By Dr Rasha Kassem, Fraud Research Group (FRG) Leader, Aston University
Charities exist to serve communities, champion causes and support people in need, but the trust that enables this vital work can be undermined when fraud enters the picture. Whether carried out by insiders or external parties, fraud depletes resources, harms reputations and undermines public trust. No charity is too large or too small to be targeted. Many charities that experience fraud report both financial loss and non-financial impacts (e.g. loss of public trust, reduced funding). This blog explores the risks charities face, how fraud takes hold, and the practical steps organisations can take to strengthen their resilience and protect the mission at the heart of their work.
How charities are defrauded
- Internal/Insider fraud: betrayal from within. According to the 2024 BDO – Fraud Advisory Panel Charity Fraud Report, roughly 50% of detected fraud cases in UK charities involved staff, volunteers, trustees or members. The schemes include misappropriation of cash or other assets (around 40% of cases), false invoicing, inflated expense claims, fraudulent procurement, payroll fraud, and the diversion of restricted donations.
- External fraud — outsiders preying on goodwill. Charities can also be victims of imposters, phishing campaigns, fake fundraisers or cyber-fraud. For example, criminals may pose as suppliers or as legitimate charities to divert funds.
Why charities are so vulnerable
- Culture of trust + limited oversight. Charities often rely heavily on goodwill and voluntary commitment — which can result in weak internal controls, few checks and balances, and relaxed financial governance.
- Resource constraints. Many charities lack the financial or human resources to invest in robust systems — whether for oversight, auditing, or cybersecurity.
- Complex funding streams. Charities often manage multiple income and expenditure streams (donations, grants, restricted funds, third-party fundraisers, overseas payments). This complexity can mask irregularities, especially if accounting lacks rigour.
- Blurring of volunteer / paid-staff roles and insufficient separation of duties. Volunteers may handle funds or fundraising; staff may handle both operations and finance — creating opportunities for fraud.
- Lack of anti-fraud training and awareness. Staff and volunteers often receive little or no training on recognising fraud risks, identifying red flags or understanding internal controls. Without structured anti-fraud education, even well-intentioned team members may overlook suspicious activity or be unsure how to respond appropriately when concerns arise. In small charities, new volunteers may be responsible for handling donations or managing online fundraising pages with minimal instruction, increasing exposure to error and manipulation.
- Limited external accountability. Unlike investors in the corporate sector, many donors, funders and beneficiaries rarely request detailed information about how money is used. This low level of external scrutiny can allow irregularities to go unnoticed, especially when charities feel pressure to present positive results rather than highlight financial issues or control weaknesses. A charity receiving many small, one-off donations may not face the same reporting expectations as one funded by large institutional grants, reducing external pressure to demonstrate robust financial management.
Preventing and mitigating fraud in charities — what works
- Implement strong internal controls — segregate financial duties (e.g. different people authorise, approve and record payments), require multiple signoffs for expenditures, avoid pre-signed checks, and keep rigorous records.
- Establish and promote whistleblowing mechanisms & ethical culture. Employees and volunteers should feel empowered to report suspicious behaviour anonymously, and organisational leadership must demonstrate zero tolerance for fraud.
- Conduct regular audits and fraud risk assessments. Charities should periodically review financial flows, audit accounts (even small ones), and assess vulnerabilities — especially when using volunteers or third-party fundraisers.
- Invest in cybersecurity and digital safeguards. As fundraising and operations increasingly happen online, charities must protect against phishing, impersonation, secure their payment systems, require two-factor authentication, and limit access to sensitive data.
- Ensure transparency and accountability to donors. Clear financial reporting, visible impact reporting, and open communication help rebuild and preserve trust — making fraud harder to conceal and easier for supporters to spot anomalies.
- Strengthen training and monitoring. Provide regular anti-fraud training for staff, trustees and volunteers so they understand common fraud risks, red flags and reporting routes. Ongoing monitoring — such as reviewing financial activity, checking fundraising pages and verifying key transactions — helps identify irregularities early and reinforce accountability across the organisation. Periodic spot-checks on cash handling or digital fundraising platforms can reveal inconsistencies before they develop into significant losses.
Key Takeaway – Safeguarding the Mission
Fraud should never undermine the vital work charities carry out every day. By strengthening internal controls, investing in training, embracing transparency and staying alert to emerging risks, organisations can build a culture where fraud has little room to take hold. Protecting against fraud is not just a compliance exercise — it is a fundamental part of safeguarding the mission, maintaining public trust and ensuring that every pound, dollar or donation reaches the people and communities it is intended to support. Together, through awareness and action, we can help charities remain resilient, trustworthy and capable of making the greatest possible impact.
Additional Readings:
Check the FRG website: https://www.aston.ac.uk/research/bss/research-centres/fraud-research-group/research-projects
The dark side of giving- Exposing charity fraud: https://www.acfe.com/fraud-magazine/all-issues/issue/article?s=2025-marapr-charity-fraud-dark-side-giving