To catch a fraudster one must think like a fraudster, experts say.
With 347 Taranaki charities registered with the Charities Commission, the region's not-for- profit sector is worth more than $99 million to the Taranaki economy annually.
Nationally, the 25,785 registered charities are worth about $14.2 billion.
Earlier this year, accounting organisation BDO conducted a "not- for-profit fraud survey" which showed that 86 per cent of respondents considered fraud to be a problem for the sector.
However, only 8 per cent of respondents considered fraud to be a problem within their organisation.
BDO national audit director Mark Bewley said fraud was far more common than people realised.
A key concern highlighted in the survey was that most respondents considered fraud prevention a low priority.
"Trust is probably the weakest form of control," Mr Bewley told a fraud prevention seminar in New Plymouth last week.
Only 28 per cent of charities had fraud control policies in place, but 78 per cent thought that becoming a victim of fraud would damage their reputation, he said.
The Charities Commission and BDO jointly presented the workshop as part of a nationwide series in 21 towns and cities around New Zealand.
Representatives from a wide range of Taranaki charities attended.
"The overwhelming response to these workshops indicates a very high level of concern among charities in New Zealand about the risk fraud poses," Charities Commission chief executive Trevor Garrett said.
Mr Bewley said fraud was fuelled by a combination of motivation and opportunity. The motivation was usually some form of personal financial pressure while the opportunity was a weakness in a charity's systems and procedures.
The best way for charities to minimise the risk of fraud was to identify these opportunities, he said.
"How do you catch a fraudster? You have to think like a fraudster," Mr Bewley said. "Do the unpredictable."
This could be something as simple as putting an extra $20 in the till and seeing if it was still there after reconciliation.
Of the charities surveyed, 12 per cent reported fraud to police in the past two years, with the average takings being about $8000, he said.
However, the real figure of unreported fraud was likely to be much higher at about 57 per cent, he said.
"This apparent disconnect between accepting fraud and taking action is a real concern and indicates that fraud, deception and lack of transparency may be costing charities all over New Zealand a lot more money than is being reported," Mr Bewley said.
The main reason charities did not disclose their fraud was because they feared it would stop the donations would coming in, he said.
From his experience this was not usually the case.
Generally fraud went on for a long period of time and happened to charities of all sizes.
"Just because you're small doesn't mean you are immune."
The main way to detect fraud was through tip-offs, Mr Bewley said.
The most effective way to achieve this was through implementing a whistleblower policy within the organisation.
Tips for protecting your charity from fraud
* Internet banking security:
* Financial responsibility
* Clear role descriptions within the charity
* Caps on expenditure
* Know your staff
* Limit cash handling
* Regularly check accounts
* Record grant funding and how it is used
* Due diligence for account income and outgoings
* Ask questions
- © Fairfax NZ News
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