Grantmakers must take steps to protect against fraud

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We have seen an increase in the level of fraud since the start of the Covid-19 pandemic, not only through more “traditional” methods such as changing supplier details, phishing emails and hacker attacks. ransomware, but also by an increase in the reported number of fraudulent grant applications. be done. It is more important than ever that funders have strong due diligence processes in place to ensure that grants are awarded appropriately and reach those who need them most, and continue to follow up after the allocation to ensure that grants have been spent as agreed.

The ultimate responsibility for ensuring that charitable funds are spent appropriately, including that they are used as intended by grant recipients, rests with a donor’s trustees. Therefore, strong grant-making processes should be in place and reviewed periodically to ensure there is evidence that “reasonable” steps have been taken to confirm that payments are being applied to advance the objectives. charities. However, it can be a little more complicated for those giving grants abroad.

Questions to ask

Some areas to consider are:

  • Have appropriate identity checks been performed to ensure that you “know your customer”?
  • Has governance been reviewed in terms of structure, purpose and objectives?
  • Has the beneficiary been assessed from a financial point of view? are they financially viable with the capacity to manage the project in accordance with the grant agreement?
  • Is there the appropriate capacity, technical skills and experience to carry out the project?
  • Have risk management procedures, including the receiving entity’s risk register, been reviewed?
  • Are appropriate procurement processes in place, including staffing to execute the project?
  • Are there sufficient reporting requirements in place, including adequate data availability, to measure and report results and impacts? Are they likely to be followed in practice?
  • Should a representative from the charity visit the project to check on progress?
  • What audit trail will be available to confirm that the grant has been spent in accordance with the terms and conditions?
  • Are the charity’s expectations for contact and reporting likely to be met by the recipient or are there indicators that show otherwise? Have you taken recipient history into account?
  • If the proposed recipient is a previous recipient, have there been any significant changes since due diligence that would require them to be reconsidered?
  • If the grant is ultimately funded by a donor, are relevant contractual commitments passed on to the proposed recipient?
  • Are the trustees satisfied that appropriate due diligence has been performed on the proposed beneficiary?

Above all, don’t ignore the red flags. If you have any concerns, do additional research on the recipient or ask for more information.

Trustees must continue to review their grant due diligence processes in light of changing working practices as we emerge into the “new normal” post Covid-19. Pay particular attention to ensuring that there has been adequate reporting and review of grants awarded during lockdown periods when processes, such as project site visits, may have been postponed due to government guidelines .

Siobhan Holmes is Director and Head of Grants at haysmacintyre

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