The reported cost of fraud to charities decreased by £200m last year, but still takes £1.1bn out of the sector.
A report by the National Fraud Authority released today has revealed that charities estimate to have lost 1.7 per cent of their income in the last financial year to fraud and financial crime. Four per cent of charities reporting in to the NFA’s Annual Fraud Indicator said they had detected fraud in 2010/11.
But this was an improvement on the previous year, when the authority estimated that it cost the sector £1.3bn, or 2.4 per cent of income. This year's survey of charities was widened to include Scotland, and had more charities reporting in.
Payment fraud, fraud by staff and volunteers and cyber fraud were the top three most prevalent types of fraud and financial crime identified by charity victims. However, much of the fraud detected was of very low value: a quarter resulted in no financial loss and another quarter cost the charity less than £500.
The NFA has nearly doubled its estimate for how much fraud costs the UK. It now believes the cost of fraud to be around £73bn a year, as opposed to the £38.4bn it had previously estimated.
Coinciding the with release of the figures from the NFA, the Charity Commission has released a new strategy for charities dealing with fraud, financial crime and financial abuse. The strategy emphasises prevention, and precedes the release of a charity fraud guide which will advise charities on how to protect against the crimes.
The Charity Finance Group, meanwhile, has called on charities to take the release of the report as a reminder to review their fraud policies and controls. “While there is no silver bullet that can protect against all fraud, targeted information sharing, greater awareness and education can significantly reduce the likelihood of it happening,” said CFG's chief Caron Bradshaw.
Sam Younger, chief executive of the Charity Commission, said: “The impact of fraud is felt across all sectors, and charities are no exception.
“Strong financial controls and good governance are key to reducing the risks to charity assets. These are vital if charities are to meet the public’s expectation that money they donate is used properly and goes to the causes for which it is intended.”
Nearly 4,000 charities were surveyed as part of the Annual Fraud Indicator.
