“Charities are too trusting” says TC Group expert

Charities must radically change their culture and introduce far stricter financial controls if they are to avoid even greater levels of fraud a TC Group industry expert has warned.

Speaking at a seminar organized by TC Group in conjunction with CAF Bank, partner Mark Cummins warned that the greatest risks faced by charities invariably come from within their own ranks – the largest percentage of perpetrators are employees.

Excessive trust or responsibility invested in one individual combined with a traditionally relaxed and unchallenging culture together with poor financial controls create an ‘open goal’ for criminally minded opportunists.

He explained that financial fraud has many facets, from the misuse of a charity’s bank account to Gift Aid fraud, false invoices or purchase orders, fraudulent debit or credit card transactions and even fake fundraising events.

He added: ‘Ultimately trustees are responsible while auditors have a key role to play. Charities must have in place strong internal management and financial controls over everything from supervision of cash counting to maintaining a clear audit trail re Gift Aid.

‘Most important is to create a robust control culture, and this needs to be driven by trustees and management. Also, it must be challenging and skeptical: it is not easy to say, but one can be too trusting and this is almost always where the problems lie.’

CAF Bank Client Relationship Manager Bethany Diprose told delegates that according to the Annual Fraud Indicator 2017 there had been an additional £400 million increase in charity fraud over the past 12 months, a ‘massive increase’ that now totals £2.3 billion annually.

She added:

‘There were 4.7 million fraud and cyber-crime incidents in the year October 2016 to September 2017. These constituted deceptions, phishing, CEO scams with people impersonating senior officials and internal fraud such as false expense or misuse of charity money.’

Key areas that trustees should address include the holding of annual fraud risk reviews, maintaining regular communications with delivery partners, encouraging staff to voice concerns, creating robust anti-fraud policies and codes of ethics and ensuring that all employees are subject to strict screening and vetting procedures.

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