Recently reported data shows how some charities in the UK have been affected by fraud over the last year and how charities perceive their fraud risk.
- 58% think the risk of fraud is going to increase over the next 12 months
- 40% said hybrid working has increased the risk of fraud
- 55% of reported frauds were perpetrated by staff or volunteers
- 69% experienced financial loss due to fraud.
Everyone is under increasing financial pressure from the escalating costs of goods and services and increasing inflation leading to the current cost-of-living crisis. The knock-on effects of the pandemic and the increase in remote working practices, linked with the escalating cost of living has increased the risk of abuse by employees with organisations increasingly becoming victims of opportunistic theft or abuse of position frauds.
All organisations are at risk of fraud and will be targeted where weaknesses are identified. The charity sector is not immune to such threats. Every charity, NGO and not-for-profit is susceptible to fraud and cybercrime by criminals exploiting the current global crisis.
It is at times such as these where organisations have unfilled vacancies, positions filled by temporary employees, or where existing employees may be struggling with financial or emotional wellbeing that Charities need to be aware of the risks and take steps to keep their money, people and data safe.
Our experience tells us that in such challenging times, the risk of fraud is usually at its highest and taking your eye off the ball at times like this will leave you even more vulnerable to both internal and external fraud risks.
Our advice to you now is simple: Take fraud risks as seriously as you can – learn from others and act now to enhance your own fraud prevention controls.
The Stop Fraud Pledge
To ensure Charities are addressing this risk and putting in place measures to combat fraud risk, the Charity Commission is urging all Charity trustees to sign up to their Stop Fraud Pledge, which commits charities to taking six practical actions to reduce the chances of falling victim to fraud.
Key requirements of the Stop Fraud Pledge include:
1. Appoint: a suitable person (staff member, volunteer, or trustee) to champion counter fraud work throughout your organisation.
2. Ensure: that all trustees are aware of their legal duty to protect the charity’s assets.
3. Consult: with staff, volunteers and trustees to identify the types of fraud that threaten your organisation and the ways you can prevent them.
4. Create: a written fraud policy and share it regularly with staff, volunteers and trustees so that everyone understands what fraud is and how they can help prevent it.
5. Perform: checks on the individuals and organisations with whom you have a financial relationship.
6. Assess: each year how well your fraud controls are working, taking into account new risks and making improvements as needed.
Proactive Fraud Risk Review Options
TIAA has developed a series of reviews that are designed to provide your Charity with external assistance in achieving compliance with the Stop Fraud Pledge and to provide your Trustees with assurance over key fraud risk areas.
TIAA’s Data Mining Tools give us the ability to analyse large data sets quickly and easily as part of our comprehensive proactive fraud health check reviews, which are aimed at providing clients with peace of mind over high-risk areas or to ‘red flag’ any areas that are highlighted which may require further analysis or investigation.
Our Fraud Risk Reviews cover several areas, with the option to complete all, or a combination of those that most effectively meet your specific needs.
Proposed Scope of Work
Fraud Risk Assessment:
This is a key element of providing assurance to the Board that your organisation is taking action to manage and reduce the risk of fraud and covers two of the Stop Fraud Pledge actions (Consult and Assess).
The review considers the robustness of your operational processes for a selection of high fraud risk areas and provides an assessment of the extent to which these controls provide mitigation against fraud. This includes:
- The preparation of a Fraud Risk Assessment.
- Providing advice on areas of good practice to address areas of weakness/vulnerability.
This is a key element of providing assurance to the Board that your organisation is taking action to manage and reduce the risk of fraud and covers three of the Stop Fraud Pledge actions (Appoint, Ensure and Create).
The review considers the robustness of the Anti-Fraud Policy and associated policies in providing mitigation against fraud and/or the impact of fraud.
This includes establishing the level of awareness of staff within this area and establishing the escalation processes in place to enable you to respond quickly and effectively should a fraud occur.
Transactional Deep Dive:
This is a key element of providing assurance to the Board that your organisation is taking action to manage and reduce the risk of fraud and covers the remaining Stop Fraud Pledge action (Perform).
The review uses data analytics and data mining tools to test for potential significant fraud exposures due to non-compliance with the organisation’s approved procedures and/or inadequate or ineffective segregation of duties.