Fraud in Charities – Payment Fraud

In the second of a series of blogs for Charity Fraud Awareness Week, our Head of Charities and member of the Charity SORP Committee, Jenny Simpson, looks at payment fraud and what you can do to protect your charity against it.

The circumstances surrounding the fraud

The Finance Director of a charity defrauded the organisation of several hundred thousand pounds over a four-year period by forging cheque signatories and paying themselves large sums of money, which were then coded as charitable expenditure in the accounting records.

The fraud went undetected for so long because the charity was in a period of unusual upheaval/working.  Its main operational base was closed for a major refurbishment, and it was spending large amounts on venue hire.  The fraudulent payments were ‘lost’ within this spend.

What you can do to protect your charity

This fraud was successful because the Finance Director was able to both raise the cheques and post the transaction in the accounting system, effectively overriding the charity’s policies on segregation of duties.  It is important that charities have a robust culture of ethical behaviour where everyone, including senior management and Trustees respect and comply with policies and procedures.  A whistleblowing policy also encourages anyone in the organisation to report concerns without feeling exposed.

The fraud may also have been detected sooner if the budget holder for venue hire had reviewed their actual spend against budget. They should have noticed the invalid amounts and queried them.

This blog is intended as a general overview and discussion of the subjects dealt with. It is not intended to be, and should not be used as a substitute for taking professional advice in any specific situation. Wylie & Bisset LLP (and its subsidiary Wylie & Bisset (Audit) Limited) will accept no responsibility for any actions taken or not taken on the basis of this blog. If you would like further advice or would like to discuss any of the issues raised in the blog then please get in touch with your regular Wylie & Bisset contact or use the contact form on our website.

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In a series of blogs for Charity Fraud Awareness Week, our Head of Charities and member of the Charity SORP Committee, Jenny Simpson, looks at payment fraud and what you can do to protect your charity against it.   Today…
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