Charities under-reporting fraud, accountant claims

Research finds charities are failing to report fraud

Charities are under-reporting both the number of instances of fraud and the amount of money lost through it, according to research carried out by a senior forensic accountant.

A freedom of information request to the Charity Commission from Paul Huck, senior associate in litigation services at Zolfo Cooper, found that only 175 reports of serious fraud and theft were received by the regulator during the financial year 2009/10.

Huck, who submitted the request as part of a postgraduate dissertation on charity fraud, said his research suggested the level appeared very low.

His research included interviews with 10 charities with a combined annual turnover of about £1bn. Huck found all had experienced several incidents of fraud each year for several years. "All these charities experienced fraud," he said. "I suspect any other large charity would be very likely to have done so as well."

Huck said it was not clear what constituted a single report of fraud in the commission's eyes. "But even if all frauds reported by a charity are counted as one incident, that means only 175 out of 160,000 charities reported serious fraud in the year," he said.

His findings also showed that charities had no accurate picture of which types of fraud were most common. Huck said that although charities protected themselves against fraud, they were less concerned by fraud against others carried out by someone within the charity, or in its name.

A spokeswoman for the Charity Commission said the number of serious incidents reported to it had increased. "But we believe there is still a substantial amount of under-reporting, given the overall number of registered charities," she said.

The commission would consider regulatory action against trustees who did not report incidents, she said.

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