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Top Tips: Dealing with Fraud

Sometimes, fraud can happen despite having solid financial management practices and internal controls in place. Sadly, many NGOs have been the victims of fraud, on either a large or small scale. Fraud is the act of intentionally deceiving someone in order to gain an unfair or illegal advantage (financial, political or otherwise).

It is very important for NGOs to prepare in advance for potential fraud, by having a written policy or procedure.

Download Humentum’s Fraud policy template

 

Examples of Fraud

Alongside theft, some common types of fraud include:

  • bribes paid to NGO staff by suppliers, partners or beneficiaries
  • supplies sold for personal gain
  • unauthorized personal use of assets (e.g. telephones, vehicles)
  • staff being paid inflated expenses (supported by false receipts)
  • the same project being funded by two different donors
  • resources given to “ghost” staff or beneficiaries, who do not really exist

Dealing with Fraud

An NGO’s fraud policy should cover:

  • how you expect to deter fraud
  • how allegations can be reported (including “whistle-blowing”)
  • how you will respond to allegations of fraud
  • how allegations will be investigated
  • how you will respond to different types of fraud

Finally, staff should know about the policy.

All allegations of fraud must be treated seriously, even if there is no suspicion of malicious intent. Allegations should be responded to as soon as possible, usually with an investigation.

You should record the details of each fraud and the actions you take in response in a fraud register. This is an important document for monitoring fraud and learning how to strengthen controls in the future.

Consulting for Fraud Investigations and Internal Audit

Alleged fraud is difficult to manage internally, particularly if donor funds are involved. Humentum has the experience and expertise to confidentially help your organization address fraud head-on.

Learn more

Keeping Risks Low

Here are some tips on how to deal with fraud – and keep RISKS LOW!

DO:

R   Report the fraud to a senior member of staff or board member
I    Investigate all incidences to gather facts and evidence
  Secure the assets and records
K   Keep calm!
S   Swiftly act

DON’T:

   Look the other way (this could implicate you in the fraud incident)
O    Overlook the impact of fraud on staff morale and credibility
  Withhold information to protect others

Above all, remember that prevention is better than cure!

 

Want to learn more?

Humentum offers both online training on Fighting Fraud as well as consulting services for fraud investigation, internal audit, and organizational assessments.