Jonathan Orchard, partner at Sayer Vincent, shares real life examples of fraud within charities.
Today’s example is a case where the payroll manager working for the same charity for many years had been diverting payments, resulting in over £100k of fraudulent payments. More and more luxury goods were bought and very little annual leave was used. The text book signs of fraud were there in abundance…. but ignored.
The fraud was not complicated. Leavers records were not closed, but instead the bank account details changed to divert the pay into the payroll manager’s own bank account. This was a small team, working very closely with HR and managing a large payroll. The payroll manager worked alone on leavers and changes, rather than sharing these duties with the team. And this person had strong relationships throughout the charity, including with senior managers. Regular independent verification of changes to personnel details and review of duplicate bank accounts did not take place. (A check you can set up easily on the system – checking to see if the same bank details come up more than once on either payroll or suppliers’ ledger.) Independent oversight and critical review of reports produced from the payroll system would have detected this fraud much earlier.
The disappointment and shock when a long-standing member of staff is found to have committed fraud is profound. We need to factor in the impact on morale when considering how we respond to fraud. In this example, the payroll manager lost their job. And the length of service and relationships held made the decision to prosecute a difficult one.
In many of our fraud examples , we have seen that the driver for fraudulent behaviour is a problem in the personal life of the fraudster. In this case, the trigger for the fraud was a change in personal circumstances and a bout of depression. Checking prospective recruits is important, but how well are we looking after our staff as individuals over the course of their employment? It is natural and right that we build trusting relationships, but the danger is that oversight arrangements become less vigilant. Given the example given here, should we be doing more to consider our employees all-round health and well-being in order to protect them and the organisation’s future?