Research and figures from the Centre for Counter Fraud Studies and accountancy firm BDO show that the UK charity sector is losing a total of £1.65bn a year on average to fraud. The figures have been derived using global averages and then applying these to the UK sector, and that improved counter fraud measures should be introduced and used in order to minimise the financial impact that fraud has. The figures also show that there is a global 5.47% fraud rate for charities, an increase of 20% from before the economic downturn.
Charities face genuine problems in combating fraud, primarily because they often have only minimal employees and do not have the available resources to be able to put into counter-fraud measures, unlike the private sector. This makes charities a relatively easy target for fraudsters and criminals that are intent on embezzling funds from organisations.
A recent global study showed that there was a fraud rate of 5.47% for charities, and the Centre for Counter Fraud Studies used this figure and applied it to charities with a turnover of more than £10m every year in order to determine that fraud was costing the charity sector £1.65bn every single year.
The Centre for Counter Fraud Studies is located at the University of Plymouth, and their report not only showed the incredibly high rate of fraud within the charity sector but also highlighted the actual implication that inactivity has. They said that if charities had taken similar measures to those employed by private businesses then they could have saved £659m a year, or approximately 40% of the money lost. However, charities may find it difficult to be able to justify the kind of expense that it would take to introduce these counter measures, whereas private businesses would be expected to pay the fees.
Fraud is a global problem, although it is difficult to say whether the UK has the same levels as the rest of the world. Fraud is almost certainly rife in some continents, but recent arrests such as in the case of the man found guilty of fraudulently obtaining more than £200,000 from charity collections would indicate that it is a definite problem here too.