UK charities lose £1.65bn annually due to fraud

Charities lose out to fraud

Fraud in the charity sector costs British voluntary organisations approximately £1.65 billion per year, according to a new report released by the Centre for Counter Fraud Studies at the University of Portsmouth and accountancy firm BDO.

The authors of the report noted that improving anti-fraud measures could prevent around 40% of the losses, or save up to £659 million.

The Minimising Fraud and Maximising Results for Charitable Purposes report calculated the above cost by taking the global average annual loss from charity fraud of 5.47% and applying it to all 842 UK charities with an income of more than £10 million per year. The global average annual loss from fraud has increased by 20% since the beginning of the financial crisis, suggesting that more efficient prevention and protection is necessary. The sector needs to establish a strong counter-fraud culture, introducing effective deterrents and abolishing inefficient processes.

Jim Gee, director of counter-fraud services at BDO, commented that many charities and not-for-profit organisations had to operate at tight budgets and found it hard to put aside money for improving their counter-fraud measures. The report shows that reasonable investments in improving prevention could result in reducing costs from fraud by 40% over a two-year period, so considering the option is well worth it, he said.

The report's findings are in line with figures from the National Fraud Authority, which showed that in 2011, UK charity fraud came in at £1.1 billion. Some of the fraud incidents received extensive media coverage and this may have a negative effect on the public image of the sector, Third Sector informed.

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