Even small suggestions of fraud can put whole grant investment programmes at risk. Fear of fraud among grant managers is common and intense: not because it is widespread, but because any occurrence seems to cast a shadow of doubt over the good work done by so many.
Experiences of dealing with rare cases of fraudulent grant holders may plague grant programme managers, perhaps because being deceived feels highly personal. Those who commit fraud are taking money away from honest causes and from organisations and people working hard to make a difference, and that can be painful.
Yet removing risk entirely should not be best practice for good funds. Most grant programmes work ‘at the margins’: not at the margin of what is legitimate, but at the margin between what is proven to work and what is still untested. Strong grant funded projects carefully balance the tried-and-tested with the innovative (and inherently more risky) and on occasions, some projects will fail.
Grant funding that operates entirely in the ‘safe zone’, funding only activities with strong track records, is missing opportunity. Lots of learning can come from projects that take a calculated risk to do something new but which fail, and any good grants portfolio will include a mix of projects across the risk spectrum… with proportionate risk management structures in place.
Over the years, Ecorys UK has managed grant programmes (and paid out grants) worth hundreds of millions of pounds and has developed a wide range of measures to reduce fraud risk in grant programmes.
We believe that fraud prevention starts at the application/pre-application stage. Use an on line portal; register applicants in advance; check for duplicates; and crosscheck applicants against previous grant funds or rounds if you can.
Carry out due diligence on grant applicants just as you would with other business investments or partnerships. Companies House and the Charities Commission both hold huge amounts of reliable, up to date and free data on organisational governance, history and finances. Ask to see applicants’ audited accounts and - if you are looking at large grants - get an accountant to review them.
Make sure you ask questions in the application form about financial management and organisational governance, and think about the weight you give these when scoring applications. Do not be scared of adding financial conditions to approval, but do not use these to avoid making tricky decisions.
Once grants are approved, you can protect your programme by drawing up a tight agreement or contract with grantees. Though this may not prevent those who are intent on fraud, it will give you strong legal basis to investigate anything suspicious. Make sure a Chairperson, Chief Exec or Finance Director signs the contracts.
When it comes to making payments, you should be checking bank details, which should be submitted electronically or on headed paper and signed by the Finance Director, Chairperson or Chief Exec. Ask for as much evidence of delivery and/or spend as you see fit. Reserve the right to audit or spot check any organisation you are grant funding - and actually witness delivery if you can.
If your budget allows, supporting projects to improve their financial skills through capacity building, training or support is a good idea, since far more grants money is lost due to poor financial management than through fraud. Mismanagement might also extend to data security, so ensure that you invest in and test your security systems.
Lastly, develop strong internal risk management structures. Ecorys ensures that at least two people sign off all grant payments, and the final payment authorisation comes from someone who has had nothing to do with the preparation of the claim, giving everybody confidence.
Ecorys UK manages a range of UK and EU funding streams. For more information about fraud reduction or our grant management services, contact Russell Peacock