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A Five Step Plan to Reduce Charity Fraud

Fraud is on the rise and it’s estimated by the Annual Fraud Indicator 2017 to cost the UK economy £190bn per year. Charities are far from immune. Recent cases have highlighted the vulnerability of the sector. Jonathan Orchard, Partner at Sayer Vincent, has put together a five step plan to help your charity avoid the financial and reputational damage that fraud can wreak.

Accept that fraud exists
Organisations are estimated to be losing between 3 to 8 per cent of their income due to fraud – income that won’t get through to beneficiaries. Additionally, the impact of fraud on a charity’s work, beneficiaries and reputation can be hugely damaging, so the first step towards reducing fraud is to accept it exists.

Understand your own vulnerabilities
Charities need to think like fraudsters and really scrutinise their organisation’s weaknesses and vulnerabilities. There are common areas for fraud such as payroll and expenses, payment and procurement processes, fundraising and of course cyber risks –which must all be considered.

Given the scale of cyber risks, we advise that charities should consider what information they are putting in the public domain and how that information could be used in the wrong hands. For example, publishing important contact details such as finance personnel or the names of key suppliers or senior managers on their website. Having access to these contacts makes it easier for fraudsters to engage in phishing.

Build awareness and the right culture
Fraud risks should be openly discussed internally with trustees, staff and volunteers. There needs to be clear policies around fraud, bribery and corruption that everyone understands. To develop the right culture, employees need to understand what fraud and theft means to the charity, the responsibilities of staff in managing fraud, details of any whistle blowing plan or policy and crucially, how the charity will react to fraud.

To read the full Directory of Social Change article click here.

Source: Directory of Social Change


A Cloud Security Checklist for Charities

It would not be an exaggeration to call it “the cloud revolution” – cloud platforms and services such as Infrastructure as a Service (IaaS), Software as a Service (SaaS) and Platforms as a Service (PaaS) have enabled organisations of all kinds to take advantage of on-demand computing power, storage and tools that would previously be unimaginable for all but the biggest budgets.

The cloud is an absolute no-brainer for charities running digital services, websites or infrastructure, but for organisations that handle sensitive constituent and donor data, security is the first concern.

Storing data in the cloud is generally safer than keeping it locally for the simple reason that major cloud providers are held to strict standards to be able to operate, and these include being responsible for customers’ data in their datacentres. As a cloud infrastructure customer, you fortunately inherit the best practises of that vendor around policies, architecture and processes built to keep security-sensitive organisations’ data safe.

However, there are a few vital checks you should make before taking the plunge with a cloud vendor:

1. Verify your provider

A provider should be able to demonstrate their adherence to security standards and best practises by showing that they comply with industry-recognised standards.

Security schemes like ISO 27001 or certification under the government’s Cyber Essentials Scheme are good ones to look out for, but there are multiple.

The Cloud Industry Forum, a professional membership body for cloud providers, lists a few of the most common security certifications and regulatory standards on its website.

To read the full Charity Digital News Article click here.

Source: Charity Digital News


Committee Seeks Views on Charity Accounting Framework

The SORP-making body is looking for engagement partners that will form key stakeholder groups to help gather feedback and ideas for change.

The SORP-making body charged with developing the Charities Statement of Recommended Practice (the SORP) is looking for engagement partners that will form key stakeholder groups to help gather feedback and ideas for change.

The SORP is the set of rules which governs charity accounting for charitable companies and larger charities (charities with an income over £250,000). The main purpose of the SORP Committee is to identify potential changes to the SORP and advise the SORP-making body.

Chosen engagement partners can be individuals or organisations. They will have an interest in charity financial reporting and the work of the sector, and will have the opportunity to work with the SORP Committee to make sure that their views are expressed correctly.

These partners will be put into stakeholder groups based on their main areas of work. Groups will be asked to reflect on:

  • the information needs of users of charity annual reports and accounts
  • how far the SORP needs to change to meet those needs
  • what information users of the SORP need to prepare for good annual report and accounts
  • opportunities to simplify and remove unnecessary reporting and ensuring technical compliance with the UK-Irish Generally Accepted Accounting Practice (GAAP).

The views of the stakeholder groups inform the work of the advisory Charities SORP Committee and so shape the future form and content of the SORP.

To become an engagement partner in writing the next SORP, please read this information pack. It provides you with all of the information you need about the role and how to apply. The closing date for applications is 31 January 2020.

Read the full Charity Commission article by clicking here.

Source: Charity Commission


6 Steps to Prepare for Your Next Financial Audit

Audits can be a stressful time for any organisation. Even if your records are completely blemish-free, the experience can still be taxing. This is heightened if you’re a charitable non-profit and your future funding depends on it…

So, how can you prepare for your next financial audit and what should you expect from it?

What is a financial audit?

An external financial audit is carried out by an auditor/certified public accountant (CPA) not employed by the organisation they are auditing. The audit itself is an examination of an organisation’s financial accounts, records, transactions, accounting practices and controls.

The auditor carries out this examination to check whether the financial statements prepared by the organisation meet the ‘Generally Accepted Accounting Practices’ in the UK (UK GAAP). These accounting principles are statutory as defined by the UK Taxes Acts.

Does your non-profit need an audit?

It is not always necessary for charitable non-profits to carry out an audit. In some cases, an independent examination may be acceptable instead. However, situations where an external audit might be required are:

If your organisation’s gross income exceeds £1,000,000
If your organisation’s gross income exceeds £250,000 and its gross assets exceed £3,260,000
If the charity commission requires an audit
If your charity’s governing document requires an audit
If trustees wish to have financial statements audited
If a funder asks to see your audited financial statements
In certain cases where a non-profit is not legally required to conduct an audit, they may choose to do so anyway. One of the main reasons for this is demonstrating a commitment to financial transparency. Furthermore, funding – in many instances – is dependent on conducting audits, as are ratings by charity watchdogs.

Preparing for your financial audit and what to expect

1. Define who will have responsibility for the process

One of the first tasks is to define exactly who will carry the responsibility for the audit process. The trustees of a non-profit have responsibility for the oversight of the conduct related to any external auditor hired. They also have the power to delegate this responsibility to an audit committee if they so choose. Nonetheless, those designated responsible must be familiar with the scope of the end-to-end process and be a member of one of the accepted professional bodies in the UK.

To read the full Charity Financials article click here.

Source: Charity Financials


NCVO Launches New Safeguarding Tools

New Safeguarding Resources and Guides available from NCVO and a partnership of expert organisations: #SafeguardingAsOne

NCVO’s Knowhow advice site is a hub for an expert range of new online safeguarding resources. NCVO’s free online resources, launched on 7 October 2019, outline simple steps that voluntary organisations can take to ensure that they are run in a way that actively prevents beneficiaries, staff and others from suffering harm, harassment, bullying, abuse and neglect.

Safeguarding should be a core value of every voluntary organisation and considered a personal responsibility of everyone working in them, the National Council for Voluntary Organisations (NCVO) has urged.

To access NCVO’s Safeguarding Tools click here.

Source: NCVO Newsletter


What Should Feature in a Fundraising Strategy?

If you are thinking about putting together a fundraising strategy for the first time, or you’re in the process of doing so, there are some things you will need to think about.

Successful fundraising starts with a fundraising strategy which, in short, should serve to identify what resources will be required in order to reach a fundraising goal; although a fundraising strategy does not necessarily have to focus on just raising money, but could also help you to meet your other charitable aims.

The Institute of Fundraising has found that a lot of charities do not actually have clear fundraising plans, and are not clear what a fundraising strategy looks like – so if you are thinking about putting together a strategy for the first time, or you’re in the process of doing so, there are some things you will need to think about.

The three main elements of a fundraising strategy, like many other strategies, are:

  • Where are we now?
  • Where do we want to get to?
  • How are we going to get there?

So, firstly, you’ll need to outline the main aims and objectives of your project – or your project’s mission statement. This might include details on why you are raising the money, as well as the kinds of work your organisation has been doing. Think about what is happening in the wider world outside your organisation – factors like the current economic situation may have a direct effect on how much you can raise!

A useful tool for this is called a STEEPLE Analysis. Once you have looked at the external factors, you should then looks at what the ‘market is doing, for example, if local companies aren’t making profits, then basing your fundraising on generating income from business may be a challenge.  What resources do you have available internally – if you have your office staffed by one volunteers, then perhaps it is unrealistic to plan a fundraising appeal to lots and lots of individual donors – who would deal with the donations, bank and thank?  Pulling this all together, A SWOT analysis is useful in identifying possible Strengths, Weaknesses, Opportunities and Threats to your project.

Then you need to think of where do you want to be?  So, for example, would raising £15,000 to fund an office move solve your problems, or do you need revenue funding which will enable you to cover your core costs for the next few years? Once you have decided where you want to be, and what you want to achieve, then you can start to build the strategy for how to get there…

It is vital therefore to spend time to research possible sources for funding, whether it’s through approaching corporates for support, or targeting major donors, for example.

Another area to consider are the extra resources you will need in order to fulfil your plan, such as extra volunteers, or training.

As you work at fulfilling your strategy, it is important to constantly monitor your progression so that you can measure your success, and put into place further steps, if necessary, if the plan does not quite turn out as predicted.

Source: Institute of Fundraising


HMRC’s Criminal Offences For Failing to Prevent Tax Facilitation – What They Are and What to Do

HMRC is reminding companies and partnerships (including charities) that they can be criminally liable if they fail to prevent their staff or those that represent them from facilitating illegal tax evasion.

The offence, which came into force in September 2017, does not substantially alter what is illegal tax evasion, but focuses on who is held accountable for enabling or allowing it.

Rather than try and attribute illegal tax evasion to an organisation, it focuses on the failure of that organisation to prevent those who work for, act for or on behalf of from committing criminal tax evasion.

HMRC has published information about this, including what organisations can do to build their internal procedures in light of the offences. The ‘corporate criminal offences’ can also be found in Part 3 of the Criminal Finances Act 2017.

HMRC has also launched a new dedicated self-reporting route for organisations that have failed to prevent the facilitation of tax evasion. Find out how to self-report, and why it may be in an organisation’s interest on the Tell HMRC your organisation failed to prevent the facilitation of tax evasion webpage on GOV.UK.

If you have any queries about preventing tax facilitation please contact HMRC.

Source: Charity Commission Newsletter issue 63


Charities Working Internationally: How to Assess Risk

Charities working internationally can face certain risks because of their operating environment including the application of financial sanctions, greater levels of corruption or criminal activity, the presence of terrorists, proscribed groups or designated entities.

The Charity Commission, as a risk-led regulator, we focus on areas of higher risk and we expect the same of trustees. The Charity Commissions International Charities Engagement Team recently published a blog to help you assess risk more effectively. It also includes links to risk management tools, which can help you protect your charity from harm.

How to assess risk for charities working internationally.

Source: Charity Commission Newsletter issue 63


New Guidance for Charities with a Connection to a Non-Charity

If your charity has a close relationship with a non-charitable organisation – such as its founder, trading subsidiary, or a regular partner – you must manage the connection in your charity’s best interests and protect its independence. You need to plan for the risks as well as the benefits that the connection can bring.

The Charity Commission’s new guidance for charities with a connection to a non-charity will help you to do this. It draws together relevant law and practice, setting out 6 principles to help trustees run and review these connections.

It follows concerns that some relationships between charities and non-charities have damaged public confidence in charity. It will also help us, as the regulator, to better hold charities to account against existing rules.

Source: Charity Commission Newsletter issue 63


Beyond Charity Risk Registers

Charity risk management has traditionally been undertaken by identifying as many risks as possible and then applying an impact/likelihood scoring matrix. This may be undertaken at team, department and then board level. The resulting risk register will be extensive and so the board typically focuses on the top ten highest scoring risks. In practice, however, this leads to much debate and discussion on the scoring methodology and distracts attention away from how the risks are actually being managed.

To achieve better governance of the key strategic risks, many boards accept that there will be a set of headline risks (usually five, but up to six) which will always be key for their organisation. And it is likely that these are similar across many organisations. This does away with the need for subjective scoring methods and an arbitrary cut-off for risks that get board focus (it will always be the eleventh charity risk that comes back to bite you!).  It also saves much time and debate at board meetings.

To read the full Directory of Social Change article click here.

Source: The Directory of Social Change


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