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Charity Fraud Awareness

Charity Fraud Awareness. Lisa Heading Fraud Prevention & Investigations Unit December 2012. Content:. What is Fraud? What leads people to commit Fraud? Stats / figures and why Charities are vulnerable Protecting against Internal Fraud – Red Flags Anti-Fraud Programme

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Charity Fraud Awareness

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  1. Charity Fraud Awareness Lisa Heading Fraud Prevention & Investigations Unit December 2012

  2. Content: • What is Fraud? • What leads people to commit Fraud? • Stats / figures and why Charities are vulnerable • Protecting against Internal Fraud – Red Flags • Anti-Fraud Programme • Best Practice Recommendations • Q & A Session

  3. What is Fraud? The Charity Commission and the Serious Fraud Office define fraud as: ‘a form of dishonesty, involving either false representation, failing to disclose information or abuse of position, undertaken in order to make a gain or cause loss to another’. Zurich expands this definition to:  • Misappropriating, concealing, diverting or obtaining money, assets including data, information or services by deceptive means; • Misusing one’s position through unlawful or improper acts with the intention of causing financial loss to Zurich, its customers, employees and / or suppliers; • Any false representation, or material non-disclosure, which is intended to be misleading with the intention of securing a financial or other gain, or causing a financial loss or reputation risk. 

  4. The Fraud Triangle What leads people to commit Fraud? • Rationalisation • “No-one will miss it” • “Merely borrowing” • Employer dissatisfaction • Need outweighs the risk/crime • Opportunity • The ability to commit fraud – what’s the environment like? • Culture? • Controls - lax / non-existent? • Governance – poor oversight? • Motivation • Financial difficulty • Need for money • Greed • Maintenance of lifestyle

  5. Annual Fraud IndicatorMarch 2012

  6. Protecting against Internal Fraud 33% of reported fraud is identified through whistle-blowing and tip-offs; 15% is identified by management, 15% by audit and 12% by accident. A far greater amount goes undetected. One way to protect against fraud is to look out for the warning signs (Red Flags), such as: • changes in the behaviour of employees or volunteers; • new staff resigning quickly; • an increase in the number of complaints being made; • transactions taking place at unusual times or not being recorded on a timely basis; • discrepancies in accounting records; • unexplained items on reconciliations; • missing documentation; and • missing funds or assets.

  7. Anti-Fraud Programme The most effective way to deal with internal / external fraud is to develop an anti-fraud programme, appropriate and proportionate to the size of the charity. Areas to be considered include: C – Controls -robust financial controls H – Heighten fraud awareness by training all staff and volunteers A - Anti-corruption policies and procedures R – Reporting - whistle-blowing policies I – Implement fraud risk assessments T – Tone at the Top I – Insurance (theft) E – Employees -robust recruitment and screening procedures S - Segregation of duties and authorisation limits

  8. Benefits of an Anti-Fraud Programme • The benefits of an effective anti-fraud programme cannot be • understated. • These include: • reduced risk and impact (financial and reputational) of fraud or error; • less disruption dealing with fraud or error after the fact; • greater likelihood of achieving charitable objectives; • early warning of problems; • better decision making; • better allocation of resources; • more effective communication with stakeholders; and • effective continuity planning.

  9. Best Practice Recommendationstominimise the risk of fraud: • Critically review your financial controls at appropriate intervals, keeping them up-to-date. • 2. Segregate duties – don't allow one or two people to be in charge of your charity's financial controls. • 3. Make sure all of the separate parts of the financial records agree with each other and always keep receipts. • 4. Avoid weakening your financial security for the sake of saving time; e.g. Never pre-sign blank cheques, even where a second signature is required. • 5. Keep a register of valuable assets and property and inspect them periodically.

  10. (Cont) Best Practice Recommendationsto minimise the risk of fraud: • Ensure online banking arrangements are secure and protected • with dual-level authorisation. • 7. When recruiting staff, especially those who handle finances, make appropriate background checks and references. • 8. If the charity makes grants to beneficiaries or other organisations, carry out appropriate due diligence checks on applicants. • 9. Ensure Trustees receive and consider regular reporting information about the charity's finances. • If you suspect or become aware of fraud, make sure you know • what to do and whom to inform. Prompt and appropriate action will help limit any damage.

  11. Any Questions? lisa.1.heading@uk.zurich.com

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