Register
Already registered?
Sign in

Expert Articles: Risk Management

Advice on risk from Markel, a specialist insurance company working with charities, community groups, trustees, social enterprises and care providers.

The Future of Online Giving

The Future of Online Giving

Big Questions Live 2018

Big Questions Live 2018

Partner Content: Presented By JustGiving

It's easy to be pessimistic about the future of giving, with GDPR in effect and the potential impact of more sector scandals on donations, but is the outlook really so bleak or is it simply a case of finding new, engaging ways of reaching donors?

Insider fraud in the charity sector

Insider fraud in the charity sector

Partner Content: Presented By Markel

Charity Commission reveals that almost half of insider fraud cases in the third sector are not reported.

A wonderful workplace for innovation: Independent Age

A wonderful workplace for innovation: Independent Age

Partner Content: Presented By Independent Age

Want to work for an agile, ambitious and flexible charity? We spoke to Independent Age about the organisation's culture and the new innovation role it's recruiting for.

Do you want to work for a small charity that thinks big?

Do you want to work for a small charity that thinks big?

Partner Content: Presented By CPotential

CPotential is recruiting for a new team of corporate, trusts, grants and individual giving fundraisers. We spoke to them about the team culture and what makes it a 'wonderful workplace'.

Safeguarding in the Third Sector

Safeguarding in the Third Sector

Partner Content: Presented By Markel

Safeguarding - the process of making sure that children and vulnerable adults are protected from harm - is a big concern for organisations in the third sector.

Wonderful Workplaces: Building a better world for children - Plan International UK

Wonderful Workplaces: Building a better world for children - Plan International UK

Partner Content: Presented By Plan International UK

Want to make real change happen? We spoke to Plan International UK about what it's like to work for the growing charity and the individual giving roles it's recruiting for.

Do you have your eye on the future workforce?

Do you have your eye on the future workforce?

Partner Content: Presented By Faculty of Occupational Medicine

Exclusive interview with Ernie Masser from Cass Business School about the CEO opportunity at The Faculty of Occupational Medicine and why it's such a rewarding role that will shape the future workforce.

ISM: Want to make a difference to the music sector?

ISM: Want to make a difference to the music sector?

Partner Content: Presented By ISM

Stephanie Collier at the Incorporated Society of Musicians (ISM) shares her insider insight into what it's like to work there and the roles they're recruiting for.

Follow us on:
  • Facebook
  • LinkedIn
  • Twitter
  • Google +

Latest Jobs

RSS Feed

Third Sector Insight

Sponsored webcasts, surveys and expert reports from Third Sector partners

Markel

Expert Hub

Insurance advice from Markel

Safeguarding in the Third Sector

Safeguarding in the Third Sector

Partner Content: Presented By Markel

Safeguarding - the process of making sure that children and vulnerable adults are protected from harm - is a big concern for organisations in the third sector.

Third Sector Logo

Get our bulletins. Read more articles. Join a growing community of Third Sector professionals

Register now