Are your charity’s controls strong enough to prevent fraud?
Charities work incredibly hard to maintain transparency and public trust – yet fraud still happens, often because of simple, unnoticed control gaps. Without strong safeguards and active oversight, even minor weaknesses can lead to financial loss and reputational damage.
How weak controls create opportunities for fraud
Fraud in charities is often opportunistic rather than sophisticated. Even well-run organisations can be vulnerable when gaps in internal controls go unnoticed.
Common risk areas include:
- a lack of regular oversight or independent review
- limited segregation of duties
- informal processes
- over-reliance on trusted individuals
These issues can lead not only to direct financial losses but also reputational damage, which can be far more difficult to recover from.
Strengthening governance to prevent fraud
Preventing fraud begins with strong governance. The Charity Governance Code of 2025 expects trustees to manage risks proactively, maintain robust internal controls and ensure transparent reporting. Trustees should also keep up-to-date with legal duties (including compliance) and emerging regulatory changes.
Large charities are now subject to the ‘Failure to Prevent Fraud’ measures under the Economic Crime and Corporate Transparency Act (ECCTA). Organisations can be held liable if a person associated with them commits fraud for the organisation’s benefit.
To demonstrate good practice, trustees should:
- undertake regular fraud risk assessments
- implement internal control frameworks in daily operations
- provide fraud awareness training for staff and volunteers
The role of forensic investigation in understanding fraud
When a suspected fraud arises, a forensic investigation aims to uncover what happened, how it occurred and what weaknesses allowed it to take place.
A forensic review often involves:
- tracing transactions and financial flows
- reviewing internal documents and controls
- analysing patterns in financial data
The outcome is a clear picture of the issue and practical recommendations to strengthen controls, improve oversight and prevent recurrence. The process helps charities recover from incidents, emerge stronger and demonstrate accountability.
When fraud threatens a charity’s survival
Even a modest fraud can significantly impact a charity’s ability to deliver its objectives. Cashflow pressures, regulatory scrutiny and loss of funds can bring about significant financial challenges.
When fraud leads to actual or potential insolvency, trustees have specific responsibilities and liabilities that must be carefully navigated to protect the charity and its beneficiaries. Failure to adhere can expose the trustees to regulatory or personal consequences.
At this stage, trustees are advised to:
- monitor cashflow and forecasts more frequently
- avoid actions that might further compromise the charity’s financial position
- document decisions and the rationale behind them
- engage early with regulators, funders or lenders
- seek specialist advice to understand their duties
Where a charity operates as a company, trustees act as company directors and must comply with additional duties. Early, specialist restructuring and insolvency advice helps ensure decisions are reasoned, informed and aligned with legal obligations.
Building a culture of vigilance
Charity Fraud Awareness Week is a timely reminder that preventing fraud is not a one-off task but an ongoing commitment. Promoting transparency, regularly reviewing controls, and acting quickly when concerns arise all help charities safeguard their funds, people and reputation.
How Moore Kingston Smith can help
At Moore Kingston Smith, our Forensic, Restructuring & Insolvency, and Nonprofit Advisory teams work closely with charities at every stage – from strengthening governance to managing investigations and supporting recovery. Get in touch with us to find out more about how we can help you build stronger fraud resilience.
