Survey shows fraud falling  

Fraud in the not-for-profit sector continues to decrease, according to a survey by accounting firm BDO.

May 2010

Fifteen per cent of respondents to its survey said they had suffered a fraud in 2010, down from 16% in 2008 and 19% in 2006. A total of 272 not-for profit organisations took part in the survey, 22% of them from New Zealand, the rest from Australia. The survey is run every two years and the latest results will be released early next year.

BDO said the greatest number of frauds was in the social services sector, with the most common method (24%) being cash theft. The 42 organisations that reported a fraud had 75 instances, with the total amount of fraud valued at $1.1m and averaging $14,291 per offence. Thirteen of those cases were in New Zealand, worth a total of $515,800.

The majority of survey respondents said they did not report the fraud to police and 36% of organisations did not terminate the employment of the person who committed the fraud. Of the organisations that suffered fraud, 67% said they did not recover any of the funds.

BDO said the survey identified internal controls and tip-offs as the most effective way of discovering fraud, while strong internal controls, ethical organisational culture and external audits were seen as the best ways to reduce the risk.

The survey profiled the typical fraudster as someone in their 30’s or 40’s who is in a paid non-accounting role in the organisation. Financial pressure and maintaining a lifestyle were the most common motivators for the fraud.

BDO said the survey was not designed to highlight the level of fraud, but to raise awareness about the issue and to help organisations understand how to protect themselves.

“The results of the survey indicate that the sector has not only increased its awareness of fraud risks, but has benefitted from improving their internal control environment to help reduce fraud,” BDO said.