Researchers have warned of a “persistent problem” of insider fraud at charities after finding that half of cases are still carried out by employees despite efforts within the sector to tackle the problem.
The latest annual Charity Fraud Report 2024, produced by BDO and Fraud Advisory Panel, found that 50% of fraud in charities were committed by staff, which remained the same as last year’s result.
Fraud committed by people with no connection to the charity, meanwhile, increased from 23% in 2023 to 29% in 2024.
Out of the 139 respondents from UK-based charities, 42% reported fraud or attempted fraud, which was a one percentage point decrease from 2023.
Those charities that had been victims of fraud reported experiencing four to seven cases on average, down slightly from the year before.
Some 84% of charities suffered financial loss, which was a decline from 92% in 2023, while 40% managed to recover losses.
The average loss per fraud was between £102,000 and £197,000, with total losses accounted for between £5.9m and £11.4m.
Over the past 12 months, misappropriation of cash or assets accounted for 40% of fraud reported.
Authorised push payment or payment diversion fraud took up 33% of fraud reported, with expenses and subsistence fraud taking up 29%.
Police reports rise
Most instances of fraud (52%) were reported to the police, up from 37% the year before.
Some 45% of charities took internal disciplinary action, up from 35% the year before, while 12% did not act (2023: 21%).
Internal controls remained the most common means of detecting fraud, with 62% of charities citing this compared to last year’s 67%.
Some 10% of respondents reported using external whistleblowers to detect fraud, an increase from 4% last year.
Some 36% conducted a fraud risk assessment in the past year, down from 48% the year before, while 50% did fraud awareness training, up from 47% in 2023.
Looking ahead, some 50% of charities expected fraud risk to increase in the next year, compared with 63% in 2023.
Meanwhile, 56% stated that cyber-related fraud, including phishing, was their biggest concern.
‘More needs to be done’
Tracey Kenworthy, BDO counter fraud director, said: “While it’s encouraging to see the changes charities are implementing to both prevent and detect fraud, the persistent problem of insider fraud suggests more needs to be done.
“In the past, charities have been overly reliant on trust. Although our survey suggests that this is changing, the persistent problem of internal perpetrators highlights the importance of having robust internal controls and fostering an anti-fraud culture of openness and transparency.
“While charities have a more optimistic outlook for the coming 12 months, it’s important that they continue to tackle the fraud risks they are facing.”
David Green, Fraud Advisory Panel chair, said: “This year’s Charity Fraud Report highlights the profound and long-lasting implications fraud has on charities of all sizes.
“Whilst there are positive and meaningful steps taking place to detect and prevent fraud, charities should not take their finger off the pulse when assessing fraud.”
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