TT11 Dealing with Fraud

Guide to Financial Management

Top Tips 11

Top Tips for Dealing with Fraud

Sometimes, fraud can happen despite the best internal control system. Sadly, many NGOs have been the victims of fraud, on either a large or small scale. You are not alone if it happens to you.

Fraud is defined as: a deliberate, improper action which leads to financial loss to the organisation. This includes theft of goods or property; falsifying expenses claims; and falsification (or destruction) of records to conceal an improper action.

It is very important for NGOs to prepare in advance how to deal with any occurrences of fraud, by having a written policy or procedure.

Examples of fraud

Alongside theft, some common types of fraud include:

  • bribes paid to NGO staff by suppliers, partners or beneficiaries,
  • supplies sold for personal gain,
  • unauthorised personal use of assets (e.g. telephones, vehicles),
  • staff being paid inflated expenses (supported by false receipts),
  • the same project being funded by two different donors, and
  • resources given to ghost staff or beneficiaries, who do not really exist.

Dealing with fraud

An NGO’s fraud policy should cover:

  • how you will respond to allegations of fraud,
  • how you expect to deter fraud,
  • how you will respond to different types of fraud,
  • how allegations can be reported (including "whistle-blowing"), and
  • how allegations will be investigated.

Finally, staff need to know about the policy.

All allegations of fraud must be treated seriously and investigated as soon as possible. Internal investigations have to be fair and take time to assemble real evidence before coming to conclusions. The police may be able to help you.

You should record the details of each fraud and the actions you take in response in a fraud register. This is an important document for monitoring fraud and learning how to strengthen controls in the future.

Keeping Risks Low

Here are some tips on how to deal with fraud – and keep RISKS LOW!


R    Report the fraud to a senior member of staff or Board member
I     Investigate all incidences to gather facts and evidence
S    Secure the assets and records
K    Keep calm!
S    Swiftly act


L     Look the other way (this could suggest you are involved)
   Overlook the impact of fraud on staff morale and credibility
  Withhold information to protect others

Above all, remember that prevention is better than cure!

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