Page 64 - Demo

It is a sad fact of life that fraud has increased over recent years. Religious institutes have tended traditionally to think of themselves as exempt from the risk of fraud and other related errors. Recent cases have proven that this
is not the case. A signi cant proportion of fraud on charities is perpetrated
by people known by the charity such as employees or volunteers. One of the frequent aspects of fraud is that its perpetrators are often people who are generally regarded as honest. Most such fraud is opportunistic. The person sees a weakness in the system and takes advantage of it. It is often committed because the individual concerned is under some outside pressure.
One of the easiest means of prevention is by implementing good internal and management controls. This all sounds very grand but it is really no more than applying basic common sense.
The Charity Commission publishes guidance for charities on internal controls – CC8 – which also includes a helpful checklist for charities to assess their own control systems. Good nancial control centres around the principles of delegation, authorisation and supervision, the segregation of duties and the employment of properly quali ed staff and advisers. Trustees should have
a written policy relating to internal nancial controls including setting out cheque and payment signatories, the limits to be applied, credit and debit care control and cash handling procedures.
Trustees may not be able to oversee personally all of the various checks
and controls but they should always be aware that while they can delegate functions, they cannot delegate responsibility. Consequently, trustees must ensure that they check that controls over delegation are working properly. Functions should be separated to avoid a single person initiating, processing and recording a transaction. For example, those who prepare the payroll
should not have the ability to transfer funds into employees’ bank accounts. Wherever possible, two trustees should sign all cheques and authorise all online payments. Where this is not possible, there should be levels of authorisation in place and limits on certain individual’s authority. Trustees should also accept that they need access to professional advisers who understand their charity and who are able to offer specialist advice. While such advice will incur fees, often the fee will be signi cantly lower than the cost of doing something wrong because advice was not sought!
On the next page we set out some of the basic controls that institutes should be looking at both to prevent fraud and to ensure the risk of innocent error
60 Chapter 4