What can you do to reduce the risk of grant fraud?

Published by Tom Wacher on 23 October 2020

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During these difficult times, speed is often of the essence and normal procedures need to be adapted. It is often difficult to measure the actual outcomes of grant-funded organisations as the work undertaken is rarely reportable in financial terms. When grantmaking is mishandled, it can damage an organisation’s reputation and public trust and it’s important to remain vigilant. The level of risk will depend on various factors such as the type of grant recipient, the purpose of the grant, the nature and size of the grant. In addition, a high volume of low-value grants can increase the risk because it is not practical to monitor expenditure at a level that might find any fraud. For example, grants for capital projects are likely to be at a lower risk of fraud than those paid to individuals or less well-established groups.

What actions can you take to reduce the risk of grant fraud?

  • Make sure that you carry out due diligence on any grant applicants, take the time to get to know the applicant/organisation, their people and the projects they are involved in.  Checks should be carried out on any grant applicants to ensure you know who the grant is going to. Use previous acquired knowledge to risk assess. Consider collaborating with other grant makers in your target area.
  • Be clear from the start about the expected outcomes and what audit arrangements are in place to audit the outcomes. A lack of clarity in what is expected can mean that genuine grant recipients can deliver the wrong thing.  It can be difficult to distinguish between an error and deliberate abuse where the required outcomes are unclear. Ensure there is regular and comprehensive auditing of a sample of grants and that the recipient is clear about your rights of inspection.
  • Encourage any grant recipients to be open and honest about any problems they are facing, making sure that grant recipients are aware of what is expected of them.
  • Make sure there is a robust approach to monitoring and that there are sufficient resources available to undertake the investigations.  Watch out for bogus information being supplied to support any grants.
  • Ensure your staff know what a fraud may look like and what their responsibilities are in reporting a fraud and to whom. Staff can become close to grant-funded organisations and it is essential that they are reminded that they make declarations of interest promptly. Regular anti-fraud training and bulletins help with this.
  • Determine the level of risk you are prepared to accept when considering grants and stay within this zone.

If you are aware of a grant fraud you should always report internally and depending on the action undertaken by your organisation consider reporting directly to the Charity Commission.

If you would like to discuss the topics explored in this article, do call us on 0330 124 1399, via our enquiry form or speak to your usual Kreston Reeves contact.

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