Over half of charities hit by fraud knew the perpetrator, according to new research

Over half (53%) of charities affected by fraud over the past two years knew the perpetrator, according to new research into the fraud and cybercrime risks facing charities.

The research suggests over a third of those committing fraud were the charity’s own staff members; trustees and volunteers together were responsible for 28%; beneficiaries were identified in 13% of known frauds.

The Commission says charities can be at particular risk of insider fraud, because they often rely excessively on goodwill and trust in single individuals.

The findings are based on the largest-ever survey of charities’ attitude towards fraud and cybercrime, commissioned by the charity regulator, the Charity Commission and in partnership with the Fraud Advisory Panel, and are launched on Monday 21st October and Wednesday 23 October 2019.

While there is no evidence that charities are at greater risk of fraud or financial crime than other types of organisation, the risk of fraud in charities appears to be growing, costing the sector millions – and potentially billions – of pounds each year. The potential impact of this on the reputation of charity and charities’ ability to deliver maximum benefit in pursuit of their causes cannot be ignored.

Gap between awareness and action on fraud

The new research indicates that charities are increasingly aware of the wider risk of fraud. Over two thirds of charities (69%) think fraud is major risk to the charity sector and insider fraud is recognised as among the greatest threats to charities.

But the findings show that charities are not always recognising how vulnerable their own organisations are, and are not consistently putting basic checks and balances in place:

  • over a third (34%) think their organisation is not vulnerable to any of the most common types of charity fraud;
  • 85% of charities think they’re doing everything they can to prevent fraud, but
  • almost half don’t have any good-practice protections in place.

The Commission is concerned about this gap between awareness and practical action because it poses a threat to a charity’s ability to deliver for beneficiaries if donors cannot be confident in charities’ stewardship of the money it receives. The Commission is calling on charities to take simple steps, including to:

  • introduce and enforce basic financial controls [ e.g. having at least two signatories to bank accounts and cheques, undertaking regular bank reconciliations]
  • ensure no one single individual has oversight or control of financial arrangements; effective segregation of duties is a crucial method of preventing, and detecting fraud.
  • encourage staff, volunteers and trustees to speak out when they see something they feel uncomfortable about.

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