Charities continue to fight fraud and financial crime on two fronts: internally and externally. Fraud could take the form of dishonest officers, employees and agents stealing the charity's money or third parties setting up bogus schemes which elicit donations from the public at the expense of legitimate charities.
The National Fraud Authority revealed in its 2012 Annual Fraud Indicator that over £1 billion was lost to fraud in the voluntary sector. This represents around 2.5% of the total turnover of the sector. However, many frauds go undetected in this sector and there is concern about significant under- reporting. This means that the true impact of fraud on charities may be much greater then shown by the statistics.
A recent case involving an accountant, who admitted stealing more than ½ million pounds from a subsidiary of a hospital fundraising charity, serves as a stark reminder that fraudsters have no moral compass when choosing their victims. The lesson is clear: charities are vulnerable. It is vital to have financial controls, checks and balances and good governance in place to revert, detect and combat fraud.
Once a fraud has been committed it is important to act swiftly and decisively, especially to ensure that stolen monies (and the assets acquired with those funds) are not dissipated. Organisations must be careful not to put the charity's property, funds or reputation at risk. Decisions made within the first 48 hours of discovery of a fraud will make the difference between success and failure. Freezing assets and seizing evidence is absolutely critical to the effectiveness of a fraud investigation and the successful recovery of stolen funds.