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Commission urges sector to put fraud figures into context

Finance | Tania Mason | 24 Feb 2009

The Charity Commission has sought to downplay the prevalence of fraud in the sector in the wake of a new report from the independent watchdog the Fraud Advisory Panel.

The report, published yesterday (Tuesday 24 February) suggested that three in five charities in England and Wales have no proper anti-fraud policies in place, with smaller charities even less well-prepared.

Responses to a survey by the Panel from 1,123 charities showed that even though half agreed that fraud was a major risk to charities because of their reliance on trust and goodwill, most had still done little or nothing to prevent it happening on their turf.

However, the survey also found that only 7 per cent had fallen victim to fraud in the last two years – a proportion, according to Commission chief Andrew Hind (pictured), which “puts the findings in context”.

“We welcome the fact that this research has been done – clearly there is more that charities can and should do to be fraud-aware,” he said.

Incidence ‘far lower than other sectors’

“But the research also shows that fraud in the sector is far lower than in other sectors, and that of the 7 per cent that had had experienced it, half of these incidences involved amounts of under £1,000.”

According to the research, fraud is significantly more common among the largest charities (20 per cent), those that employ full-time staff (15 per cent) and those with trading subsidiaries (20 per cent). The presence of volunteers makes no difference to the incidence of fraud.

Frauds are most often discovered by internal controls or audits (46 per cent) or by the bank (18 per cent).

Of those charities that had suffered fraud, 83 per cent reported it to their board of trustees. Three-quarters also reported it externally, typically to the police or the bank, but only 10 per cent told the Charity Commission. Half of charities recovered some or all of their money.

Hind added that the Commission took a “proportionate approach” towards how it expected small organisations with limited resources, and larger charities with significant resource and capacity, to protect themselves against dishonesty.

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