20th June 2016
Charity payroll fraud is in the spotlight again after the latest report from the Centre for Counter Fraud Studies at Portsmouth University. The fact the Charity has been singled out again adds to the PR woes currently facing the industry.
This report has the backing of a number of fraud experts – the University of Portsmouth’s Centre for Counter Fraud Studies and Experian, who fills the gap vacated by the National Fraud Authority, which closed its doors back in 2014.
‘Industrial scale’ fraud is present in the UK according to the report, with innovative external attacks and widespread internal vulnerabilities creating £12 billion in losses. There have been several high profile phishing attacks on business such as at at the National Childbirth Trust, targeting company staff with fake phone calls and emails impersonating legitimate senior staff contacts. Phishing attacks in the UK rose by 21% in 2015.
Charity payroll fraud has been singled out and is estimated to cost the 160,000+ charities and not for profit organisation in the UK around £1.9 billion. Interestingly our report on the Hiscox study in America identified the vulnerabilities in the sector and we’ve recently published guidance on the NCVO Know How Non Profit Site in this respect.
With expenses claims, for example, fraud can go unchecked for years. An employee might add a few miles onto a business trip here or there, claim a visit that didn’t actually take place or misuse a fuel card. They could claim overtime or extra hours that were not actually worked. Sloppy checking and infrequent auditing could mean these losses are never detected.
Furthermore, where ‘ghost employees’ are created fraudulently and subsequently found out, many businesses will choose to take the losses on the chin. There are two reasons for this. Firstly, taking an employee to the police and going through a court process can be time consuming and costly, and might not get the result you would expect. Secondly, some companies would rather sweep things under the carpet rather than lose face in a very public way. Our advice at the present time is to take action, review procedures and arrange a payroll audit – your payroll outsourcer may be able to help.
The new EU General Data Protection Regulation will have a significant effect on how charities handle personal data, so it is important that they act now to understand the new rules, how to successfully operate within them, and how to avoid payroll fraud.
We’ve put together several blogs covering this subject that give valuable tips for business: