The percentage of charities affected by fraud has fallen over the past 10 years, according to the voluntary sector's largest survey of attitudes towards fraud and cyber crime.
The survey, which was commissioned by the Charity Commission and the Fraud Advisory Panel and published today at the start of Charity Fraud Awareness Week, reveals that 4 per cent of charities have suffered at least one fraud in the past two years, compared with 7 per cent in 2009.
A report into the survey, called Preventing Charity Fraud, says this runs contrary to national trends and suggests charities might be under-reporting it or failing to identify it.
The report says the impact of fraud is much greater now than it was a decade ago.
This year, 68 per cent of charities said fraud had had some sort of adverse affect on their organisation, compared with just 27 per cent in 2009.
Twenty-eight per cent of charities this year said the fraud resulted in reputational damage, compared with 12 per cent in 2009.
"The results are generally encouraging, with some improvements made over the last 10 years," the report says. "However, significant fraud threats and vulnerabilities persist."
One of the most striking aspects of the report is the gap between awareness and action.
Eighty-five per cent of charities think they are doing everything they can to prevent fraud, but almost half do not actually have any good practice protections in place.
"It is concerning that many charities believe they’re not at risk – even those with the best counter-fraud defences are likely to fall victim at some point," the report says.
More than half of charities hit by fraud know the perpetrator, the report says.
A total of 29 per cent of perpetrators of charity fraud were paid members of staff (40 per cent in 2009), 18 per cent were volunteers (11 per cent in 2009), 13 per cent were beneficiaries (5 per cent in 2009) and 10 per cent were trustees (3 per cent in 2009).
"While fraud committed by staff has fallen significantly, fraud by trustees and volunteers has doubled," the report says.
Only 14 per cent of fraudsters had no previous connection to the charity (11 per cent in 2009).
Mandate/chief executive fraud, involving the impersonation of organisations or staff, is the most common type of fraud.
The commission is urging charities to introduce basic financial controls, such as having at least two signatories to bank accounts and cheques, ensuring no single individual has control of financial arrangements and encouraging whistleblowing.
Helen Stephenson, chief executive of the commission, said the first step for charities in tackling fraud was acknowledging that they were vulnerable.
"Zero tolerance of fraud is an important element of sound financial stewardship, which is vital to public trust and confidence in charities," she said.
"The steps we are recommending are simple because we know that smaller charities in particular don’t need or want lots of bureaucracy – just the tools they need to deliver as much benefit as possible."
Questions were sent to a representative sample of 15,000 charities in England and Wales, of which 22 per cent – or about 3,300 charities – responded.
The responses are compared with those contained in Fraud in the Charitable Sector, which was published by the Charity Commission and the Fraud Advisory Panel in 2009.
To coincide with publication of the report, the commission is today encouraging charities to adopt a new pledge based on eight principles to tackle charity fraud.
The guiding principles include reporting every fraud, knowing that fraud threats change constantly and ensuring everybody involved in a charity is aware they have a part to play in fighting fraud.