Revealed: how fraud costs charities billions

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The staggering extent of fraud inflicted on the charity and voluntary sector

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27th May 2016 by Graham Martin 0 Comments

Fraud is costing charities up to £1.9 billion a year, it has emerged.

Recently released figures suggest that the amount the voluntary sector is losing to dodgy practices is going up.

The scale of the problem was reported in the Annual Fraud Indicator 2016, a UK-wide survey into fraud across UK public life.

It found that the British charity and voluntary sector was subject to fraud amounting to £1.86bn in 2013/14, the last years figures were available for, or 2.5 per cent of the sector’s annual income and expenditure.

This is up from £1.1bn in 2012.

Fraud is best seen as similar to a clinical virus – something that continually mutates and changes

Broken down, it is estimated that the voluntary sector lost £886m to payroll fraud, £776m to procurement fraud and a further £196m to grant fraud.

The figures represent the sector across the whole of the UK – a separate breakdown for Scotland was not available.

Report authors, accountants PKF Littlejohn, is working with the Charity Finance Group (CFG) to produce a guide for charities on how to tackle fraud which will be published next month.

Heather McLoughlin, policy and public affairs officer at CFG, said: "Unfortunately, despite our good work, charities are not immune to fraud and need to be aware of emerging risks, such as cyber-enabled fraud.

"This report is a welcome addition to the body of research on fraud in the UK. However, charities shouldn’t fixate on the numbers – the critical thing is to be aware and take appropriate action."

Jim Gee of PKF Littlejohn, said:  "Fraud is best seen as similar to a clinical virus – something that continually mutates and changes as fraudsters seek the greatest benefits for the least risks.

“The best way to reduce its extent and cost is to make sure charities are fraud-resilient and able to protect themselves against a continually evolving threat."