Fraud: have you got it covered?

28 March 2022

Whatever form it takes, fraud is a costly inconvenience at best – and at worst, a devastating blow to your organisation. Both of which should be avoided at all costs.

Whether it’s a fraudulent grant application, internal fraud from disgruntled employees deciding to lodge a false claim for injury in the workplace, or a fake supplier taking payment and never supplying the goods, it pays to be aware of where your charity could be exposed and the actions you can take to reduce your chances of getting caught out.
In this article we will be sharing how you can minimise the chance of your charity falling victim.
What are the costs of fraud?
Some of the costs of fraud are obvious, such as financial loss and a halt in productivity, but there are hidden costs that you might not have considered. Some events might require an investigation where you need to look to your own people as potential suspects; think about the damage to morale as a result.
There could also be PR issues, the media often spins stories in an unflattering light, no matter how well you handle the situation. This may cost you precious donations and goodwill for years to come.
Be aware of the risks
You need to be as vigilant as any other non-charitable business with assets and cash flow at stake, because without cash, the support you can offer your service-users will quickly disappear.
Being aware of the risks you’re exposed to can have a huge positive impact on the security of your charity. This isn’t an issue you can afford to ignore, because sadly the reality is that ‘if’ can often become ‘when’. 
Prevention is better than cure
Make sure you carry out risk assessments, especially in vulnerable areas such as accounts and IT, and taking action to plug any gaps. Consider enlisting a professional service to perform a risk assessment for you, they might be able to spot issues you can’t.
The key is to have sound control measures and accountability. One example is to ensure no one person is left in charge of finances, to keep staff responsible. Having multi-skilled people who can cover various areas of the day-to-day running will enhance the opportunity for fraudulent activity to be caught.
Robust vetting at the hiring stage and for grant applications also helps limit the chances of fraud. Consider reviewing your processes to add extra peace of mind for your organisation.
Encourage good practice
Making sure staff understand the risks of fraud and how to prevent it, plus the procedures to follow if they have concerns is really important. It’ll also help to have evidence of this, so you can demonstrate to your insurers that all reasonable measures were in place to limit your exposure, in case you need to make a claim.
Simply making staff aware of common fraudulent ‘evidence’ such as spelling errors, and emails that arrive out of the blue is an easy way to increase your security.
With injury claims fraud, having reliable, up-to-date health and safety records of accidents makes it much harder for someone to falsify a claim.
Check your insurance
Your corporate and public-liability insurances should have an element of fraud cover built in. However, it’s worth reviewing this to make sure it’s enough for your charity’s risks and you’re aware of any exclusions. You may find that trustees need separate cover.
We suggest speaking to an insurance broker who will be able to make sure you get the right insurance for you. Not all policies are the same and it’s vital you understand that now when things are good, rather than finding out in the event of a claim that you aren’t covered. 
A reassuring thought
This article may not have been the most uplifting read, but it’s an incredibly important one. Understanding the risks around fraud and how to mitigate them is one of the most powerful things you can do for your charity.
On a final note, we wanted to remind you that you’re not on your own!
A good insurance broker can help you review your processes, identify risks, and provide advice about how to limit your exposure. Once you’ve found a broker who truly understands your charity’s mission, you’ll find a lot of these recommendations will slot into place, leaving you free to focus on what really matters - your charity and the important work it does.
Sarah Cox, Managing Director