Protecting a charity from fraud and deception

NC Insurance
January 27, 2014

Unfortunate as it is to admit, charity fundraising is often seized upon by con artists and scammers, recognising this as an opportunity to steal money, using a good cause as a distraction.

The Nation Fraud Authority found that in 2013 alone, the charity sector lost £103 million as a result of fraud, both internally (charity employees stealing funds) and externally (individuals personally gaining on the false pretence of working for a charity). You can read the full study here.

This risk of fraud and deception, shocking as it is to admit, has made preventive measures a must in the charity. The following measures have been implemented to reduce this risk.

Charity Law

The most recent legislation which applies to charitable fundraising is the Charities Act 2011, which serves to amend earlier acts and to consolidate the legal rules with regards to charity into one piece of law. This legislation sets out the requirements an organisation has to meet in order to be recognised as a charity and the rules governing personal gain.

Coming into effect in March 2012, the Charities Act 2011 did not serve to introduce new law; rather, the purposes was to bring a range of acts together, to make the regulation and control of charity more effective.

You can download the full legislation, here.

Registration

Registration is compulsory for any charity with an income of £5,000 or more per annum. While those receiving less than this amount are not required by UK legislation to register, the way the organisation describes itself must reflect this lack of recognition by the government.

You’ll often see charities advertising themselves as ‘registered’ or as having ‘charity status’. An organisation that describes itself as such without completing the necessary registration process is in fact breaking the law.

To begin the process of registering a charity, and to obtain more information, visit the UK government website.

Insurance

Sadly, these measures are simply not enough and fraud continues to be an issue within the charity sector.

An extra precaution which organisations can take is take specialist charity insurance, offered by firms such as Northern Counties Insurance. The benefits of such insurance are numerous, although with regards to fraud, the most effective tools of these policies is the requirement of Criminal Records Bureau (CRB) checks for volunteers.

By completing criminal background checks, charities can protect themselves from the risk of fraud. This is also a useful and vitally important tool when volunteers are required to work with children or vulnerable adults.