Regulatory lessons for charities from fraud to governance failures
· Posted on: April 4th 2025 · read
The last few months have seen numerous cases of regulatory action as well as advice to charities; from major fraud investigations to compliance failures and governance concerns, the cases below offer critical lessons for those working in the not-for-profit sector.
This article unpacks four such cases and the key takeaways for trustees and management.
The importance of financial oversight – Cardiff Sixth Form College.
A striking case centres around one of the highest-performing sixth form college in the UK – claiming the strongest A-Level results in the country for 12 of the past 13 years. However, between 2012 and 2016, irregularities in financial management led to a joint investigation by South Wales Police and the Charity Commission.
In March 2025, three individuals (including the Charity’s founder) were charged with theft, fraud and false accounting totalling £5 million. The offences relate to high-value unauthorised transactions, poor conflict of interest management, and significant related party dealings. The Charity Commission also cited delayed accounts, governance failings and insufficient financial controls. Since the alleged fraud, the Charity has changed ownership.
For Governors and Trustees in the education sector and beyond, this is a crucial reminder that governance is more than a tick-box exercise. Even high-performing institutions can be vulnerable where internal controls are weak or where oversights enable management override. Due diligence, prompt filing of accounts, rigorous audit trails and clearly documented decision-making processes are essential in ensuring that such frauds don’t go unnoticed. Furthermore, this case highlights the importance of having a robust process for managing conflicts of interest and related parties – ensuring that declarations of interest are completed and that registers of interests are maintained.
Trustee responsibilities and governance failures – Dudgeon Park Community Centre
An inquiry by the Office of the Scottish Charity Regulator (OSCR) into Dudgeon Park Community Centre exposed serious governance failings; Trustees were unclear about their legal duties, failed to maintain proper records, and operated a licensed social club on premises owned by a football club – an activity deemed non-charitable.
Funds were transferred without transparency, including significant sums to the football club during the COVID-19 pandemic. The inquiry found that former trustees acted with a lack of diligence and misunderstood their roles, with some unaware they were even trustees.
This case highlights the necessity of effective trustee training. Boards must be proactive in understanding the legal framework in which they operate and in identifying gaps in their knowledge when they seek to recruit new Trustees. Charities must ensure that they strong processes for inducting trustees, making them aware of their responsibilities, and providing regular training to keep them updated to any regulatory changes. Clear financial controls, accessible documentation and regular reporting from finance teams will also help ensure proper oversight can be exercised.
Knowing your obligations – Counter-terrorism regulations
Three charities – Sahara Hands, Peculiar Peoples’ Palace Ministries, and Impact Planet – were publicly named by the Office of Financial Sanctions Implementation (OFSI) for failing to respond to regulatory information requests. OFSI stopped short of financial penalties but issued a formal disclosure for repeated non-compliance.
The lesson here is clear: compliance is not optional, especially in the context of financial sanctions and counter-terrorism regulations. Charities must monitor official communications and maintain accurate contract details with regulators. OFSI flagged that, in many cases, correspondence failed because of outdated contact information.
It must remain a priority for finance teams to maintain up-to-date records on regulatory portals and ensure that an individual is designated the responsibility for regularly monitoring correspondence. Failing to engage, even passively, can lead to significant reputational damage and enforcement action.
CICs and fraudulent letters – warnings from the regulators
The Fundraising Regulator reported that 12% of complaints in 2024 related to a small number of Community Interest Companies (CICs). Concerns included misleading fundraising tactics, unauthorised door-to-door collections, and a lack of transparency. The Charity Commission has also issued a warning about fraudulent letters falsely sent in its name, requesting trustee removals or fund transfers.
This dual warning signals a growing reputational risk around charitable fundraising. Trustees and finance teams must take active steps to monitor outsourced fundraising activity, subcontractor behaviour, and compliance with the Code of Fundraising Practice. Despite not being charities, CICs engaging in misleading behaviour can erode trust across the whole not-for-profit sector.
Charities must also educate their staff and volunteers on how to identify and report fraudulent communications, and ensure there are clear procedures for verifying correspondence with regulators. At a time of declining public trust and increasing donor caution, even indirect association with poor practice can have a major impact.
This dual warning signals a growing reputational risk around charitable fundraising. Trustees and finance teams must take active steps to monitor outsourced fundraising activity, subcontractor behaviour, and compliance with the Code of Fundraising Practice.
These cases show that regulators are willing to act and increasingly expect high standards of governance, transparency, and engagement. From routine compliance failures to major fraud, the consequences for poor oversight, governance, and controls are growing.
Charities must embrace a proactive, risk-based approach to governance. Whether it’s safeguarding assets, understanding legal duties, or ensuring fundraising integrity, now is the time to strengthen internal systems and culture.
