Fraud in small charities: evidence from England and Wales

• Published in: Journal of financial crime 2019-01, Vol.26 (1), p.211-222
• Main Author: Ohalehi, Paschal
• Format: Article
• Language: English
• Subjects: Charities; Costs; Donations; Employees; Fraud; Internal controls; Prevention; Trustees; Volunteers
• ISSN: 1359-0790; 1758-7239
• DOI: 10.1108/JFC-12-2017-0122

Purpose Despite the increasing awareness of fraud in organisations and the potential benefits of strong fraud management through deterrence and prevention in the UK, there remains limited research on fraud in small charities. This paper aims to examine astonishing cases of fraud in small charities whilst raising awareness of the impact of fraud and its wider implication in the charity sector. Design/methodology/approach This research used a qualitative approach amongst randomly selected 24 charity trustees with income of £0-250,000 and over £250,000. Recent statistics from fraud survey published in Annual Fraud Indicator by the National Fraud Authority and the United Kingdom Fraud Costs Measurement Committee were presented and the theory of why people commit fraud is described. Findings This paper summarises evidence that shows the frequency and severity of fraud in charities, which remains increasingly high. Furthermore, smaller charities are not immune from fraud and suffer losses due to lack of segregation of duties and weak control systems when compared to larger charities with stronger control systems and better governance structure. This paper addresses a very important topic in the charity sector. Whilst fraud and fund misappropriation receive significant media coverage in large charities, smaller charities also suffer losses occasioned by fraud even in large proportion albeit with less reporting in the media. Practical implications Charity managers and trustees will benefit from having sufficient knowledge in deterrence and prevention of charity fraud. Originality/value This is a novel research as it looks into the nature of fraud in small charities of which there is limited research both in the voluntary and fraud literature.