Fraud tools and tips

The ACNC has provided advice on fraud prevention and good governance for charities in Protect your charity from fraud acnc.gov.au/fraudguide and Governance for Good acnc.gov.au/governanceforgood

The top 10 tips from Protect your charity from fraud (adapted) are:

Tip How to 
Clear, written financial procedures, delegations and limits Have financial controls that staff and volunteers follow. For example:

  • Have two cheque signatories (and do not sign cheques in advance)
  • Have two people involved in handling and recording money received, and
  • Set clear financial delegations limiting authority to approve purchases and other transactions to set amounts.
Robust human-resources procedures Ensure recruitment processes are sound, and provide training and communication to staff and volunteers about fraud-prevention measures, including financial controls and how to report suspicions.
Code of conduct Demonstrate and encourage ethical behaviour.  Display prominently your code of conduct.
Financial responsibility Ensure those with financial responsibility are competent and understand their role and responsibilities.

Have written role descriptions setting out expectations of staff, including their financial responsibilities.

Fraud-prevention policy Have a fraud-control policy setting out who must do what to prevent, identify and respond to fraud

Consider use of fraud/non-compliance with rules and regulations (NOCLAR) whistleblowing reporting mechanism as a preventive and detection control.

Internet banking security Ensure your accounts and online banking passwords are secure and limit who can have access to them.  Regularly change your passwords.
Limit cash handling Large amounts of cash can encourage theft and fraud, so limit the amount to be handled by your staff and volunteers.  Bank promptly.
Regularly check your accounts and any grant funding Review your accounts regularly and identify anything that does not make sense.

Keep a record of all grant applications and how the grant funds were used.

Monitor performance against its budget, and if you see a significant variation in spending or income, ask for more information.

Ask questions Members of your board or management committee should feel comfortable to ask questions about the financial information they receive before each board or committee meeting.

Make people accountable and do not take anything for granted.

Understand the importance of reporting fraud Make sure your staff and volunteers understand the importance of reporting fraud to senior management and that a clear process is in place to report concerns to the police and the ACNC as soon as possible.

This will help to protect your charity from fraud and enable the ACNC to work with you to take appropriate steps to protect better your charity

 

While these tips are written for charities, the principles have application to all not-for-profit entities.

The ACNC has reminded members of a charity’s governing body such as board and committee members, trustees and directors – what the ACNC calls ‘responsible persons’ – that they have legal duties towards the charity.

They must act in the charity’s best interests to avoid conflicts of interest and to act with reasonable care and diligence.  They should act in a way that protects the charity’s assets and ensures that the charity’s financial affairs are managed in a responsible manner and for its charitable purpose.  This helps protect against fraud.

Their role includes:

  • Making sure that everyone involved in the charity (including trustees, board and committee members, and staff and volunteers) is aware of the risk of fraud and what it can mean for the charity
  • Using proper financial controls and procedures suited to the size and nature of the charity, and
  • Acting responsibly and in the interests of the charity, if a charity becomes the victim of fraud or other financial crime.  This includes notifying the police and the ACNC and taking appropriate steps to manage the consequences of the fraud.

For information about scams and general advice, visit the Australian Competition and Consumer Commission’s SCAMwatch website.


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