RAF Honington mess charity caught up in £200k fraud
27 Jun 2019
A Charity Commission class inquiry into the Royal Air Force (RAF) mess charities has found there were serious governance and management failures, which allowed a contractor to siphon off around £200,000 in charity funds over a four-year period at RAF Honington in Suffolk
27 Jun 2019
The fraud was perpetrated by an accounts clerk, who worked for a commercial contractor providing services to the mess charities under a Super Catering, Retail and Leisure (SCRL) contract. Prior to outsourcing the catering services, this individual had been employed on the base on a civil service contract, also working in the mess.
There are 72 RAF mess charities in the UK and overseas providing 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, with ultimate oversight from the RAF.
In October 2014, the fraud by the SCRL employee working at 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.
A Proceeds of Crime Act 2002 report relating to the conviction of the mess clerk established that she admitted to fraudulently obtaining a total of £197,000 during the period from 2010 – 2014, although she was convicted for a £72,000 element of the total losses.
The statutory inquiry uncovered evidence of funds being credited to unauthorised accounts which increased the likelihood of fraudulent activity rather than accounting errors. It was established that the mess clerk obtained £108,000 (of the total of £197,000 within the Proceeds of Crime Act report) prior to transfer of the clerk’s employment from the civil service to the contractor.
The RAF opened its own inquiry into the fraud in August 2016, which concluded that losses of £197,000 occurred over approximately four years and had started prior to the implementation of the new contract arrangements in the messes.
The Commission’s inquiry said 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.
Accounting records were inadequate, and were not maintained and preserved, compromising 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 Commission said.
The managing trustees, who were the station commanders at the base, held the legal responsibility for the mismanagement at RAF Honington. The inquiry stated: ‘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.
The inquiry found that the mess clerk convicted of the fraud was declared bankrupt and paid just £1 under the Proceeds of Crime Act, so recovery action could not be taken against her.
The RAF secured recovery of approximately £157,000 from the Treasury (HMT) and £40,000 from the contractor in early 2019 to reflect the accountability of the contractor in allowing the fraud to take place following the transfer of the mess clerk to their employment.
Governance has also been tightened to address the local issues at Honington and the broader systematic risks identified to prevent further fraud at other messes. This included the re-instigation of the internal audit board, the appointment of a new IE and tightened controls on bank and cheque payments.
Harvey Grenville, head of investigations and enforcement at the Charity Commission, said: ‘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 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.’