Trust is not a control

A recent case involving a small charity highlights the need for even the smallest organisations to assess how they might be vulnerable for fraud and to put in place simple preventative or detective controls. The effects of a single fraud can have a devastating and disproportionate impact  for smaller organisations. In the case of The First Friends Nursery the amount fraudulently taken was in the region of £50,000. This amount was enough to cause serious financial difficulties for the charity which threatened its existence with obvious knock on impacts for staff, parents and the children. The trusted worker was able to extract money from the charity for her own use in a number of ways: stealing cash; forging signatures on cheques, and inflating her wages. There were a number of simple controls that should have been in place which would have prevented this fraud, or detected it at a much earlier point. Those controls include:

• segregation of duties;
• bank account reconciliations;
• clear audit trails;
• supervision and checking of outputs;
• clear reporting lines and
• avoiding reliance on one key individual.

Relevant guidance and tools include:

• undertaking a fraud risk assessment 
• taxonomy of fraud and key controls