A report by the chartered accountants Coopers & Lybrand says that, as the recession continues to bite, charities are becoming increasingly susceptible to fraud. Up to 1,700 charities could be being defrauded of anything up to pounds 160m a year.
Tony Percival, a senior audit partner in the firm, said it was likely that more than 1 per cent of Britain's 170,000 registered charities - which enjoy a gross annual income of pounds 16bn - were vulnerable to fraud.
Charities are especially susceptible to fraud because: their operations depend on trust; it is difficult to predict future income and collect and account for all promised donations; much of their income comes in the form of cash and cheques which are easily pilfered; and many charity trustees are part-time volunteers who are unable to monitor operations constantly.
In an attempt to help charities guard against fraud, the company is sending 250 of them a briefing paper outlining basic preventive steps - including the need for proper records, financial checks and properly trained and vetted staff.
Charities are also being offered a one-day 'health check' - for a fee of around pounds 250 - in which the company assesses a charity's vulnerability to fraud. This can be followed up with a more in-depth investigation - a charity fraud diagnostic - in which a team of auditors provides a more detailed analysis of the effectiveness of its financial control systems. The fee for this service would be individually tailored to the size of the task.
Mr Percival said yesterday: 'It became obvious to us some while ago that the charity sector was in some ways more vulnerable to fraud than the private sector. This led us to feel that we should be looking at what we could do to help raise awareness of this problem. Some of the frauds in charities recently have highlighted this awareness.'
Clare Gardner, an audit manager, said that in many cases fraud could be avoided by commonsense practices. She gave as an example a charity for the homeless which had its head office in one of its hostels. Residents were intercepting the post and stealing cheques and cash - a loss which could have been prevented by fitting a lockable post- box at the front door.
Charities Briefing, available free from Clare Gardner, Coopers & Lybrand, Plumtree Court, London, EC4B 4AL.Reuse content