1. Insider Fraud - Charities
Alan Bryce, Head of Development, Counter Fraud & Cyber-Crime
Charity Commission for England and Wales
26th September 2018 1

2. AGENDA : An overview of the charity sector counter fraud environment
Insider charity fraud – new research 2018
Questions

3. Charity sector
Approx. 170,000 regulated charities in England & Wales, vast majority are small/medium size
£75 billion per annum income, 750,000 trustees, several million employees and volunteers
5 counter fraud managers across entire sector, about 50 “counter fraud specialists”
No evidence to suggest charities are more or less at risk of fraud than private or public sector… BUT 4

4. What do the following have in common:
£1.3 billion (2011)
£1.1 billion (2012)
£147 million (2013)
£1.9 billion (2016)
£2.3 billion (2017)

5. National Crime Agency (2015) stated:
…..individuals, the private sector and the charity sector lose billions of pounds each year to fraud.

6. Scale of insider fraud in charities?
Approximately a third of a non-representative sample of frauds reported to the Commission in 2016 were internal
Anecdotally, some charities suggest over 90% of frauds are internal 4

7. Themes Myths? CHARITY FRAUDS – some themes & myths I have heard
Excessive trust
Lack of “challenge”
Not possible to put in place all the controls required to prevent fraud
Absence of oversight/ segregation of duties
Themes
Fraudsters would not target charities
Reluctance to recognise/treat fraud as fraud
People who work in charities or volunteer would not commit fraud
Myths?

8. 2 Phase approach unexpected results?
PRESENTATION TITLE DATE
Insider charity fraud – 2018 research
2 Phase approach
Published April 2018
Phase 1 – review sample of frauds reported to us directly or information suggests increased fraud risk
Key finding - 19 out of 20 charity cases the absence of appropriate controls was primary enabling factor
unexpected results?
Phase 2
Combination of “call for evidence” AND
Direct interviews with charities, professional representative organisations (identify good practice)
54 respondents

9. Phase 2 Who committed insider fraud 43% by an employee 33% by trustee
10% by volunteer
10% “other”
4% did not answer this question

10. Phase 2 Factor that contributed to fraud occurring;
43% excessive trust or responsibility placed on one individual
24% due to lack of challenge or oversight
24% either absence of controls or existing controls poorly applied
5% combination of factors
4% did not answer this question

11. Phase 2 Action taken/ reporting
38% recovered part or all of money/assets taken
81% undertook review of adequacy of controls
62% reported to Action Fraud/police
57% reported to Charity Commission
19% of frauds reported to authorities resulted in prosecution

12. Some initial conclusions
(Phase 1) Ensure counter fraud controls both in place and consistently/robustly applied
(Phase 2) majority of frauds enabled due to either excessive trust/responsibility placed on one individual or lack of challenge/oversight 4

13. £30k fraud by Chair of PTA, no financial controls (sentence 2 years)
Some recent examples
£30k fraud by Chair of PTA, no financial controls (sentence 2 years)
£6.7k Charity admin officer (former volunteer), personal debt motive, son raised concern (suspended sentence) 4

14. Charity Against Fraud group
Looking to the future
Survey of charities on counter fraud (early 2019) – joint Charity Commission/Fraud Advisory Panel research
Fraud research 2019
2 to 3 meetings per year, over 40 charities/professional bodies/stakeholders represented
Charity Against Fraud group
Starting October 22nd 2018
Second national Charity Fraud Awards 2018
Webinars (2017 and 2018)
National charity fraud awareness week
“Protect your charity against fraud” webpage
CC8 (internal control) review and consultation
Commission guidance

15. Questions?