Charities report annual fraud losses of £8m

29 Jul 2019 News

Charities reported fraud losses of almost £8m last year, according to figures released by the UK’s national reporting centre, Action Fraud.

Accountancy firm RSM obtained the figures through a freedom of information request to Action Fraud, finding that charities submitted 1,057 reports of fraud totalling £7.85m in the year to March 2019.

This means the average amount lost per fraud case reported during the year was £7,428.

Employee fraud accounted for the highest level of fraud losses (£1.68m), followed by abuse of a position of trust (£1.63m) and mandate fraud (£1.23m).

Mandate fraud, which is when an employee is tricked into switching a regular payment to a fraudster’s account, was responsible for the highest number of identified complaints (173), followed by employee fraud (95) and hacking (62).

True level likely to be higher

Nick Sladden, RSM's head of charities, said the data was “unlikely to show the true level of fraud affecting charities”, with accountancy firm Crowe previously estimating a much higher £2.5bn.

The data only shows fraud that has been reported, and Action Fraud said some of the larger loss amounts may require further investigation to assess the true financial impact on the charity.

Nevertheless, Sladden said the research was quite revealing about the types of fraud to which charities are most regularly falling victim.
He said: “Mandate fraud appears to be a particular problem, with affected charities losing over £7,000 on average.

“Frankly, if staff receive the right training and if the correct controls are in place, there's no reason why these types of fraud attempts should be successful. 

“It's also clear that some charities need to keep a closer eye on their employees - and on those in positions of authority.

“While no-one wants to work within a culture of distrust, charities still need to be alert to the threat of insider fraud and ensure that proper checks and balances are in place to minimise the risk.
“While some larger charities may be able to absorb the losses from fraud, for smaller charities already struggling with cash-flow issues, a loss in the thousands can prove critical.”

Civil Society Media's Charity Finance Week takes place in October and this year the theme is Accounts and Accountability. Find out more about the events taking place. 



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