Cultivating a counter-fraud culture in your charity

By Gary Duncan, 28 April 2025

Charities need to create the best possible work environment for their employees, but also protect the organisation from fraud.

In a Fraud Advisory Panel webinar, Tracey Carpenter, Insider Threat Manager at Cifas, the fraud prevention service, and James Bolle, the Culture Builder at PRPSFL, discussed the dangers of insider fraud and offered advice on how charities can build a robust counter-fraud culture.

Internal threats

Insider fraud is a common problem across sectors. Many of us, however, would be surprised to hear that people actually steal from charities. But, as Carpenter explained, they do – and more often than you’d think.

She cited a survey which revealed that up to 50% of charity fraud is committed by staff or volunteers. She highlighted a few examples: the finance officer who embezzled £200,000 to fund his gambling addiction; the employee who fled to Turkey after stealing £150,000; the finance director who helped himself to £1.3 million from a homeless charity which then went into liquidation.

‘It’s a really sad fact that where there’s opportunity, somebody will take it,’ Carpenter said.

‘I don’t care about this company anymore’

Charity fraudsters, as with fraudsters in general, are driven by three things: opportunity, motivation and rationalisation. 

‘If they can hit one of those areas, that will be enough for them to consider committing fraudulent conduct against the charity,’ Carpenter said. As an insider threat manager, she added, ‘It’s your job to make sure the opportunity isn’t there.’

Addiction is a common driver of fraud in the sector, whether it be gambling, drugs or alcohol. 

Economic hardship is another factor. People who struggle to pay the rent and put food on the table are more likely to dip into the till, especially if they can rationalise their behaviour. They might think the charity ‘owes’ them, Carpenter said. Maybe their supervisor didn’t approve their requested hours, or their boss was given a fat pay rise and they weren’t.

Often, she said, fraudsters will say, ‘You know what, I don’t care about this company anymore and I’m not sure they care about me.’

Some will persuade themselves that it’s not even a crime if they don’t actually steal directly from the till. No one is being hurt, they think, if all they’re doing is adding a few extra hours to their timesheet or passing on the personal information of donors and grant providers to the highest bidder.

Carpenter said the individual might seek to justify their behaviour on the grounds that ‘everyone else is doing it’, or tell themselves that they’ll pay it back on payday. For some, it’s just a short-term ‘loan’ to cover their next mortgage payment or gas bill. 

‘Almost every act of dishonesty can be rationalised by the perpetrator,’ she said.

The cost of doing nothing

To protect themselves from their own employees, charities must have the right controls in place and rigorously implement pre-employment screening.

The cost of not doing so could be crippling. 

‘You certainly don’t want to be one of those newspaper headlines,’ Carpenter warned.

For charities, doing the right thing also makes sense from a hard business point of view. Charities rely on the generosity of the public for donations, but many people are currently struggling with the challenging economic conditions and rising inflation that have characterised recent years.

Those charities that keep their house in order – avoiding bad publicity and weeding out dishonest employees – are more likely to be the charity of choice when the public decides where they’re going to donate their hard-earned cash. Those with soft controls and a history of insider fraud are not.

Carpenter acknowledged that pre-employment screening can be particularly difficult for charities: it’s not easy grilling potential volunteers who generally mean well and who are, by definition, offering their services for free.

But charities can’t be complacent and Carpenter said she ‘can’t emphasise enough’ how important it is for them to thoroughly vet all job applicants. ‘You need to make sure you know exactly who you have in your charity, either as an employee, a trustee or a volunteer,’ she said.

Focus on communication

Bolle, who helps organisations build and nurture their internal cultures, said charities should focus on communication to strengthen their counter-fraud processes.

‘When was the last time you talked about fraud risk or how much fraud was committed in your organisation?’ he asked.

When his clients ask him how much communication is enough, he’ll always say the same thing: enough is never enough.

‘Whatever communication you’re doing about fraud today, think how you can do twice as much and then a little bit extra,’ he explained.

Hand in hand with that, charities should also proactively reward employees for good behaviour.

‘When was the last time one of your full-time employees got a bonus payment based on the fact that they minimised a fraud risk?’ he asked. ‘When was the last time you praised someone because of how they managed the risk of fraud in your organisation? When was the last time someone was promoted because they blew the whistle effectively?’

Charities that do this will be able to set the tone from the top and demonstrate that they’re serious about tackling fraud and embedding the right kind of culture within the organisation.

But what, exactly, is culture?

Culture is difficult to define and just as difficult to manage, Bolle said. Fundamentally, though, it’s how people behave within the organisation every day.

‘If you have a team of volunteers collecting money on behalf of your organisation, the way they behave is your organisational culture,’ he said. ‘If you have people in the office laughing and joking, that’s part of your company culture too. The truth is that organisations have multiple cultures within them. As soon as two people in your organisation get together and interact, they’re creating their own culture. Your charity has multiple cultures that hopefully can all align under a single umbrella.’

Everyone in the charity, from part-time volunteers to the chief executive officer, is part of that culture. They must all work together every day to prevent fraud and raise awareness of potential risks, and reinforce that through targeted training and communication.

What if you look at your organisation and don’t see evidence of these behaviours?

Then you probably don’t have an effective fraud management culture, Bolle said – and maybe it’s time you acted.