Despite improvements in fraud awareness among charities, half of all detected charity fraud is still committed by internal perpetrators, according to a new report from business advisory firm BDO and the Fraud Advisory Panel.

The survey of over 135 UK charities found that 42% were victims of fraud over the last 12 months. Offences committed by staff, volunteers and trustees remain the most prevalent with 50% of detected frauds perpetrated by individuals within the organisation.

The most common type of charity fraud was the misappropriation of cash or assets by staff and volunteers (40%), followed by payment diversion fraud – also known as authorised push payment (APP) fraud – experienced by a third of charities (33%) and accounting for losses of over £459m last year. Staff expenses fraud also remains high with over a quarter (29%) of charities reporting incidents over the last 12 months.

Whilst the survey indicates that fraud prevention measures are working by detecting and acting on fraud early, 85% of charities still reported that they suffered a financial loss as a result of the fraud committed.

Tracey Kenworthy, counter fraud director at BDO, 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. The introduction of the Economic Crime and Corporate Transparency Act will provide a framework that some charities can leverage to strengthen their fraud prevention efforts.”

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