Almost three in five charities fear they will increasingly fall victim to fraudsters in 2023, particularly from among their own staff.

Among 100 charity representatives interviewed the misappropriation of funds by staff is “posing the biggest threat” with the cost-of-living crisis and economic downturn “potential catalysts”, say researchers.

Two in five felt that hybrid working had increased the risk of fraud in their organisation.

The survey has been carried out by accountancy firm BDO and anti-fraud charity Fraud Advisory Panel.

It found that 58% of charities believe the risk of fraud will increase, while only 1% believe it will decrease.

More than a third said they had experienced fraud over the last year. The most common fraud was misappropriation of cash or assets by staff or volunteers, cited by 43% of those surveyed, which is more than double the level mentioned last year.

Staff expenses fraud was the next most mentioned, cited by more than a quarter.

Among those detecting fraud, staff were the perpetrators in 46% of cases and volunteers in 9%.

Just under a quarter (23%) of frauds were committed by a third party with no connection to the charity. This is a reversal on last year’s figures when “external threats were greater than those from within”, say researchers.

Another growing area of fraud is supplier and procurement crimes, which increased from 5% in 2021 to 26% in 2022. This usually involves collusion between an insider and an external party.

“Long experience shows that in times of recession fraud risks are often greatest just when defences are weakest,” said Fraud Advisory Panel chair David Green.

“Our advice to charities is simple: now is not the time to take your eye off the ball. Take fraud risks as seriously as you can. Use these survey findings to learn from others, and then strengthen your own counter fraud activities.”

The survey also found that of those charities that discovered fraud, more than two thirds said it resulted in financial losses. Most (88%) of these losses were under £100,000. Three in ten said they had suffered reputational damage.

BDO fraud director Tracey Kenworthy said: “While there is an acknowledgement among charities that we’re likely to see higher incidences of fraud next year, there is still a worrying level of complacency when it comes to preparing for and mitigating against the risks of fraud.

She added: “What’s also concerning in our findings is the growing threat from a charity’s own staff and volunteers. Culturally, this is difficult for charity finance leaders.

"No-one wants to think badly of their own hardworking staff or operate within an atmosphere of mistrust, but this shouldn’t mean that sensible checks and balances aren’t embedded into the system to ensure that risks are contained.”

Share Story: