ACNC Reveals Charity Fraud

The charity regulator, the ACNC, has investigated complaints against more than 200 Australian charities in its first year of operation, including one charity whose husband and wife directors have since fled the country.

In the ACNC’s first year, the regulator says the Compliance team received and assessed 202 charity related concerns – an average of 17 charity related complaints per month.

The regulator says eight of these involved investigations of serious matters of fraud and governance.

In particular, one of the most serious investigations involved an (so far) unnamed charity around allegations of serious mismanagement and fraud against a husband and wife who were directors on the charity’s board.

“The couple took over the charity, initially with the support of the members and existing board; however many members cancelled their membership following the couple's increasing abuse of their position within the charity,” the ACNC review revealed.

“The complainant alleged that the couple illegally changed the charity’s constitution, redirected funds for their own personal gain, and initiated the sale of the charity’s assets, without the knowledge or the authority of its members. They also transferred large amounts of cash from the charity’s bank accounts to personal accounts offshore.

“The ACNC’s investigation into this charity suggests serious problems with the charity’s governance, including failure to invite members to meetings, failure to hold discussions or votes regarding changes to the charity’s constitution and selling the charity’s assets. It also found that records of meetings were incomplete or inaccurate.

“The charity is no longer operating on a day to day basis and the individuals who are the subject of the complaint have left Australia; they have no intention of returning,” the review said.

“The ACNC is liaising with the relevant authorities overseas, as well as working to ensure control of the charity is returned to its members and the assets protected.”

The majority of concerns raised about charities in the ACNC Review fit three main risk types. These are: governance (50), fraudulent or criminal activity (48), and private benefit (21).

The ACNC said that it had a softly softly regulatory approach. The report does not name the charities involved or the states in which they operate and has not revealed if any criminal charges have been laid as a result of its investigations.

“We work with charities to help them correct their mistakes, using the least intrusive powers possible to do so,” the review said.

“We take our regulatory function seriously. When wrongdoing occurs, it is often not just a financial loss that damages the charity. The impact on its reputation and the effects on staff, volunteers, beneficiaries and board members are also damaging. This is why we handle compliance sensitively and in line with our regulatory approach.”

The review revealed a second serious fraud investigation concerning a senior member of staff was using the charity’s credit card to make private purchases, unrelated to the work of the charity.

The ACNC said contacted the charity’s board about the allegations, and commenced working with the charity as part of its investigation.

“As an initial step, the board removed the individual alleged to have made the purchases, the purchases were admitted and the individual repaid some of the debts.

“However, the ACNC investigation found that the theft of funds was more extensive and significant than initially identified.

“The charity worked with the ACNC throughout the investigation, committed to dealing with the matter and continuing their charitable endeavours. With the support of the ACNC, they worked through the issues of governance that had allowed the theft to occur, and sought to implement changes to address the identified vulnerabilities.

“At the ACNC’s behest the charity filed a report to the police so that the alleged fraud could be investigated by the appropriate authority,” the review said.

The ACNC’s first annual review said the majority of concerns raised about charities were governance (50), fraudulent or criminal activity (48), and private benefit (21).

The majority of the concerns (131) were raised by the public, 40 were referred by other government agencies and the remainder (31) came from other sources and active intelligence.