fraudFraud is one of the biggest hazards for both commercial and NFP organisations. However NFPs suffer worse than the rest, reveals the 5th Not-For-Profit Fraud Survey, which has just been released by BDO. Since year 2004, BDO has prepared and released biennial fraud surveys aimed at preparing NFP organisations to deal with frauds by realizing their susceptibility. You can download this year’s survey report here.

For the Not-For-Profit Fraud Survey 2014, BDO Australia analysed responses from 436 NFP Organisations from Australia and New Zealand. The results show that, evidently, frauds are still a big hazard for the NFP organisations and 90% of the respondents consider them as a serious problem of the sector. It is interesting to know, however, that only 28% of the respondents consider their NFPs susceptible to frauds.  The rest believe that their anti-fraud mechanisms and protective measures are enough to keep them safe. It appears, though, that the both protected and unprotected NFP organisations suffer from fraud. Those who have a Risk Management Framework (RMF), however, have suffered $51,000 less than the totally unprepared NFPs.

According to BDO NFP Lead Partner Chris Skelton, it is very important for NFPs to be aware of their susceptibility to frauds and to implement certain protective mechanisms. While many commercial organisations suffer from even bigger fraud, the problem may be fatal to NFPs as it may affect their future funding sources and ruin their reputation. Therefore, it is not surprising that many NFPs never actually report the fraud they fall victim to.

In order to make it easier for Not-For-Profits to understand and prepare for the hazard of frauds, the authors of the report, Marita Corbett and David Ferrier from BDO and Lisa Bundesen from NFP Management Solutions, have participated in a webinar that examines and explains the results of the survey in an accessible manner. You can watch the webinar online for free here

Below, we have summarized the most important points of the survey for you:

  • The frauds reported total $3,229,400 and the average fraud is $22,904.
  • 54% of the frauds were not reported.
  • Only 10% of organisations reported frauds since 2012. In 2006, the figure was 19%.
  • 28% of the NFPs consider themselves vulnerable, which means a 20% increase since 2012.
  • The other 78% of the NFPs believe their fraud controls protect them well enough.
  • 70% of the organisations who have been victims to fraud since 2012, have experienced frauds before, which means they have failed to implement working fraud protection mechanisms.
  • The average fraud is above 50, a paid employee no related to the accounting department.
  • 30% of the largest fraud cases were a result of a collusion, and 31% of the collusion cases included a board member. 16% of the frauds were volunteers. 63% of the NFPs participating in the survey fired the frauds after they were discovered.
  • 35% of the frauds were discovered thanks to tips from volunteers, employees or third parties.
  • 83% of the respondents believe their susceptibility is low, 18% have a fraud control plan and 55% have a code of conduct. 

All in all, BDO Australia believes that the NFP organisations are far from being safe and there is still a lot to be done in terms of fraud education and control. There have been less fraud reported (and, hopefully, committed) in the past 9 years, but BDO plans to keep analysing the cases and to help NFPs discover and implement new anti-fraud mechanisms. Even if you are quite sure that your NFP is free from fraud risk, take the time to browse through the Not-For-Profit Fraud Survey 2014 and watch the AuSAE webinar – it never harms to be informed, prepared and protected!