charities are ill-prepared to deal with fraud, according to
independent watchdog the Fraud Advisory Panel (FAP).
New research conducted amongst charities with an income
of £10,000 or more, and released today, reveals that
60% of charities in England and Wales have no significant
anti-fraud policies and procedures in place. This rises
to almost three-quarters amongst the smaller charities.
The Fraud Advisory Panel studied more than one thousand
charities of varying type and size to assess the impact
and cost of fraud in the charitable sector, and to discover
what charities are doing to fight fraud.
It found that even though half of all respondents think
fraud is a major risk to charities, due to their reliance
on trust and goodwill, fraud is still not properly considered
across the sector as a whole. However, only seven per cent
of respondents, a comparatively small number, said they
had suffered a fraud in the last two years.
Ros Wright, chairman of the Panel and a former director
of the Serious Fraud Office, said: “Charities that
fall victim to fraud must cope with cancelled projects and
damaged reputations as well as direct financial losses.
Then there is the harm done to staff morale; our in-depth
follow-up interviews found significant levels of stress,
feelings of betrayal and illness, and sometimes even redundancy,
all as a direct consequence of fraud.”
”Yet most charities still have no anti-fraud measures
in place. Our researchers spoke to organisations that had
been brought to the very brink of extinction by fraud, but
many remain unaware even of the support available through
bodies such as the Charity Commission.”
“Charities that have avoided the attentions of fraudsters
need to learn lessons from those which have not been so
Just over half of the charities that have already fallen
victim to fraud now think, in retrospect, that they contributed
to the fraud taking place by being too trusting or having
inadequate internal controls.
“That should be a wake up call, but instead many
charities are behaving as if fraud happens only to other
organisations”, added Wright.
“In fact, the experiences of the charities in our
study suggest that in England and Wales thousands of charitable
organisations are hit by fraud every year. The small organisations
are the least prepared, and so are the most potentially
"But remember, the vast majority of the 170,000 plus
charities in England and Wales are small charities. Overcoming
resistance to change, spreading the word about the urgent
need for real preventative and effective controls and procedures,
is clearly an important and pressing challenge both for
individual charities and the sector as a whole.”
Andrew Hind, chief executive of the Charity Commission,
commented: "We welcome the fact that this piece of
research has been done. Fraud is a serious problem and clearly
there is more that charities can and should do to be fraud-aware.
"However the research also shows that fraud in the
charity sector is far lower than other sectors, and that
of the 7% of charities that said they had experienced fraud
in the last two years, half of these incidences involved
amounts of under £1,000, which puts the findings in
"At a time of recession it is vital that all money
given to charities is applied correctly, and we do expect
charities to report incidences to the Commission through
our serious incident reporting system. Charity trustees
are expected to have regard to all relevant Commission guidance,
including on reporting serious incidents, and our guidance
continues to be promoted through events, visits and publications.
"The benevolent and trusting nature of the charity
sector does mean that it is potentially vulnerable to those
who would commit fraud. However there does need to be a
proportionate approach towards what small organisations
with limited resources and finances are expected to do to
protect themselves, and what we would rightly expect of
larger charities with significant resource and capability.