Only 45 per cent of charities surveyed have a written counter-fraud and corruption strategy, a report produced by accountancy firm PKF-Littlejohn into the sector’s resilience to fraud.
It has shown that despite some improvement, more needs to be done for charities to protect themselves against fraud. The report, The Resilience to Fraud of the Charity Sector in England and Wales 2015, builds on a similar report published in 2010.
Based on an analysis of data provided by 392 charities in England and Wales. PKF-Littlejohn refers to the report as the “most extensive and comprehensive report yet undertaken into the resilience of charities in England and Wales to fraud”.
It found that 44.4 per cent of charities surveyed have a written counter-fraud strategy, a slight decrease on the 45.9 per cent that answered yes to the question in 2010. However, 80.4 per cent of charities said fraud and corruption risks were included in the organisation’s risk register
The charities were measured using a charity-specific version of the Self-Assessment Fraud Resilience Tool (SAFR), which was developed by PKF-Littlejohn alongside the University of Portsmouth and the Charity Commission, and measures how well organisations protect themselves against fraud. After answering 29 questions about the effectiveness of their arrangements to counter fraud, they were given a rating from 0 (worst) to 50 (best).
The findings show that the areas that the sector performs worse in are those including ensuring counter-fraud staff are professionally trained; using estimates of losses to make judgements about how much to invest in countering fraud; understanding the cost of fraud; and regularly reviewing the effectiveness of counter-fraud work.
On the other hand, the charity sector performed well in areas including having effective arrangements to report fraud and corruption, having a zero-tolerance approach to fraud, and including fraud and corruption risks in risk registers.
However, the survey was self-selecting, suggesting that those organisations that filled it in would naturally be more interested in fraud prevention.
The charity sector achieved a mean score of 26.1, a slight increase from 24.2 in 2010, and a median score of 26.5, a slight decrease from 2010 when it was 25.
Excluding the worst 10 and 10 per cent of the 392 charities who used the SAFR tool, the scores ranged from 10 to 40.5.
In the foreward of the report Oliver May, head of counter-fraud at Oxfam GB, said that there is a great myth that fraud is not a problem for charities.
He said: “Fraud is never a ‘victimless’ crime, but when perpetrated against a charity it is, perhaps, particularly malignant. It makes victims not only of donors and beneficiaries, but also the organisation and its staff and volunteers. Consequential losses can be very damaging. The ripples spread wide.”
“The donors and supporters of charities in England and Wales are not naïve. They recognise that charities do become the victims of fraud and that this is an environmental hazard for any organisation. What they expect, however, is that we do everything reasonable to deter, prevent, detect and respond to it. I therefore encourage my colleagues in the charity sector to reflect upon the findings of this study, consider where the vulnerabilities are in our own organisations, and act to tackle them.”
