Charity Fraud: Approaching 10% Gets Attention; but Not In U.S.

by Gary Snyder

The National Fraud Authority's (NFA) Annual Fraud Indicator sampled the larger income charities. The Charity Commission, which is Independent regulator for charities in England Wales, wants charities to better protect themselves against fraud and financial crime

The sample shows that:
     * Nearly 1 in 10 (9.1%) charities with high income reported that they had detected fraud in the last financial year (2011/12);

     * The most common types of fraud were highlighted as payment and banking fraud (47%), accounting fraud (14.8%) and identity fraud (14.1%);

     * 1599 charities completed the survey, and of the 9.2% that were a victim of fraud, almost a quarter (23.1%) said they had suffered insider-enabled fraud.

The difference between the UK and the U.S. response toward nonprofit fraud is striking. In the United States where nonprofit malfeasance amounts to much larger totals, sector leadership, stakeholders and regulators have shown a total disregard to charity fraud.

The Charity Commission even aims to help charities protect themselves something unheard of in the USA since there is no acknowledgement of fraud. A wide range of guidance can be found on its website, including the Compliance toolkit (chapter 3) and its summary strategy for dealing with fraud and financial crime. The strategy emphasizes prevention, as well as cooperation with the sector and other government agencies to detect, deter and disrupt fraud in charities.

Caron Bradshaw, CEO of the Charity Finance Group, said: "Putting anti-fraud measures in place and enforcing these is absolutely critical for all charities, regardless of size. The high levels of trust, use of volunteers and reliance on one or only a few people to deal with finances can all present opportunities for fraudsters. Trust within the charity sector is an excellent thing, however trust should always be supported with controls: the two are not mutually exclusive. Actively applying controls means questions can be asked freely and without fear."

Nonprofit Imperative gathers its information principally from public documents...some of which are directly quoted. Virtually all cited are in some phase of criminal proceedings; some have not been charged, however. Cites in various media: Featured in print, broadcast, and online media outlets, including: Vermont Public Radio, Miami Herald, National Public Radio, Huffington Post, The Sun News, Atlanta Journal Constitution, Wall Street Journal (Profile, News and Photos), FOX2, ABC Spotlight on the News, WWJ Radio, Ethics World, Aspen Philanthropy Newsletter, Harvard Business Review, Current Affairs, The Chronicle of Philanthropy, St. Petersburg Times, B, USA Today Topics, Newsweek.com, Responsive Philanthropy Magazine, New York Times...and many more Nonprofits: On the Brink (2006) Silence: The Impending Threat to the Charitable Sector (2011)