Commission responds to National Fraud Authority report

Immediate release 27 January 2011

The Charity Commission, the independent regulator of charities in England and Wales, has encouraged charities to be more 'fraud aware', in response to a report published today by the National Fraud Authority into fraud across many sectors.

1,000 charities that were surveyed for the report have estimated that the percentage of their turnover lost to fraud is on average 2.5%. The report shows that fraud in the charity sector represents 3% of all fraud in the UK.

Sam Younger, Chief Executive of the Charity Commission said;

"We have previously said that fraud in charities has been under reported, which is reflected in today's report. However it also shows that instances of charity fraud remain low and the public can be assured that the vast majority of charitable money is going straight to good causes.

 

Whilst no system can guarantee that any charity or business will be totally protected against loss, charity trustees must make sure that they have strong financial controls in place to protect their charities. One of the ways they can do this is by using the advice and guidance on our website. Charity trustees must be more fraud aware, and I hope that today's report is a wake-up call to any charity who thinks it will never happen to them."

Fraud is a criminal offence and must be reported to the police. When it occurs in charities, it is the Commission's role to see if there has been any mismanagement, to make sure trustees deal with any incidence of fraud properly and to ensure that charitable funds are protected going forward. Last year the total amount of fraud and theft reported to the Commission through serious incident reporting was £21m.

The Commission also helps charity trustees to protect their charities from fraud by producing advice and guidance. The Commission is reminding trustees to use the guidance available on its website, including checklists to help them minimise the risk of fraud. In addition to detailed guidance for charities of all sizes, the Commission has produced some simple top tips* for trustees of smaller charities:

1. Make sure you have access to accurate and up to date financial information and monitor the charity's financial performance against its budget

2. Make sure that cheques and cash are kept securely, banked promptly and recorded in the accounting records

3. Ensure cheque books are kept in a secure place - do not sign blank cheques

4. Make sure there are proper controls in place to protect income received by post and bank it as soon as possible

5. Make sure there are proper controls in place in relation to fundraising events, such as making sure two people handle and record the money received, that money is banked as soon as possible and that collection boxes are numbered and recorded

6. Keep proper records when claiming gift aid - HMRC give advice on what should be recorded

7. Make sure you have a clear policy on paying expenses to staff and volunteers and make sure they are authorised by someone other than the claimant

8. Make sure you have controls to ensure that all income from trading is recorded and received

9. Have monitoring procedures in place to make sure grants have been used for the agreed purposes

10. Report any suspected fraud to the police and to the Charity Commission

*taken from CC8, Internal Financial Controls

The Charity Commission has produced the following publications to help charities which are all on the Commission's website at www.charitycommission.gov.uk:

Internal Financial Controls (CC8)

Internal Financial Controls checklist

Reporting serious incidents to the Commission

Charities Back on Track 2010 (PDF) - case studies of charities including cases of fraud

The Charity Commission regularly issues alerts to charities and the public to warn against possible scams and fraudulent practice.

The Commission will be publishing shortly additional new guidance for trustees on Fraud and Financial crime.

End.

For further information please contact the press office

PR 05/11

Notes to Editors

1. The Charity Commission is the independent regulator of charities in England and Wales. See www.charitycommission.gov.uk. For further information call our contact centre on 0845 300 0218.

2. Last year in the Commission's compliance casework, issues of fraud and theft featured in:

• 245 of 2615 assessments (9% of the total)
• 17 of 106 completed regulatory compliance cases (16%)
• 9 of 180 new investigation cases opened during the year (5%)
• 175 out of 451 reports of serious incidents (39%)
• 21 out of 53 whistle-blowing reports (39%)
  (Charities Back on Track, 2009-10)

3. During 2009/10 the total value of the fraud and theft reported to the Commission through serious incident reporting by trustees was £21m against a total income £1.74bn for the 175 reports from the charities affected.