Over the last couple of years we have all been on a journey into the unknown and now we feel like we might have arrived, but…
Fundraising fraud occurs when money is raised for a charity however not all of the money is passed on to the intended recipient. Funds are effectively diverted from the purpose for which they were intended, damaging the reputation and morale of the charity and eroding public confidence in the entire sector.
There are various types of fundraising frauds with the most common detailed briefly below:
Bogus fundraising – when person(s) unknown to a charity pretend to fundraise on its behalf. The fraudster uses false credentials to give the impression they are genuine and undertakes collections that do not reach the charity.
Supporter fraud – when person(s) exploit a charity’s willingness to engage with its supporters. The charity is asked to provide fundraising materials or other support to facilitate fundraising activities and the event organiser intends to keep all or part of the funds raised.
Supporter theft – when person(s) raise money for a charity with good intentions, however for some reason keeps all or part the funds raised.
Implied association – when a charity’s branding is used falsely to imply association without the charity concerned being aware and without the money being given to the charity.
Organised fundraising fraud – when a bogus fundraising company offers to undertake charity fundraising, usually at a number of locations or over a period of time. Typically only a small percentage of the raised funds are received by the charity.
Grant fraud – there are three common grant frauds. Application fraud relates to bogus applicants whereby the funding is stolen and there was no intention of delivering the project for which the grant was originally provided.
Identity fraud takes place when the named contact in the grant paperwork is unaware that an application has been made in their name. Fraud by false representation occurs when documents provided to the funder are fake or have been tampered with.
The Charity Commission recommends that trustees should take appropriate steps to mitigate unauthorised fundraising (including legal action if necessary) and ensure that all donations are received by their charity. Suitable controls and procedures can help to prevent and detect fundraising fraud. Controls should be designed to match the identified risks and these will vary from charity to charity. The controls and policies should be regularly reviewed to ensure they remain robust and that they are being operated effectively.
Some common fundraising controls include:
- Explaining to fundraisers that no deductions can be made from the funds raised (e.g. expenses)
- Ensuring fundraisers are contacted before and after the event
- Follow up donations post event so that discrepancies can be accounted for or referred
- Regular cross checking of amounts stated on online platforms (social media, just giving etc.) with amounts received so that discrepancies can be accounted for or referred
Some common grant-making controls include:
- Information checks – checking information provided against public sources
- Risk checks – Is each identity a real one? Is the person who they say they are?
- Paying grants in instalments to avoid putting all of the funding at risk at the same time.
If you suspect fundraising fraud it is important that you act promptly:
Ensure a process exists for reporting concerns and tell your staff about it.
- Report your concerns to the relevant national law enforcement agency such as Action Fraud.
- Report matters promptly to your charity regulator and when reporting to the Charity Commission tread fraud as a serious incident.
If you have any concerns or would like to speak to us about protecting your charity from fundraising fraud, please contact [email protected]
By Claire Wait