Fraud costs charity sector £1.3 billion, says National Fraud Authority
Howard Lake | 27 January 2011 | News
The National Fraud Authority (NFA) has for the first time put a figure on the cost to the charity sector each year of fraud. The sum of £1.3 billion was derived from responses to a survey by over 1,000 charities. The estimate represents around 2.4% of the total charity sector turnover.
The figure is contained within the NFA’s second Annual Fraud Indicator (AFI), published today, which estimates fraud is costing the UK over £38 billion a year. Nearly half of this (£21 billion) affects the public sector, £12 billion the private sector, and £4 billion affects individuals. If the total figure were broken down to a cost per person, then fraud would cost an average of £765 per adult member of the population.
Fraud consists of a wide range of techniques, with new ones cropping up, especially using new technology. Fraud methods include credit/debit card and cheque fraud, lottery and advanced fee fraud, online ticketing and rental fraud.
The NFA and the Charity Commission are working closely together on a number of counter-fraud prevention initiatives to encourage charities to build improved fraud prevention measures into their operations and to develop a stronger counter fraud culture in this sector.
Sam Younger, Chief Executive of the Charity Commission said: “We have previously said that fraud in charities has been under reported, which is reflected in today’s report. However it also shows that instances of charity fraud remain low and the public can be assured that the vast majority of charitable money is going straight to good causes”.
During 2009/10 the total value of the fraud and theft reported to the Commission through serious incident reporting by trustees was £21m against a total income £1.74 billion for the 175 reports from the charities affected.
Younger added: “Whilst no system can guarantee that any charity or business will be totally protected against loss, charity trustees must make sure that they have strong financial controls in place to protect their charities. One of the ways they can do this is by using the advice and ./guidance on our website. Charity trustees must be more fraud aware, and I hope that today’s report is a wake-up call to any charity who thinks it will never happen to them.”
The Charity Commission has produced the following publications to help charities prevent or deal with fraud:
CC8: Internal Financial Controls
Internal Financial Controls checklist
Reporting serious incidents to the Commission
Charities Back on Track 2010 – case studies of charities including cases of fraud
www.attorneygeneral.gov.uk/nfa
About Howard Lake
Howard Lake is consultant editor of UK Fundraising. He founded the site in 1994 and successfully sold it in 2022. As director of Giving X Ltd he is exploring growing giving on a massive scale.
He is the founder of Fundraising Camp and co-founder of GoodJobs.