Date posted: 20/10/2022 2 min read

New guide arms charities to combat fraud

A new guide for charities and those who advise them provides an extensive toolkit to prevent, detect, report and investigate fraud.

In brief

  • Charities are a significant economic sector but sometimes fraudsters may undermine their good work.
  • Charity Fraud: Tools for Prevention is a new guide that draws on original research to arms charities to combat fraud.
  • The guide offers fraud prevention tools, resources, templates, case studies and good-practice models.

Charities play a significant role in society supporting a diverse range of causes. They make an important economic contribution too, employing 1.35 million people in Australia and 145,000 in New Zealand. A combined 3.5 million volunteers make an impact in their communities.

Occasionally, fraudsters may undermine a charity's good work. It can lead to financial losses, reputational damage to the organisation itself and diminished public confidence in the charity sector as a whole. Measures to protect against this are critical.

To arm charities to combat fraud, Chartered Accountants Australia and New Zealand (CA ANZ), in collaboration with Social Business Consulting, have created a new guide, Charity Fraud: Tools for Prevention, that draws on original research from two surveys conducted between March to June 2022.

The survey asked respondents about their experience of fraud and what they did to prevent it, as well as recording charity demographic data. Their responses created new data about the prevalence of fraud, fraud prevention methods used and their effectiveness.

The most effective fraud prevention measure is to train, and keep training, your staff. Fraud is conducted by people.
Survey respondent

The survey showed that 34% of Australian respondents and 14% of New Zealand respondents experienced suspected or proven fraud in their domestic operations in the past two years. In charities with international operations, 61% of Australian respondents and 40% of New Zealand respondents experienced either suspected or proven fraud in the past two years.

Most charities reported greater fraud losses in domestic rather than international operations. The median loss for Australian charities was AU$45,000, with one respondent losing AU$600,000.

The median loss for New Zealand charities was NZ$5,000, with one organisation reported losing NZ$50,000 to fraud. In international operations, charities reported smaller amounts: the median was less than AU$1,000 for Australian charities and less than NZ$5,000 for NZ charities.

To respond to this fraud experienced in charities, Charity Fraud: Tools for Prevention offers a suite of charity fraud prevention tools and includes a wealth of resources, templates, real life case studies and good-practice models.

Under an umbrella of an overarching fraud prevention framework, the guide suggests strengthening policies and procedures around managing finances, conflict of interest, delegation of authority, donor acceptance, code of conduct, due diligence and screening.

Training is also a critical element. As one survey respondent said, "The most effective fraud prevention measure is to train, and keep training, your staff. Fraud is conducted by people."

The toolkit section of the guide includes:

  • prevention measures to stop fraud or deter people from contemplating it
  • detection activities to determine when and if fraud has occurred
  • reporting to safely escalate suspected fraud and notify relevant interested parties
  • investigation and response actions to determine if a fraud has actually happened, the extent of the fraud and apply consequences
  • feedback and adjustment measures to inform and improve overall fraud prevention processes based on changes in circumstances, employees, technology or regulations and actual fraud experienced.

The guide suggests that charities conduct these activities in the context of an ethical culture where all employees, volunteers and board members behave with honesty, integrity and transparency.