Financial Abuse and Mismanagement Top UK Charity Issues

Fraud, financial abuse and financial mismanagement featured in nearly 80 per cent of the UK Charity Commission's investigations into charities last year, according to a new report published by the regulator.

The UK Charity Commission is the independent regulator of charities in England and Wales.

The report found that 23 of the Commission's 29 most serious investigations involved concerns linked to these issues, which also featured in more than a third of the serious incidents reported by charities to the regulator (398 out of a total of 971) and in 43 whistleblowing reports about charities (out of a total of 98).

In addition, the report found that fraud and theft featured in 45 operational compliance cases, and serious financial mismanagement or concerns about the misapplication of funds featured in 64 operational compliance cases.

The figures are cited in the Commission's annual report of its investigatory and compliance case work, Tackling abuse and mismanagement, which sets out the regulator's approach to identifying and tackling serious abuse in charities.

The report reveals that serious governance failures also featured heavily in its case work.

Some 24 of the Commission's investigations featured governance failures, of which nine  involved concerns about unmanaged conflicts of interest and trustee benefits and six involved concerns about breaches of governing document. Concerns about poor governance also featured in 78 operational compliance cases.

Earlier this month the UK Charity regulator came under fire for not being tough enough on charities after an annual national audit of its operations.

According to a report by the UK National Audit Office (NAO), the UK Charity Commission was not regulating charities effectively, and it failed to take tough action in some serious cases and made poor use of its powers.

However, the Commission's Chief Executive Sam Younger said the new report showed that the Commission is getting tougher on dealing with non compliance and abuse in charities.

"By taking a tougher approach to non-compliance in charities and using our powers more frequently in cases which are the most serious, we can protect charity funds at risk and ensure we are better able to identify and deal with individuals who negligently or deliberately abuse charities, making them accountable to the regulator and in turn the public for their wrongdoing,” Younger said.

“Those serious cases must be a top priority for us as regulator, as they are most damaging to the public trust and confidence on which all charities rely.”

As the case studies in our report show, when problems arise in charities it is often the result of weak oversight by trustees or because one or two trustees are allowed to dominate inappropriately, resulting in mismanagement and misconduct.

“To prevent abuse, it is therefore vital that all trustees understand and take seriously their legal duties including to protect the funds and other property of their charity so that it can be applied for its intended purposes. This means ensuring that they exercise proper control over the charity's financial affairs,” Younger said.

“Trustees must also take all necessary steps to ensure there is no misuse of charity funds or assets. Trust alone is not good enough – trustees must take responsibility for overseeing their charity's work."

Tackling abuse and mismanagement also sets out ways in which the Commission is strengthening its approach to preventing, detecting and tackling serious abuse in charities.

The regulator said it welcomed UK Government  proposals for extending and improving the Commission's compliance powers, including enhancing its powers to remove and disqualify trustees and to direct trustees to take certain steps.