Most charity fraud perpetrated by staff or volunteers, report suggests

08 Dec 2022 News

The majority of charity fraud cases occurring in the last 12 months were perpetrated by staff members or volunteers, research has suggested. 

Accountancy firm BDO and charity the Fraud Advisory Panel surveyed 100 UK-based charities for their second Charity Fraud Survey which looks at the impact of fraud on the sector. 

The survey found that there has been an increase in fraud instances since last year, with 46% of reported frauds committed by a staff member and 9% by a volunteer. 

Previously, there was an equal split between perpetrators being an internal or an external threat.

This year, the survey estimated that financial losses from fraud for the respondents totalled up to £3.5m but the majority (28%) lost between £1,000 and £9,999. 

The latest survey had a larger sample of respondents and included a mixture of quantitative and qualitative questions, with some differing from those of last year. 

Increases in fraud attempts and financial losses

Three in 10 charities have experienced more instances or attempts of fraud in the last 12 months compared with the previous 12 months. 

The majority (69%) said they suffered financial losses due to fraud. Almost nine in 10 charities that reported a loss said it was below £100,000. This is an increase on last year, when 42% of respondents that experienced fraud reported not losing money as a result.  

When looking at the perpetrators, this year’s report found that 55% of reported frauds were committed by a staff member or volunteer. 

Only 23% of fraud were committed by an external party with no link to the charity. BDO said this might suggest that charities are now managing external threats more effectively. 

The report noted a five-fold increase in supplier/procurement fraud, from 5% last year to 26%.  

Asked what type of fraud charities have suffered over the past year, 43% of the 35 respondents that provided an answer cited misappropriation of cash or assets.

Nearly 40% of all respondents agreed or strongly agreed that hybrid working has increased the risk of fraud. 

Over half believe that the biggest barrier to good fraud prevention is a culture of “over-reliance on trust”, followed by a lack of internal resources (45%) and a lack of fraud awareness (43%).

Fraud increases ‘in times of economic uncertainty’

Phil Sapey, counter fraud manager at Cancer Research UK, said that fraud tends to increase in “times of economic uncertainty”. 

“We, in the charity sector, should recognise this and review our fraud risks and responses accordingly. When fraudulent attacks are made against Cancer Research UK it has a direct cost to people affected by cancer and to our volunteers and supporters who give up hours of time fundraising for essential donations that will pay for research that is helping us to beat cancer. It’s therefore essential that we manage the risk of fraud, even though it’s unpalatable to think of people stealing from us,” he added. 

Robb Montgomery, head of counter fraud at Save the Children International, urged organisations to have a robust response plan in place. 

He said: “The risk and sophistication of fraud schemes are increasing; so too should the resources allocated for prevention and response. A senior leadership team that sets a proactive agenda, be it in a round of budget planning or an all-staff meeting, is an invaluable support to an organisation’s counter fraud function.”

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