What can charities learn from the recent fraud cases?

July 27, 2017 at 13:06

CFG Counter PinkUnfortunately this week there have been two high profile cases of fraud being committed within a charity.

This blog will provide an overview of each case, tell you about how CFG can help you to prevent fraud, and how you can join us in tackling fraud by signing up to our counter fraud pledge.

Overview of each case

The first case involved the head of finance defrauding the homelessness charity Cyrenians Cymru, based in Swansea, of £1.3m over 6 years. This caused the charity to go into liquidation from owing £915,000 in May 2015. With the liquidation of the charity, 75 staff became unemployed and 2,500 service users were affected by the closure of the charity.

The second case involved a payroll manager for the Red Cross, who over a period of 7 years embezzled £359,551 from the charity. This fraud was only detected after the manager had left the organisation upon retirement in 2015 and remaining staff noticed problems with the ‘recipient’ (actually Booth) accounts.

Significantly, both of these cases have reached court, with Robert Davies from Cyrenians Cymru receiving 5 years in prison for his fraud. We hope this encourages all charities to take action when fraud is suspected and report it when detected.

What can other charities learn?

Sadly, these are clear examples where internal controls broke down for both charities.  These controls are ultimately there to protect your beneficiaries and it is important that a culture within your charity is created where any breaches can be reported and dealt with effectively and efficiently.

Both of these cases of fraud are prime example of internal fraud. It can be difficult for charities to accept that staff and volunteers would knowingly defraud the organisation they work for. However, it is important that charities are aware of these risks and that they implement strong and effective financial controls. The Charity Commission’s CC8 Internal financial controls for charities is a good starting point for trustees and staff to understand what your Trustees legal duties are and how your charity can manage assets and finances in a way that reduces risk.

What is CFG doing to help charities tackle fraud?

CFG has launched the Counter Fraud Campaign to help give charities the confidence and the tools they need to tackle fraud. As part of this campaign we have produced the The charities counter fraud checklist. The checklist is designed to help you to establish (and strengthen) a counter-fraud policy and to cultivate the right culture in your charity.

We want the charity sector to get savvier when working to reduce our risk to fraud. With increased expectation from government, funders, donors and the media for charities to account for every penny it is essential that charities are not seen as falling behind on proactive measures.

How can taking the Counter Fraud Pledge help you?

CFG Pledge - for printAs part of CFG’s work to help charities feel confident in tackling fraud, we have created the fraud pledge with 6 promises to help you and your organisation tackle fraud.

Not only will taking the pledge show to your stakeholders that you are taking active measures to prevent and combat fraud wherever it may occur in your organisation. We’ll also provide you with the tools and resources needed. Once you have completed the pledge you will receive the counter fraud pledge badge which you can proudly display to your supporters and beneficiaries.

Though those charities that have already signed up to the take the pledge, they have between them, could save over an estimated £8 million over the next 12 months.

Only by working together can the sector help to prevent fraud.