Some charity fraud could go unpunished as budget is cut
Significant fraud carried out in charities may go unpunished because of 27% government cuts to their regulator, the Charity Commission.
Its chief executive, Sam Younger, is considering a policy of ignoring some official reports of charity fraud.
This would be for cases up to a "quite high" threshold.
The government says it is confident the commission will respond to the challenging cuts. It wants charities to help provide more public services.
This could give billions of pounds of taxpayers' money to voluntary organisations which help disabled people, the elderly, the unemployed and other disadvantaged groups.
"One of the possibilities is saying that we can't investigate absolutely every allegation that comes our way," Mr Younger told BBC Radio's File on 4.
"There are 180,000 charities and we may have to put the bar quite high and say we will only investigate if a certain minimum amount of charitable funds is at risk," he added.
Freeze bank accounts?
That would leave responsibility for some fraud investigations entirely to the police, who are already overstretched and facing further cuts of their own.
And, according to Mr Younger, it could also stop broader lessons being learned.
"For the Charity Commission the issue is, what are the regulatory questions it throws up?
"For example," he asks, "are there questions of poor governance that has allowed fraud to happen?
"And in the most extreme circumstances, is the fraud such that we ought to be thinking of using our statutory powers to freeze bank accounts or to get rid of trustees?"
The Charity Commission - the regulator for England and Wales - examined 450 reports of fraud and financial mismanagement last year, a number it regards as a significant underestimate of the problem.
It recently reported on Independence South West (ISW), a charity providing day care for severely disabled people in Plymouth. Standards were so poor that an inspector twice gave it a zero-star rating in 2009.
The chairperson, Lady Veronica Haydon-Foster, accepted two police cautions for misusing the charity's invoices for personal benefit.
The detective who investigated her case says that she misappropriated £32,000 intended for care benefits for a disabled dependent, and that fake ISW invoices were produced purporting to show payments for care which did not exist.
Lady Veronica, who has not responded to attempts to contact her, was also improperly appointed chief executive of the charity at a salary of £33,000 a year, which did not appear in the annual accounts.
Under newly appointed trustees and with a new chairperson, ISW is now improving services and carefully controlling its finances.
Even some of the most prestigious voluntary organisations can fall victim to fraud. This autumn George Gray, the former finance director of one of the Prince of Wales' charities, The Prince's Foundation for Integrated Health, was jailed for three years for siphoning off £250,000 in a series of payments to private bank accounts.
It was more than a year before anybody noticed what the judge called Gray's "deeply unsophisticated" frauds. Governance of the charity was extremely poor, according to the Metropolitan Police fraud investigator who caught Gray.
The Prince's Foundation for Integrated Health no longer exists, not solely for reasons connected to the fraud. Nobody from Clarence House was available for comment.
The Charity Commission is keen to stress that most voluntary organisations handle funds honestly. But it admits that it has no idea of the true extent of fraud and is concerned that annual accounts are filed late by a quarter of charities, with a combined income of £6bn a year.
"I don't think we should run away with the notion that fraud is necessarily rife among charities," said Mr Younger
"But of course charities are going to be as vulnerable as other organisations are," he pointed out, "and I think it's certainly important to us as an organisation to try to get a better handle on what the extent of fraud is to make sure we're in a better position to advise charities on what they need to do to protect themselves."
The Minister for Civil Society, Nick Hurd, says he is confident the Charity Commission will respond to the challenge of its budget cuts.
But when asked if he would be happy to see it stop investigating some formal reports of fraud, he said: "No, I would want to discuss it with them."