CBO’s Recent Appeals for New Research on Health-Related Topics
Financial irregularities: too much trust by trustees
1. TOO MUCH TRUST
BY THE
TRUSTEES?
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2. Watts Gregory LLP in association with WCVA
Watts Gregory Charities Unit
3. • 314 cases of serious fraud with costs of over £100K went
before the UK courts in 2010 with a total cost of £1.3bill.
• £1.1bill of fraud went before the courts in the first 6
months of 2011.
• It is estimated that fraud costs the UK economy £73bill
annually.
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Incidence of fraud
4. • Charities lose on average 2.4% - 5% of their income to
fraud
• £1.65 billion loss to the sector as a whole per BDO
survey
• £1.1bill loss in 2011 per National Fraud Agency
Fraud in Charities
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7. • Too powerful a Chief Exec.
• Ability to override controls
• Fix own salary
• Fix daughter’s salary and appoint her to roles without
due process
• Dubious expense payments
• Conflicts of interest not managed
Recent example - AWEMA
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8. • £2.3 mill fraud by FD
• Forging signatures on cheques and credit cards
• False expenses
• Took 3 years to find
• Position enabled override of procedures
• Paid self and falsified records to cover it up
• Treasurer of local church / ex wife a Tory councillor
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Example – London Philharmonic
9. • Charity fundraiser siphons off £200K of street
collections
• Charity treasurers making fictitious payments but
really paying themselves
• Fraudulent gift aid claims
• Etc.
Other Examples
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10. • Income related
• Expenditure fraud
• Property fraud
• Gift aid fraud
• Etc.
Types of fraud
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11. • Motive / incentive / pressure
• Rationalisation
• Opportunity
The Fraud Triangle
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12. • Focus on “opportunity”
• Implement controls to restrict opportunity
• Others are tough to break but
• Don’t contribute to the pressures
• Recruit good people
• Be observant / watch for indicators
Breaking the Fraud Triangle
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13. Mercia
• 35% by accident, tip off or customer complaint
• 45% by formal internal procedures – review, staff
whistle blowing, internal audit, suspicious
supervisor, other internal controls
• 20% other – regulatory bodies, external audit,
external control
How is fraud discovered?
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14. Deloitte
• 48% by tip off, whistle blowing etc.
• 19% by accident
• 19% internal audit
• 15% internal controls
• 11% external audit
• 3% other
How is fraud discovered?
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15. • Auditors should not be relied on to find fraud
• Whistle blowing is vital
• Internal audit and controls are important
Lessons
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17. • People risks
• Culture
• Behaviour
• Organisational structure
• Others
Fraud indicators
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18. • Male – 85%
• Aged 36-45
• Defraud own employer
• Work in a finance related role
• Part of senior management
• Been in company for more than 10 years
Typical fraudster
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19. • Get the culture right / set the tone
• Communicate to all
• Establish robust controls, policies and processes
Fraud prevention
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20. • Don’t ignore the dangers – “we are all nice
people and we trust each other”
• Get culture right and support it with good
processes and systems
• Be alert to warning signs
To sum up
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