One of the more surprising aspects of many of the publicly reported charity frauds is how frequently they involve a long-serving member of staff. We came across such a fraud at the headquarters office of a large international charity.
A long-serving junior member of staff ordered foreign currency for bogus trips and pocketed the money. The fraud came to light while the individual was on annual leave. The person covering their role innocently asked a frequent traveller about a recent trip (according to the log maintained). It transpired that the trip did not take place; currency was neither requested nor received, despite records to the contrary.
An investigation confirmed that the fraud had been happening for around a year and was triggered by a trip that was cancelled after the currency had been ordered. The cashier had fraudulently signed for $800 in the name of a frequent traveller and pocketed the funds. This went undetected and so the frequency of fraud increased and over the course of the year amounted to close to £8k. The cashier was aware of which members of staff were frequent travellers and used this information to request funds for additional trips, knowing that large travel budgets would be available and additional currency requests would not be detected as part of routine budget monitoring.
Check that controls are actually working
In theory, sound controls were in place over the order and issue of funds. Currency requests were approved by a senior manager and the issue log book confirmed the traveller received the currency. However, the reconciliations of funds issued to funds spent were, at best, ad hoc. There was no central oversight over these reconciliations. Had such oversight been in place, individual travellers would have been alerted of funds issued that they had not received and the fraud would likely have been detected much earlier. In fact, it may have been prevented, as obvious regular checks would have deterred a fraudster.
How a charity responds to suspected fraud sends a message throughout the organisation
An investigation began as soon as the suspicion came to light, following which the police were informed. However, the organisation failed to communicate the incident internally or learn from the experience. The cashier was given the opportunity to resign, despite their admission of fraud. There are pro’s and con’s to communicating attempted and actual frauds across staff teams. A balance needs to be struck between motivating teams and being clear about the actions the charity will take in response to fraud attempts. The charity needs to deter others and underpin the zero tolerance culture.
The ways of defrauding a charity from within are not usually sophisticated. Where there is cash, there is a real opportunity for theft. Make sure that you are doing all the simple things and you will have gone a long way to preventing fraud.