truro - charity seminar 2016

Charity SeminarEpiphany House 14 June 2016

Chairman’s WelcomeTom Roach

pkf-francisclark.co.uk

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Housekeeping


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What’s new in PKF Francis Clark?

• 1 April 2016 – merger with Princecroft Willis

• PKF Francis Clark

• 58 Partners

• Over 580 staff

• 8 offices – Taunton, Exeter, Salisbury, Poole, New Milton, Torquay, Plymouth and Truro


PKF Francis Clark

PKF Francis Clark offices

https://www.google.co.uk/url?sa=i&rct=j&q=&esrc=s&source=images&cd=&cad=rja&uact=8&ved=0ahUKEwjjkvvLys_MAhXC1RoKHQAhCIcQjRwIBw&url=https://www.linkedin.com/company/francis-clark-chartered-accountants&psig=AFQjCNFW6WfD0zu-KviYUE2JF1IU3cZoKQ&ust=1462972282204840


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International Network

• Previously Leading Edge Alliance

• Changed to PKF network

• International network of independent firms

• Over 450 offices, across 150 countries

Programme

Financial Reporting Update – Tom Roach

VAT Update – Julie Towers

Investments – David Clifton

Tax Update – Steve York

BREAK

Legal Update – Helen Furneaux

Financial Controls – Darren Perry

Cyber Fraud – Robert Butterworth

LUNCH


Financial Reporting Update

Tom Roach

Introduction

• Not another SORP 2015 talk! A brief recap

• Some thoughts on transition to SORP 2015

• Other matters, including re trading subsidiaries and company secretarial and other filing matters


SORP 2015 brief reminders


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Background

• Dates – periods beginning on or after 1 January 2015

• Depending on the size of the charity you may have a choice:

• FRS 102 SORP – all can

• FRSSE SORP – can if under small companies threshold

• Then within each SORP, the ‘larger’ charities will have a separate list of additional requirements

• Larger charities are those with income over £500k not the new audit threshold of £1m


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Two SORPS please - summing up

• Choice of two SORPs – consult to agree which one to chose

• In very, very simple terms for many charities, I think the additional burden of FRS102 SORP will be:• cash-flow statement

• key management personnel disclosures will need consideration

• and so they will go for FRS 102 to avoid changing again

• A chance to improve your trustees’ report

• Number of presentational changes and anyone with longer term financial assets or liabilities will need to think through


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SOFA – other changes

• In addition to format changes, which are welcomed, the following

• Comparatives for all columns – practical issues to resolve

• Income recognition – ‘probable’ rather than ‘virtually certain’ – SORP Module 5 covers and for some care will be needed

• Exceptional items now ‘material items’ and clarity on where to put them in the SOFA

• Governance costs – no longer on the face but form part of support costs and spread as appropriate across categories


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Balance Sheet

• Financial Instruments• rare for complex instruments (e.g. derivatives linked to loans, incl

swaps, caps and collars)

• But care re long term debtors and creditors and the time value of money

• And care with lease incentives

• Holiday pay accrual

• Stocks of donated goods – fair value unless cannot be established reliably – some common sense to apply here

• Defined benefit scheme actuarial assumptions


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Disclosures in the notes

• Salary bandings – all charities now, small and large, numbers earning > £60k in bands of £10k

• Trustees and staff remuneration

• Increased disclosure, more transparency, public interest

• Some scope for what is disclosed but FRS102 SORP users must disclose remuneration of ‘key management personnel’ – Module 9

SORP 2015 transition


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Transition – practical matters

• Rewrite prior year (say March 15) accounts under SORP 2015

• Transition balance sheet (say March 14) must:• Recognise assets & liabilities required by SORP 2015

• Not recognise assets or liabilities where SORP 2015 doesn’t permit

• Reclassify items if a different category under SORP 2015

• Apply SORP 2015 in measuring all recognised assets & liabilities

• Adjustments to the transition balance sheet as a result of changes in accounting policy will be recognised directly in fund balances (‘reserves’)


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• Adjust transition date balance sheet as though always under new SORP 2015 but 4 mandatory exemptions where retrospective application is forbidden:1. Derecognition of Financial Assets and Liabilities

2. Accounting Estimates – this is the most relevant one to most entities

3. Discontinued operations

4. Minority interests

• And 20 optional choices, including connected to:• Fair value/Revaluation as deemed cost

• Lease incentives


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• Use table to track restatements

Disclosures:

• Reconciliation of balance sheets at transition and last year

• Restatement of last year’s SOFA

• Notes explaining the adjustments


Financial position 1 April 2014 31 March 2015 Group Charity Group Charity £000 £000 £000 £000 Total reserves under previous SORP Employee leave accrual Lease incentives Total effect of transition to FRS 102 and SORP 2015 Total reserves under SORP 2015


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• Reconciliation of funds (‘equity’) at transition date

• Reconciliation of funds at comparative dates

• Reconciliation of SOFA for comparative year

• Cash flow statements (unless using FRSSE)

Transition – disclosures required

Other matters


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• ICAEW TECH 16/14 updated Feb 16

• Debt exists to charity – account for in both

• How do you tidy up?• Offset against existing loan from charity

• Dividend up (but unlikely to have reserves for this)

• Capital reduction, converting shares into distributable reserves

• Waiver out of future distributable profits

• Tax • Credit in company is not taxable

• Unlikely that HMRC will seek tax on past transactions

• What about future taxable profits?

Trading subsidiaries and illegal distributions


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• Late filing of accounts at Charity Commission

• From 30 June 2016, company Annual Return being replaced by the Confirmation Statement• Check• Update• Confirm• Pay

• People with Significant Control (PSC) – all companies. For charitable companies:• New register needed – usually will be members of the company• But there might be e.g. a benefactor who pulls the strings• Report when confirmation Statement done

Filing

VAT Update

Julie Towers


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Agenda

• VAT and charities

• What’s new?

• Frequently Asked Questions


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• Charities are subject to VAT in the same way as commercial businesses

• However certain special rules for charities

• Zero-rating and exemption for some categories of income

• Zero-rating for some items of expenditure

• VAT refunds for certain categories

VAT and Charities


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• Extension of VAT refund scheme for museums and galleries

• Open at least 30 hours a week

• Free entry

• Visitors do not have to make an appointment to visit

• Arts Council accredited

What’s New?


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• Sveda case• European Court held that VAT recoverable on construction of grant

funded recreational trail. Sveda had a mixture of business and non-business activities

• Public had free access to the trail which linked to a shop and café

• The shop and café’s existence were dependent on the trail so there was ‘a direct and immediate link’ to the taxable activities.

• Case referred back to the national court in Lithuania to consider

• Review capital expenditure in case protective claims can be made

What’s New?


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Question – Hospice client asked for advice following the changes in 2015 on VAT recovery and partial exemption/non-business split

• Advice provided on the operation of the new rules and recovery of VAT on non-business expenditure

• Method of calculating non-business split reviewed to provide a more favourable recovery of VAT

• Detailed review of income from exempt fund-raising activities showed that donations were incorrectly being included with the exempt fund-raising income leading to over-restriction of input VAT

Frequently Asked Questions


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Question – charity running a group of care homes and welfare related activities asked for recommendations on maximising VAT recovery. One company in the group was already registered for VAT

• Consider joint contracts of employment

• Suggested use of a VAT group to avoid VAT on internal management charges between the companies

• VAT registered company to ensure that VAT bad debt relief claimed where appropriate

• Ensure that zero-rating certificates provided for expenditure on buildings e.g. ramps, WCs, lifts



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Question – Nursing home charity queried whether it was correct that agencies add VAT on the total amount charged for temporary staff or whether VAT should just be charged on the agent’s commission. As the nursing home is not registered for VAT, the VAT charged represents an additional cost

• There have been 2 contradicting cases on seemingly similar facts

• Reed Employment (2011) – held VAT only chargeable on Reed’s commission. HMRC said the facts only relevant to Reed

• Adecco (2016) – held VAT should be accounted for on the full fee including the element relating to staff wages

• Adecco decision likely to be appealed to a higher court

• Recommended the charity should consider submitting a protective claim for the last 4 years



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Question – Charity running an agricultural show queried whether VAT should be charged on the pitch fee

• Provision of a specific space for a stand is land-related and exempt as long as the charity has not made an option to tax on the land/building

• Provision with a space for a stand together with services is not land-related and subject to VAT at the standard rate

• This is an area that HMRC has been looking at closely over the last 2 years, in some cases they are taking the view that the provision of space for a trade stand could not be a mere supply of land as the event organiser is usually providing marketing, organisation and expertise

• This is an area to watch



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Question from a charity providing sailing as a means of promoting mental health.

• Question 1 – Can VAT incurred before the date of registration be recovered if the charity registered for VAT

• Goods – VAT can be recovered on goods purchased in the 4 years prior to the date of registration. Goods must still be held at the date of registration

• Services – VAT incurred in the 6 months prior to the date of registration

• The goods and services must be used for taxable activities



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Question from a charity providing sailing as a means of promoting mental health.

• Question 2 – Can the charity purchase any vehicles free of VAT?

• Charities providing care or medical or surgical treatment can provide zero-rating certificate on the purchase of vehicles adapted to carry a disabled person in a wheelchair

• Zero-rating also applies to vehicles with more than 6 but less than 51 seats for charities providing care to blind, deaf, mentally ill or terminally sick persons.



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Question – a charity which provides education for special needs students was planning a new building and asked whether the construction costs of the new residential accommodation and classrooms could be zero-rated for VAT purposes

• Residential accommodation – zero-rating is available for the construction of residential accommodation to be used by students/pupils. The charity must provide a certificate of zero-rating to confirm that it will use the buildings for the relevant purpose

• Classrooms – This area is more complicated. Zero-rating is available for the construction of buildings to be used by a charity for ‘relevant charitable purpose’, this means for a non-business activity. If a charity makes a charge for the provision of services (education) this is seen as a business activity. In this case we were able to agree with HMRC that the education activities were funded by grants only therefore a zero-rating certificate could be provided



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Question – a charity had undertaken a re-branding exercise and asked whether the zero-rating for advertising would cover the costs of rebranding

• The zero-rating for charity advertising only applies to advertising on a third party’s medium. These costs would not therefore qualify for zero-rating as they did not constitute advertising as such


Investments

David Clifton

Agenda

• The requirement for an Investment Policy Statement

• The need for financial advice

• Finding income (and investment returns generally) at this time

fcfp.co.uk

Investment Policy Statement


The need• Charity commission wish to know if you have one

• Helpful process to define your investment objectives and provides a framework for future investment decisions

• Legal requirement under Trustees Act 2000 if Trustees delegate their asset management function (eg to Discretionary Fund Manager).

• Trustees’ annual report should outline any investment policies adopted



• Vary in layout, length etc - no set structure except it must be in writing

• Cannot be delegated to Investment Manager, though can be discussed with them

• Charity Investors’ Group published a guide with template statements

• If using an Investment Manager; it must include their responsibility and remit, together with the principles they must follow.

Statements



It will often include:• Scope of investment powers

• Investment objectives

• Attitude to risk

• Financial risks facing charity

• Timing and liquidity needs

• Any ethical concerns

• Benchmarks and targets

Content


Need for financial advice


Trustees’ duty of care

Always responsible for:

• Setting & regularly reviewing the investment policy

• Deciding who manages investments - & terms

• Reviewing suitability and performance of Investment Managers (and ending appointments)

Trustees are not liable for the acts (or omissions) of an Investment Manager unless they have failed to comply with this duty of care.



Charity commission observation

If trustees can demonstrate that they have considered the relevant issues, taken advice where appropriate and reached a reasonable decision, they are unlikely to be criticised for their decisions, or for adopting a particular policy.



Trustees Act 2000

States that Trustees must obtain and consider proper advice from a person reasonably qualified, by ability in and practical experience of financial etc matters re proposed investment, when:

• Exercising power of investment

• Reviewing the investments

Except where the Trustees reasonably conclude that in all the circumstances it is unnecessary or inappropriate



• Adding expertise to specialisms of Trustee Board

• Helping the Trustees make informed decisions

• Providing objectivity and impartiality

• Can assist with formulating Investment Policy Statement

• Explaining pros and cons of ethical investment

• Reviewing performance

• Maximizing returns

Benefits


Investment returns

Investment returns

• New world of low inflation, interest and returns

• Time to consider exposure to equities?

• Volatility continues eg Brexit and growth threats

• Alignment of Trustees’ and Charity’s:• Attitude to risk

• Timescale for investment

• Ethical/ mixed motive objectives

“most charities need money; and the more of it there is available, the more the trustees can seek to accomplish”


Options

• Need for some cash (but real interest return may be negative)• Total returns v income + capital gains• Multi asset solutions• Common Investment Funds• Discretionary Fund Management

Investment returns


Investment returns

• Need for regular (at least annual) reviews

• Of investment performance,

• Investment managers performance

• Also investment policy

• With results considered by whole Trustee Board

Reviews


Investment returns

Five year performance

• Past performance is no guide to the future• Date that you compare an index to has a massive

bearing on reported performance• Benchmarking vital but care needed


No responsibility can be accepted for any action taken as a result of information contained in this presentation. We therefore strongly recommend that no action should be taken before obtaining detailed professional advice.

Past performance is not a guide to future returns and the value of investments and income from them may go down as well as up and an investor may not get back the amount invested.

PKF Francis Clark Financial planning and wealth management is a trading name of Francis Clark Financial Planning Ltd which is authorised and regulated by the Financial Conduct Authority. Registered Office: Sigma House, Oak View Close, Edginswell Park, Torquay TQ2 7FF. Registered in England No. 05413603.Francis Clark Financial Planning Ltd is a member firm of the PKF International Limited network of legally independent firms and does not accept responsibility or liability for the actions or inactions on the part of any other individual member firm or firms.

Exeter | New Forest | Plymouth | Poole | Salisbury | Taunton | Torquay | Truro

Disclaimer & copyright

fcpp.co.uk

Tax Update

Steve York

Charity tax update

• Gift aid declaration update

• Charity tax – risk areas

• Submissions to HMRC

• Inheritance tax



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Gift Aid declarations

New information requirement from 6 April 2016

• New model gift aid declarations for single and multiple donations

• Now must include ‘tax to cover’ statement:

• “ I am a UK taxpayer and understand that if I pay less Income Tax and/or Capital Gains Tax in the current tax year than the amount of Gift Aid claimed on all my donations it is my responsibility to pay any difference.”

• Model forms at: https://www.gov.uk/guidance/gift-aid-declarations-claiming-tax-back-on-donations#declaration-formats

Are your gift aid

forms up-to-date?


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Why are some people not paying tax?

• Personal allowance now £11,000 per person

• Interest income

• Savings starting rate of 0% on first £5,000

• New personal savings allowance from April 2016Type of taxpayer Exempt interest incomeBasic rate £1,000

Higher rate £500

Additional rate Nil

Are many pensioners

paying tax?


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Why are some people not paying tax?

New dividend regime from April 2016

• Effective dividend rates all increasing by 7.5%

• First £5,000 of dividend income at 0%

• Abolishing ‘notional’ tax credits (10%)

2015/16 2016/17 Increase

Basic rate 0% 7.5% + 7.5%Higher rate 25% 32.5% + 7.5%Additional rate/trusts 30.6% 38.1% + 7.5%


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Gift aid forms – are they taxpayers?

• New tax rules = many people at the lower income levels will no longer pay tax

• E.g. Someone with £17,000 income may pay no tax in 2016/17 (pension income £11,000, dividends £5,000 and interest £1,000)

• More gift aid claims could be made incorrectly

• Ensure charity staff understand the rules


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Charity tax - risk areas

• Income and gains not applied for charitable purposes (non-charitable expenditure)

• Notice to complete a tax return received periodically – easy to miss if not annual

• Charities pay tax profits from developing land or property

• Trading exemptions not met (e.g. income > £50k and not primary purpose)

• Consider trading subsidiary

• Can pay profits to charity within 9 months


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Charity tax - risk areas

Letting as a trade

• When does letting of a premises become a trade?

• Let on a regular basis

• Provide additional services e.g. conference facilities, IT equipment, support staff, catering, etc

• Often hard to determine whether trading – each case will depend on facts


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Charity tax - risk areas – letting rooms

Examples of services Rental Indifferent Trade factorCleaning & preparation of rooms PArrangement of furniture PServices of reception staff P PCloakroom staff PTechnical staff PBasic refreshments P


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Letting as a trade

• If trading – consider if covered by trading exemption (often income of £50k covered)

• Consider running conference facilities through trading subsidiary

• If utilising surplus rooms in a large building to generate additional income – does any endowment (e.g. Royal Charter or Act) restrict the use?


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Charity tax – do I need to iXBRL tag?

• Charities liable to Corporation Tax must complete a tax return if:• HMRC issue a ‘notice to deliver’ or

• They have income or gains which are not covered by a relief or exemption

• Tax returns required to be filed online < 12 months of year end

• Accounts and computations must be filed in iXBRL-format• Accounts in pdf allowed if:

• Smaller charity under Companies Act 2006 (income < £6.5m)

• Other unincorporated associations or incorporated if not under Companies Act


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Inheritance Tax

• Gifts to charity during lifetime are exempt

• Gifts to charity in will are exempt from IHT

• An estate will normally pay IHT at 40%

• If charitable legacies the rate of IHT may be lower:

• Reduced 36% rate if 10% or more of the ‘net value’ of the estate is left to charity

• ‘Net value’ is after deducting debts & liabilities, reliefs, exemptions and anything below nil rate band (£325,000)


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Inheritance Tax – reduced rate of 36%

• Encourage donors to review their wills

• Consider charitable legacy worded to meet the 10% test

• Carefully word will to save continual revision

• Example at:

• https://www.gov.uk/hmrc-internal-manuals/inheritance-tax-manual/ihtm45008

• Some beneficiaries may benefit if already charitable donations


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Inheritance Tax – deeds of variation - update

• Allow a beneficiary to re-direct all or part of an estate

• For IHT, a deed made within 2 years of a death is treated as though variation made by deceased

• Consultation opened Summer 2015

• Conclusion in December 2015

• Ability to use deed of variation will continue

• No new restrictions

• Government will continue to monitor their use


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Deed of variation – why used?

Source: HM Revenue & Customs – Review of Deeds of Variation for Tax Purposes – Call for Evidence – Summary of Responses – December 2015

Break


LEGAL UPDATE

Helen FurneauxSenior Associate Solicitor

Tel: 01726 74433

Email: [email protected]

Web: www.stephens-scown.co.uk

Recent Developments• Company Register Requirements• Fundraising Issues• Regulatory Approach• Legacy issues• Reputation and Risk

Persons with Significant Control

• New Statutory register as part of company books• Does not apply to CIOs and statutory corporations• Designed to improve transparency• 25% control, hire/fire board or other significant influence• Particular issues for:

• Four member companies• Appointer of trustees e.g. Founder, local authority• Trading companies• Restricted fund/significant grants

Fundraising Issues

• New Fundraising Regulator• Data Protection Directive• Age UK energy contract example• Commercial Participator Rules

Regulatory Approach

• More Investigations• Updated guidance • Serious incident reporting• New powers

Legacies

• Growing area of claims• Affected by demographic changes• Ilott v Mitson case to Supreme Court• Act swiftly• Get advice early

Reputation and Risk

Life is not Easy!

• Economic uncertainty• More critical donors• Internet challenges• Mistakes of the few affecting sector as a whole• Run by volunteers or employees working with volunteers

Response

• Know your charity• Assess potential risk, both likely and rare but significant• Have clear policies tailored to your charity• Look at insurance and other ways to mitigate risk• Does it look fishy to an outsider?• Have draft press releases • Get support when you need it.• Build relationship with your supporters

Gladstone Library Example

Updated Guidance:

CC12 – Managing FinancesCC19 – Charity ReservesCC20 – FundraisingCC35 – Trustees Trading and TaxEU Referendum (see also CC9 on Campaigning)

The information in this presentation is intended to be general information only and should not be interpreted as legal advice. English law is subject to change so whilst Stephens Scown LLP seeks to ensure the information contained in this presentation is up to date and accurate, the law can change quickly and no guarantee is made as to its accuracy which means the information should not be relied upon. Presentation slides should not be viewed as an alternative to professional advice and Stephens Scown LLP does not accept liability for any action taken or not taken as a result of this information.

Financial Control: we're all in this together

Darren Perry

In this session…

Trustee Board effectiveness: top down control

Charity Commission updated guidance

Key controls: what might an audit committee look for?


Trustee Board effectiveness

• The right people

• Understanding board role and responsibilities

• Good chairing

• Clarity of vision and strategic priorities

• Accountability of executive

• Trust and good relations

• Challenging questions

• Confidence to be courageouspkf-francisclark.co.uk

Managing a charity's finances: planning, managing financial difficulties and insolvency (CC12)

Important messages for trustees

• Recognise when charity is facing financial difficulties

• Regular, robust, up to date financial information

• Understand your income

• Understand your spending and whether you’re spending too much

• Regularly review risk and reserves policies

• Take rescue action

• Understand the implications of winding up the charity

• Impact of difficulties/winding up on beneficiaries, staff and assets


Financial management and the role of trustees

Budgets and cash flow projections

Effective internal financial controls

Monitor results against budget

Analyse sources of income

Robust risk and reserves policies


Financial management and the role of trustees

Monitor and review

Deal with one-off risks

Merger opportunities

Understand funds

Understand balance sheet

Going concern indicators


Charity reserves: building resilience (CC19)

Charity reserves: building resilience (CC19)

• No single right answer

• Key to financial protection but still poorly understood

• Develop reserves policy• Fully justifies and clearly explains

• Identifies plans for maintenance of essential services for beneficiaries

• Reflects the risks of unplanned closure

• Helps to address these risks – looking after beneficiaries (vulnerable), staff and volunteers

• Publish reserves policy – not boiler plated

• Publish assessment of risks – not boiler plated


What are reserves?

Reserves are that part of a charity’s unrestricted funds that is freely available to spend on any of the charity’s purposes. This definition excludes restricted income funds and endowment funds, although holding such funds may influence a charity’s reserves policy. Reserves will also normally exclude tangible fixed assets such as land, buildings and other assets held for the charity’s use. It also excludes amounts designated for essential future spending.

• Impact of restricted funds

• Impact of designated funds

• Subsidiaries’ reserves


Why is policy important?

A policy willGive confidence to funders

Demonstrate resilience

Explain why funding is required

Provide assurance to creditors

Assist in strategic planning

Inform the budget


How to develop a reserves policy

Nature of funds

Uncertainties

Future plans

Explain if “zero level”


Reserves – annual report

• SORP requires• Statement of policy

• Level of reserves and why they are held

• Designated funds – amount and purpose

• Designated funds – likely timing of expenditure

• Insufficient (or zero) reserves – still need to explain why

• Reserves too high• Avoid boiler-plated disclosures

• Spend it!

• Extend charity’s objects


Charity governance, finance & resilience: 15 questions

1. What effect is the current economic climate having on our charity and its activities?

2. Are we financially strong enough to continue to provide services for our beneficiaries?

3. Do we know what impact the social and/or economic climate is having on our donors and support for our charity?

4. What is our policy on reserves?

5. Are we satisfied with our banking arrangements and our current and future investment policy?

6. Have we reviewed our contractual commitments?

7. Have we reviewed any contracts to deliver public services?


Charity governance, finance & resilience: 15 questions

8. If we have a pension scheme, have we reviewed it recently?

9. How can we make best use of any permanent endowment investments we hold?

10.Are we an effective trustee body?

11.Do we have adequate safeguards in place to prevent fraud?

12.Are we making the best use of the financial benefits we have as a charity?

13.Are we making the best use of our staff and volunteers?

14.Have we considered collaborating with other charities?

15.Are we making the best use we can of our property?


Key controls

Key controls: what an audit committee would look for..

Risk management

What could go wrong?

How is it managed?

Adequately explained?

Proportionate


Risks - and controls

•Trustees’ knowledge•Challenge figures

Financial problems not

spotted

•Approval process via trustees

Ineffective budgeting

•Cash flow forecasts•Reserves policy

Insufficient liquid

reserves


Other risks to consider?

Long term cash shortage

Control procedures

not documented

Cash theft

Spending outside

charitable purpose

Spending outside

restricted purpose

Poor financial authorisation

Fraudulent spending by

staff/ volunteers

Staff expenses

fraud

Payroll fraud


Other risks to consider?

Inappropriate payments to connected

parties

Overspent capital projects Loss of assets

Insufficient insurance

IT and cyber crime


In this session…

Trustee Board effectiveness: top down control

Charity Commission updated guidance

Key controls: what might an audit committee look for?


Cyber Fraud & Risks to CharitiesRobert Butterworth

Overview

• Forms of Cybercrime

• Relevance to all organisations

• Risks and their impact

• Specific areas of current concern

• Mitigation and Prevention

• Help and further information



Cyber Dependent Crime

Offences that can only be committed using a computer, computer networks and other

forms of ICT

Malware, Hacking, Viruses, Distributed Denial of Service (DDoS)

What is Cybercrime?

Home Office and National Cyber Crime Unit


Cyber Security Breaches Survey 2016

HM Government, Ipsos MORI, University of Portsmouth


Risks – Are you a target?

National Cyber security Alliance

40% of all cyber attacksare aimed at firms and

organisations with fewer than 500 employees


Familiar threats

Phishing

Botnets

Malware & Virus

DDoS Attacks

On the increase

RansomwareWiFi Spoofing

Social Media Scams

IP Theft

Future trends

Mobile Payments

Facial Profiling

Wearable exploits

D.I.Y. Kits

Risks - Cyber Progression

As our dependency and usage of ICT and internet connected devices increases so will our potential vulnerability and risk of a breach.


Process for access


Time lost for correction and remedial action

Business Disruption

Financial loss

Reputation or brand damage

Loss of clients, sponsors, donors

Sensitive or personal information disclosed

Impact of a successful breach


• Surge of ransomware attacks in recent years• Smaller organisations now targeted• Easy way to monetise cybercriminal effort• Recent survey identified 42% of security

breaches in Uk last year were ransomware• Ransom made more reasonable to increase

likelihood of payment• Anonymous payment systems e.g. Bitcoin

Current concern - Ransomware


Ransomware Example


Current concern - Phishing


• Telephone scams• Profiling done by use of ICT• Makes approach more credible

• Wifi Spoofing• Genuine public hotspot or rogue?

• Staff Social Media usage• Sharing of information to help with profiling• Damage to reputation or brand image

• BYOD and/or personal devices

Other current concerns


Risk Assessment

What could happen – types of threat?

How bad could it be – consequences?

How often could it happen – frequency?

Guides to process are available

Mitigation – First steps


User didn’t think before clicking

Weak or default passwords in use

Insecure configuration

Legacy or unpatched hardware & software

Lack of basic security, protection, segmentation

Mitigation – Why attacks are possible


Become informed on the subject

Train your staff in security awareness

Have policies in place

Consider data and email encryption

Destruction of data

Passwords – not as straightforward as you think

Remote working considerations

Mitigation – Beyond best practice


• www.gov.uk• Search for ’10 Steps to Cyber Security’• Huge resource of relevant information

• www.cyberstreetwise.com/cyberessentials/• Government-backed and industry supported

scheme to guide businesses in protecting themselves against cyber threats

• http://nationalarchives.gov.uk/sme/• free e-learning course aimed at staff in micro,

small and medium-sized enterprises.

More information

Any Questions?

Tom Roach

(c) copyright PKF Francis Clark, 2016

You shall not copy, make available, retransmit, reproduce, sell, disseminate, separate, licence, distribute, store electronically, publish, broadcast or otherwise circulate either within your business or for public or commercial purposes any of (or any part of) these materials and / or any services provided by PKF Francis Clark in any format whatsoever unless you have obtained prior written consent from PKF Francis Clark to do so and entered into a licence.To the maximum extent permitted by applicable law PKF Francis Clark excludes all representations, warranties and conditions (including, without limitation, the conditions implied by law) in respect of these materials and /or any services provided by PKF Francis Clark. These materials and /or any services provided by PKF Francis Clark are designed solely for the benefit of delegates of PKF Francis Clark. The content of these materials and / or any services provided by PKF Francis Clark does not constitute advice and whilst PKF Francis Clark endeavours to ensure that the materials and / or any services provided by PKF Francis Clark are correct, we do not warrant the completeness or accuracy of the materials and /or any services provided by PKF Francis Clark; nor do we commit to ensuring that these materials and / or any services provided by PKF Francis Clark are up-to-date or error or omission-free. Where indicated, these materials are subject to Crown copyright protection. Re-use of any such Crown copyright-protected material is subject to current law and related regulations on the re-use of Crown copyright extracts in England and Wales.These materials and / or any services provided by PKF Francis Clark are subject to our terms and conditions of business as amended from time to time, a copy of which is available on request.Our liability is limited and to the maximum extent permitted under applicable law PKF Francis Clark will not be liable for any direct, indirect or consequential loss or damage arising in connection with these materials and / or any services provided by PKF Francis Clark, whether arising in tort, contract, or otherwise, including, without limitation, any loss of profit, contracts, business, goodwill, data, income or revenue. Please note however, that our liability for fraud, for death or personal injury caused by our negligence, or for any other liability is not excluded or limited.

PKF Francis Clark is a trading name of Francis Clark LLP. Francis Clark LLP is a limited liability partnership, registered in England and Wales with registered number OC349116. The registered office is Sigma House, Oak View Close, Edginswell Park, Torquay TQ2 7FF where a list of members is available for inspection and at www.pkf-francisclark.co.uk. The term ‘Partner’ is used to refer to a member of Francis Clark LLP or to an employee. Registered to carry on audit work in the UK and Ireland, regulated for a range of investment business activities and licensed to carry out reserved legal activity of non-contentious probate in England and Wales by the Institute of Chartered Accountants in England and Wales. Partners acting as insolvency practitioners are licensed in the UK by the Institute of Chartered Accountants in England and Wales. A partner appointed as Administrator or Administrative Receiver acts only as agent of the insolvent entity and without personal liability. Francis Clark LLP is a member firm of the PKF International Limited network of legally independent firms and does not accept responsibility or liability for the actions or inactions on the part of any other individual member firm or firms.

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