USQ academic researches charity fraud

Head of the School of Accounting, Economics and Finance, Professor Peter Best, recently co-authored a paper with BDO partners, Chris Skelton and Andrew Howard, who run one of the largest accounting and advisory networks in the world.

The BDO Not-for-Profit Fraud Survey 2010 is a biennial paper and was released in February this year. Professor Best said the paper aims to create a greater awareness of fraud threats in the Not- for-Profit (NFP) sector.

'The purpose of the survey is to develop awareness of fraud threats, perceptions of the problem in this sector, its incidence including types of fraud and average value, and best practice methods to prevent and detect fraud,' he said.

'We want the sector to heed warnings to not be complacent about fraud, and take proactive steps to reduce fraud risk.'

The survey found that the most common fraud types were cash theft and most were detected through strong internal controls and tip-offs (from internal and external parties).

The survey also found that the most common fraudsters in NFPs were people in their thirties and forties who held a paid non-accounting position, and there was a low incidence of fraud by volunteers (only 12% of cases). The principal motives for the frauds were financial pressure, gambling and maintenance of lifestyle, and generally NFPs were not inclined to report fraud to the police for fear of adverse publicity and loss of funding.

Professor Best said the sector is a significant contributor to the economy and recent reported cases have raised questions about the extent of fraud in this sector.

'There is a concern about the damaging effects fraud can have on NFPs. The community already has questions about what portion of public and donated funds actually benefit the intended recipients. Reports of fraud can affect the community’s willingness to donate funds, but also reduce NFPs’ ability to obtain funding and grants from various agencies.'

There are over 700,000 NFPs across Australia and New Zealand, with a combined income of $76 billion. The sector covers a diverse range of organisations in areas such as culture and recreation, education and research, health, social services, environment, development and housing, law and politics, philanthropy, religion and business and professional associations.

'The main lessons for the NFP sector are for the Board to practice strong governance and risk management, establish a fraud control policy, implement and promote a strong ethical culture through a code of conduct, establish a whistle-blower policy and establish and monitor internal controls.' Professor Best said.

For more information visit: www.bdo.com.au