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Australian charities generate more than $140 billion each year, significant income which can leave them vulnerable to fraud if adequate financial and governance controls are not in place.
Fraud surveys conducted in the Australian not-for-profit sector over the past decade have found between 10% and 15% of not-for-profits had suffered fraud in the two years previous.

Charities Fraud Awareness Week (21-25 October 2019) was established in the UK to empower charities to talk about and prevent fraud.

As the charities regulator, concerns about fraud are regularly raised with the Australian Charities and Not-for-profits Commission (ACNC), where we have identified that the main factors leading to fraud are breaches of trust and a lack of satisfactory controls.

Over half the allegations of fraud received by the ACNC have related to the conduct and activities of senior and entrusted members of the charity, including the chief executive officer, directors (those on the governing body) and financial officers (such as the treasurer). But fraud can be committed by any staff member (paid or volunteer) or any other person who is given some responsibility.

We encourage charities to develop an anti-fraud culture. We have seen some charities experience fraud and use this experience to transform themselves and implement strong anti-fraud systems which has ultimately made them stronger. By facing up to fraud openly, they have sent a strong message to donors and been able to audit their systems to ensure more rigor.

Everyone involved with a charity should be involved in anti-fraud measures from understanding how behaviours might indicate something illegal going on, such as people reluctant to take holidays, to operational procedures that ensure tight financial controls that are not open to exploitation by having only one person overseeing expenditure.

One of the best ways to avoid fraud is to talk about it, silence and secrecy only benefit potential fraudsters. Other measures charities can take to prevent fraud include applying data security mechanisms and strong financial controls, as well as implementing a fraud prevention strategy.

If fraud is identified it’s important to deal with it transparently, and report it to police, regulators and other relevant bodies. Reporting fraud helps strengthen individual charities as well as the sector.

For some small charities, implementing additional procedures can feel like too much of a burden, but it’s important to note that many charities will not recover from a fraud incident. The reputational and financial damage can mean the end of a meaningful enterprise. And one fraud scandal can affect the whole sector by shaking public trust in charities in general.

We strongly urge charities to protect themselves. The ACNC has extensive resources to support charities to protect themselves from fraud. The recently released Governance Toolkit includes modules to help charities manage risks including financial abuse, cybersecurity and working with partners.

Consumers should safeguard themselves too. It is estimated that each year over 90% of Australians will be involved with a charity, either by donating time, money or goods, but research shows only a third (34%) who donate check the validity of the charity to which they are donating.

In the past year, Scamwatch received nearly 1,000 reports of fake charity scams, of which 148 resulted in financial loss. Losses reported amount to over $300,000. Those statistics relate only to reported scams so I would expect the total figures to be higher.

The internet and social media are popular platforms for reported scams but phone was still the most common contact method for scammers. Scammers target both older and younger people, with those reporting the highest losses being aged over 65, followed by those aged 25 to 34.

Consumers can and should protect themselves by doing some research to confirm organisations that are fundraising are verified charities.

Before donating you can use the ACNC Charity Register which contains detailed information about all registered charities who must meet ACNC Governance Standards and report to us annually.

As the figures suggest, the contribution of the charities sector to the community is enormous. It is in everyone’s interests that the sector is robust and fraud aware.

Hon Dr Gary Johns, ACNC Commissioner