Too many charities are failing to report serious incidents such as fraud and theft to the Charity Commission, the regulator says.
In an alert issued today, the regulator says it believes serious incidents are under-reported, preventing it from assessing the true scale of the risks facing charities.
In 2013/14, 1,280 serious incidents were reported to the commission compared with 971 incidents in 2012/13. But the regulator says its casework continues to find serious incidents that should have been reported but were not.
The commission defines an incident as serious if it risks or results in significant loss of a charity’s money or assets, damage to a charity’s property or harm to a charity’s work, beneficiaries or reputation. The most common types of incidents reported include fraud, theft and confirmed safeguarding issues.
Trustees that fail to act responsibly in relation to an incident, including failing to report or not reporting promptly when the incident occurs, face possible regulatory action for mismanagement.
The alert also points out that the potential reputational damage of an adverse incident can be mitigated if trustees are able to demonstrate that they acted responsibly in handling the problem.
Michelle Russell, head of investigations and enforcement at the commission, said in a statement: "I urge trustees of all charities to read and follow the guidance we have issued today and to report incidents to us as soon as they occur. Reporting incidents is a basic part of responding responsibly to a problem in a charity. We see cases where charities experience more serious problems down the line, including reputational damage, in part because trustees failed to report an incident to us in good time. So my message is: don’t compound the problem that has occurred; help solve it by reporting it to the commission."
Research suggests that many serious incidents go unreported. The commission was told of losses of only £13.5m through serious incident reports in 2013/14, but separate studies by the National Fraud Authority and the accountancy firm BDO estimate that fraud costs charities between £148m and £1.65bn a year.