Charity Commission finds significant fraud at RAF Honington charities due to inadequate oversight and poor compliance with basic financial controls
Regulator reports that serious failures effectively allowed ‘unscrupulous individual’ to steal charity funds over four years
A Charity Commission class inquiry into the RAF mess charities has found there were serious governance and management failures and an ineffective application of basic safeguards, which allowed an individual to use charity funds for her own gain over a sustained period at RAF Honington.
This failure amounts to serious mismanagement in the administration of the RAF Honington mess charities.
The Commission opened a statutory class inquiry on 26 May 2016, after a former mess clerk at RAF Honington pleaded guilty to fraud offences against 2 mess charities involving £72,690 and was sentenced to 18 months imprisonment, and a report of material significance was submitted by the independent examiner for the funds.
There are 72 RAF mess charities in the UK and overseas. These charities provide facilities and activities for the wellbeing of service personnel. The Commission opened a class inquiry into all of the RAF mess charities because they use the same financial control procedures as RAF Honington. These control procedures are maintained by the RAF.
In addition to examining the issues at RAF Honington, the inquiry also examined the extent of losses at the other mess charities since the introduction of contract arrangements with third party service providers in 2012/2013, whether adequate steps were taken to recover losses, and if mess charities were adequately reporting serious incidents to the Commission.
The Commission previously engaged with the RAF in 2012 and 2013 over financial controls and its oversight of external contractors in its mess funds. The RAF provided assurances at that time that adequate controls were in place to protect charity assets.
However, in October 2014, fraud by an employee of a commercial contractor providing services to the mess charities at RAF Honington, was reported to the Commission. The report was incomplete, and no subsequent update was provided to the Commission until 2016 when the independent examiner reported the incident as a matter of material significance.
Following the opening of the Commission’s class inquiry, the RAF opened its own service inquiry in August 2016, which concluded that losses of over £200,000 occurred over approximately four years and had started prior to the implementation of the new contract arrangements in the messes.
The Commission’s inquiry concluded that:
• Charity funds at RAF Honington were placed at undue risk by serious failures over a sustained period to ensure that basic financial controls were followed.
• There was a failure to ensure that accounting records were maintained and preserved, which compromised the ability to effectively manage and account for the charity funds at RAF Honington.
• Although the fraud was reported to the civil and military police when it was discovered in 2014, other reasonable steps were not taken in a timely manner at RAF Honington, or more widely across the RAF mess fund estate to address the risk and issues arising from the fraud.
The managing trustees (i.e. the Station Commanders) at the time hold the legal responsibility for the mismanagement at RAF Honington. However, the unusual nature of the trusteeship of mess charities and the fact that their legal duty arises as a result of their employment and post* means the RAF also have a responsibility for ensuring adequate support and controls are in place.
The inquiry also concluded that the reduction in the resourcing of RAF’s central oversight and compliance assurance of mess funds combined with some confusion about responsibilities and accountabilities for charitable mess funds during the switchover to the new contracts with third party commercial service providers created a heightened risk to the RAF’s charitable mess funds between 2011 and 2013. This was a contributory factor in the length of time it took for the Honington mismanagement and losses to be identified and adequately gripped. It was as much a matter of circumstance and good fortune that other significant losses did not occur in the rest of the RAF mess fund estate during this period.
Since 2016 the RAF has made good the losses to charity funds via the contractor and HM Treasury. The RAF has also acted to address the local issues at Honington and the broader systematic risks identified.
Harvey Grenville, Head of Investigations and Enforcement at the Charity Commission, said:
Charity trustees are under a legal duty to protect their charitable funds, so they can be used to advance the charitable causes they set out to serve. And this applies to funds held by the RAF mess charities for supporting military personnel in their vital role serving and defending our country.
The RAF failed to adequately protect the funds at RAF Honington, thereby allowing an unscrupulous individual to steal significant sums from the mess charities over a sustained period of time. The fraud was so significant for these mess charities that it left them in a precarious financial position which could have resulted in their collapse and had a direct impact on serving RAF personnel. It also exposed wider failures in the control and assurance systems used by the RAF.
It should not have taken a Charity Commission class inquiry to mobilise an appropriate response from the RAF to address these issues and correct this situation. We are pleased to see the significant steps that have since been taken both to make good the losses and to address our concerns. However there are clear risks which arise from the short tenure of sole managing trustees appointed through the military system. We have stressed to the RAF the importance of ensuring that it maintains a sustainable governance, assurance and risk management framework for charity funds linked to its RAF stations.
The full report of the inquiry is available on GOV.UK.
Ends
Notes to editors
- *The duty arises by virtue of their post and employment since The Queen’s Regulations of the Royal Air Force obliges Station Commanders to serve as managing trustees of their RAF Station’s charitable funds.
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