Combatting Charity Retail Fraud
Retail operations are key to the finances of many Charities and gives them the opportunity to “earn” their income. Across England and Wales profits from their retail shops contributed an estimated £300m to Charities in 2019. The benefits to Charities do not stop there either with the high street presence of Charities being a valuable marketing tool to boost the profile of the Charity and to encourage further support.
The success of these shops relies on the Charity and goodwill of others in many ways. Most shops operate primarily by selling donated good, these are given by members of the public who trust the Charity to sell the goods to support the work of the Charity. Equally these items are purchased by members of the public who support the Charity by purchasing these goods. Key to the success of many retail operations are the volunteers, without this group of people few retail operations would be able to function profitably and these volunteers are the lifeblood of Charity retail.
This reliance on volunteers and difficulties in recording largely donated and unique stock items does however throw up some significant challenges for Charities when managing its retail fraud risks. This can either be in the form of insider fraud or physical theft from within the stores.
Theft can arise from shoplifting, with Charity shops often being seen as a soft target by shoplifters, due to the unique nature of each item customers may also get away with switching tags on goods to pay a cheaper price. Employees or volunteers could steal cash, take donated items before or after they are put out for sale or under-price goods for their own gain.
It this environment risk will never be completely managed away and mitigation must be proportional but the potential impact of loss from theft or fraud can be minimised by a series of control safeguards and procedures which should be considered:
- Training of all staff and volunteers on crime prevention, a culture of no tolerance and freedom to challenge is key in reducing volunteer and staff fraud.
- Use of CCTV in stores.
- Regular audits and stock counts, including surprise audit visits which all act as deterrents.
- Procedures around the sorting of items to ensure that all bags are opened in the presence of two individuals ensuring that all items are merchandised.
- Clear policies on the pricing of donated goods and a second check on all pricing.
- Clear polices on cash handing, frequency of banking, till closure times, the use of EPOS systems and independent checks to be performed by the central finance function.
The importance of staff and volunteers in combating fraud must not be underestimated as they are in the best position to see any suspicious activity. Therefore, it is vital that they have a well-defined path for reporting their suspicions and can have assurance in confidentiality.
Staff and volunteers should also be made aware of the checks which will be performed on the EPOS reports, till readings and frequency of banking so they are know the opportunity to get away with theft is reduced.
Monitoring individual store performance may also highlight fluctuations in sales or donations which may be indicators and red flags for potential fraud. This may include unusual patterns of refunds no sales and voids. These indicators need to be acted upon in a consistent and robust manner.
Known shoplifters can be barred from the store, staff must be aware of the procedures to follow and the support available should a barred person attempt to enter the store.
Finally, the Charity Commission should be informed of each occasion of Charity theft or fraud where there is loss the Charity and or any beneficiary as it will be regarded as a serious incident – in the case of petty shop lifting some pragmatism may however be required! If you do suffer a loss it is important to look at the root cause of this, what went wrong? And ensure that the systems and procedures are modified to ensure that this can’t happen in the same way again.
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