Warning on UK Charity Fraud

UK charities have been warned to protect themselves against fraud after a new report revealed nearly one in 10 charities with income over £100,000 detected fraud in the last financial year.

The Charity Commission, the independent regulator for charities in England and Wales, delivered the warning urging charities to better protect themselves against fraud and financial crime, in response to the National Fraud Authority's (NFA) latest report.

This year's Annual Fraud Indicator sampled charities with income over £100,000 saying this represented 96.5 per cent of the total income of all charities across Great Britain (£65.6 billion of the total income of £68 billion).

The NFA's Annual Fraud Indicator shows that:

• Nearly 1 in 10 (9.1%) charities with an income of over £100,000 reported they had detected fraud in the last financial year (2011/12).
• The most common types of fraud were highlighted as payment and banking fraud (47%), accounting fraud (14.8%) and identity fraud (14.1%).
• 1599 charities completed the survey, and of the 9.2% that were a victim of fraud, almost a quarter (23.1%) said they had suffered insider-enabled fraud.
• The UK Charity Commission said fraud affects all areas of the economy and as these findings show, charities are not immune.

“Charity trustees are responsible for ensuring a charity's funds are used properly, and for taking steps to prevent assets being abused. However, only a fifth of respondents (21%) said they had attempted to measure their fraud loss in the last financial year," the Commission said. 

Although it is for the police to investigate and prosecute fraud, the Charity Commission said its role in individual cases is to establish how criminal matters arose and whether the trustees have responded appropriately.

“Where necessary, the Commission will intervene to ensure charity funds are protected and the trustees have put in place steps to help ensure it does not happen again,” Chief Executive of the Charity Commission, Sam Younger said.

“The Annual Fraud Indicator highlights that fraud is an issue across all sectors, and charities are no exception. Whilst smaller charities may sometimes feel this is not an issue they need to worry about, trustees have a responsibility to ensure proportionate anti-fraud measures are put in place.

“It's worrying that almost a quarter of those who have been victims of fraud have suffered insider-enabled fraud, and this is a timely reminder that it does happen and it's not always outsiders who are the culprits.

“Trustees, staff and volunteers are the people on the ground who could help stop the opportunities for fraudsters by putting some financial risk measures in place. There should be a culture of counter-fraud and risk management created by the trustees and, in larger charities, senior management, who should lead by example in adhering to the charity's internal financial controls and good practice.”
The report can be downloaded at here.