Charities urged to guard against fraud

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Fraud and financial crime is rife in charities and they must do more to safeguard themselves, the National Fraud Authority is urging.

Tough measures like internal financial controls and professional financial management are needed to tackle the onslaught of crime, says the report from the NFA.

Not only are crooks from outside trying to get their hands on charity cash, but the number of staff stealing from within is also increasing.

The NFA Annual Fraud Indicator revealed:

  • 10% of charities with an income of more than £100,000 were victim of a fraud in the past year
  • The most common frauds were payment and banking fraud (47%), false accounting (15%) and identity fraud (14%)
  • 25% of charities claim someone inside the organisation had attempted a fraud in the past year

Trustees are responsible for the financial monitoring of their charities, but only 20% had controls in place to measure or prevent fraud loss.

A recent study by professional body the Institute of Chartered Accountants of England and Wales (ICAEW) highlighted charity fraud prevention policies were weak – especially among smaller organisations.

The ICAEW also disclosed many trustees had a lack of financial management skills.

Sam Younger, Chief Executive of the Charity Commission, said: “The indicator highlights that charities are no exception to fraud. While 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.”

For more information please contact Neil Cundale