Charity mismangement

honest7

Hi everyone

I am in desperate need of serious help. A few months ago I decided to volunteer on the Management Committee for a well known organisation, and I have since then uncovered some very unpleasant things which I can't make head or tale of.

This organisation has let a volunteer worker who has been a volunteer for the past 9 years take control of finances that should be the responsibility of the Chairperson and Treasurer. This volunteer goes on holiday every 2 months(expensive may I add and is also on benefits) and I also uncovered that she has been using the organisation's cheque book to make out payments to herself or sometimes just puts Pay "cash" with various amounts. She has also taken the organisation's Bank Statements home whilst she went away on holiday.

There has been numerous Inland Revenue warning letters, and the name on the letter is linked to an accountant for the organisation. I decided of my own back to phone the accountant to make him aware of the goings on, but he then confessed that everytime he has wanted to sort out the books for the charity he is met with opposition.

The Project Officer linked to the organisation also writes out cheques, to fund her college and university courses by using the charity accounts.This I find strange considering that she is on a paid salary.

I had an urgent meeting with the Management Committee, and as you can appreciate it is very difficult for them to understand the implications and seriousness of whats go on. One of them, even put her signature to a few blank cheques not knowing what is was for, whilst the voluntary worker wrote out a specific amount without anyone knowing. When I asked them what their specific role are, they were able to tell me, but in turn they did not seem to know what their responsibilities are.

I am the only Hearing person on the team, and I feel out of my depth. There will be a huge meeting within the next few days, and I'm starting to feel the pressure. The accountant will also be present as I invited him to come. Please remember that this was something that I uncovered myself only 2 weeks ago

I would appreciate any useful advice before the meeting, and any steps that need to be taken.

fengirl_2

I can totally understand your situation and how you are feeling. I was the treasurer of a Deaf organisation a few years ago and was the only hearing person on the committee. It was extremely difficult to make them understand their liabilities and anything to do with finance.

The fact that you have the accountant coming to the meeting will help - I think you need to brief him fully about what you have found.

Could you also get someone from your local CVS to attend and give advice. Advice is not often taken from within the committee and having someone outside may help and they may be able to implement a training programme. Let me know if yu need help in contacting someone.

Ultimately, I am sure you are aware that the Charity Commission need to be advised if charity funds are at risk - but in my experience they need firm evidence before they will act due to restricted resources. Are you able to show your Chair the enquiry reports on the CC website - especially those which concern financial irregularities?

I would be interested to be kept informed of your progress as this is my area of speciality.

honest7

Thankyou Fengirl for your prompt reply. I thought I was going crazy or something but its also refreshing to know that you were also involved with a Deaf Organisation too. I have debriefed the accountant with whats happening and he also expressed that he is not happy with the way things are run. He didn't go into too much details but he did say that he will make his point in the next few days.Sorry if I sound a bit silly but what is the CVS?

I was going to contact the Charities Commission, but was advised not too by a solicitor until the meeting took place and everything was laid out on the table. I have already made copies of Trustees roles and responsibilities and will be handing them out to the committee next week.

One thing thats concerning me though is that I also found out that this particular voluntary worker doesn't even have a current CRB, and also has the organisations Bank statements at her home, and I'm worried that if she did decide to walk,how on earth would we proceed if she has taken everything.Would I need to call the police there and then?

As you can see this is one big nasty mess, and I'm wondering if things will be too late to be rectified.

I will definitely PM you and fill you in with what happens. Wish me luck..

fengirl_2

CVS is your local Council for Voluntary Service (not always called that, but Google your town or borough and CVS). They will be an umbrella organisation for other charities. If you have any probs tracking them down, PM me with your location ad I will see what I can do.

Is the worker a cheque signatory? If so, the meeting needs urgently to remove her and cancel any cheques which have been signed. Bank statements can be replaced of course. If she does take them, I would write to her formally asking for their return by xx date or else you will inform the police. Even if she has not taken any money, it would still be theft if she took the charity's property.

I am afriad that you may find yourself taking the lead on much of this and I am pleased to see yu have done handouts for the trustees already.

I agree, dont go to the CC until you know that funds are missing - I was involved with an org where substantial funds were filtered off into the CEO's own charity and the CC didnt want to know - 'sort it out yourselves' was their response.

Working with Deaf committees is so difficult - as soon as you think they have understood something, someone says something which turns the whole thing on its head. The charity I was involved with and I fell out when I pointed out that the LA grant to provide a service in a certain place did not cover the cost of the service. The worker accused me in an open meeting of trying to stop the service and none of the trustees felt it was their duty to agree with me!

beverleyhills

Have the accounts been audited, in the past, for Annual General Meetings?

PlutoinCapricorn

I too work in the not for profit sector. If the organisation is well known, they should have a 'whistleblowing' policy and procedures, at least for employees.

This seems very serious indeed. The Trustees are ultimately responsible for the charity, I agree that the Charity Commission does not need to be brought in at this stage. I am sure that there must be guidelines somewhere for dealing with situations such as this, they are not uncommon although I am happy to say that I have never encountered one. I will ask some of my colleagues.

honest7

Fengirl: I couldn't agree with you more. It has indeed been a very trying experience working on a Deaf Committee, and its shocking how unaware they are of certain procedures.I did make it clear to them that both the Voluntary worker and Project Officer be removed as signatories from the account, and that a new account be set up. Its also sad that I have to take the lead here, when really I was just the outside person coming in

Beverley Hills: I did ask them to give me the AGM reports and they have only presented me with 3 copies, when I am in fact missing 6 more. I went through the report but I would need the accountant to verify and look over the financial affairs of the organisation. In terms of an independent auditor looking through the books I am not sure if this has even been done.

PlutoinCapricorn: I agree and understand where you are coming from. When I have asked the Deaf committee for the relevant information and proof they simply don't have a clue. This is quite sad as I have had to break it down to them that effectively we will ALL be in serious trouble whether we were aware of the situation or not; as Trustees have a duty of care and responsibility. I don't want to be the type of person to jump ship (although a few people have said I should), but at the same time I am worried and was not expecting something as big as this. I only joined the committee not so long ago, and this was suppose to be an enriching and enlightening experience.

RedBern

Does this organisation receive any funds or grant aid from the local authority (council) ? If so, you may be able to go to someone there for help/advice? Agree that the local CVS should be a good start.

PlutoinCapricorn

Report financial irregularities, charity auditors reminded

By Paul Jump, Third Sector Online, 21 April 2008
The Charity Commission has published new guidance that reminds charity auditors of their duties to report matters of material significance to the Charity Commission or the Office of the Scottish Charity Regulator.
The commission and the OSCR have issued a list of matters that, because of their “nature or potential financial impact” are “likely to require evaluation and, where appropriate, investigation by the regulator”. These include cases of fraud, money laundering, misappropriation of funds, support of terrorism, abuse of beneficiaries and persistent breaches of charity law.

The guidance reads: “The sooner the charity regulators are made aware of a matter, the sooner it can be considered and, where appropriate, regulatory action taken to protect a charity, its beneficiaries and its charitable assets.”

The commission will also be producing revised guidance on the similar duties of independent examiners in May.

Auditors already had such duties under the 1993 Charities Act, but they have been updated in the 2006 Act and the Trustee Investment (Scotland) Act 2005.

Mojisola

honest7 wrote: »

I was going to contact the Charities Commission, but was advised not too by a solicitor until the meeting took place and everything was laid out on the table. I have already made copies of Trustees roles and responsibilities and will be handing them out to the committee next week.

One thing thats concerning me though is that I also found out that this particular voluntary worker doesn't even have a current CRB, and also has the organisations Bank statements at her home, and I'm worried that if she did decide to walk,how on earth would we proceed if she has taken everything.Would I need to call the police there and then?

This would really worry me. Are you able to get hold of any paperwork and copy it and keep it safe?

My OH is the Treasurer of a charity and he would have a fit at the things you have described!

PlutoinCapricorn

I think that I can guess the answer to this, but does the volunteer actually report to anyone?

Auditors and Independent Examiners are required to report any fiinancial irregularities that they find to the CC, I wonder whether not being supplied with the paperwork on request counts?

It is easy to see these things with hindsight, but it is incredible that anyone would sign blank cheques or permit a volunteer to assume such responsibilities for so long.

By the way, there is a confidential benefits fraud hotline.

I have found an article by a firm of solicitors: it is partly for commercial organisations, but hits a few buttons. Here are some quotes, some sound familiar:

With recent surveys showing that instances of employee fraud are still on the increase, and HMRC showing regrettable lack of ability to safeguard personal data, eliminating poor security practices which make fraud easier is becoming even more important.
The following practices are not uncommon and create a significant risk of fraud:

Leaving signed blank cheques for use when the signatory is away. The risks inherent in this practice are clear. It is preferable to have a second signatory who is required to sign checks when another signatory is absent.

Rotating signatures. If a number of people can sign cheques, a fraudster can ‘rotate’ the signing of cheques, which makes the exercise of effective supervision very difficult. This is particularly common in frauds involving withdrawals of cash.

Electronic transfers. The absence of checks at the bank’s end makes the need to have very tight security procedures over electronic transfers all the more important.

Delegated authority without control. It is essential to have controls in place where certain areas of the business are under the sole control of one person. Check that all payments for services or goods received are correctly made and constitute proper value for money. One of the easiest employee frauds to get away with for year after year is the ‘kickback’ from a complicit supplier. Make sure that purchasing decisions are subject to periodic value for money testing and if the payments made are more than the market rate, find out why.

Employees who insist that all ‘their’ paperwork is left untouched until their return from holiday. This is a clear warning sign that they do not wish to have their work scrutinised by other people. Find out why.