Expert view: The lessons we can learn from fraud

There are several measures charities can take to protect themselves from dishonest activity.

The publication by the Charity Commission of inquiry reports on the Diabetes Foundation and Diabetes Help (1 October, page 3) marks the final chapter in a fundraising saga that offers lessons for trustees, donors, solicitors and fundraisers.

Arthur Bennett's long history of fraudulent fundraising, using a variety of approaches and inaccurately named supposed beneficiary charities, led to his conviction on several counts. The commission put the foundation into receivership. Having suspended (and subsequently removed) Bennett and his wife as trustees, the regulator appointed replacement trustees, of which I became chair.

The unravelling of the foundation's complex financial affairs was done initially with the help of a receiver - appointed by the commission, but paid for by the foundation. Subsequently, it was taken over by the four new trustees, and substantial funds that had been sent to the US were recovered. Funds in various accounts and holdings in the UK, unavailable for the purposes for which they had been donated, were also recovered.

Subsequently, Bennett laid claims against the foundation and the commission, but all were struck out or defended successfully. The foundation recovered virtually all of its considerable legal expenditure. The insurance that it had been allowed to take out by the commission - at a time when this permission was rarely granted - even allowed it to reclaim non-recoverable VAT.

And the lessons? With legacies, it is vital that solicitors check on the commission website that they are dealing with registered charities. Fundraisers, meanwhile, should strive to provide proof of how their fundraising has been spent on the charity's objects.

For trustees, insurance is now more readily available, but it is essential for all board members to remember their legal responsibilities. It is also crucial that boards are not backward in engaging with the commission, which has always executed its powers to protect charitable funds, and always will.

- Judith Rich is the chair of Charity Appointments and a trustee of Relate and Reach.

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