Getting to grips with financial controls

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Getting to grips with financial controls

Having effective internal financial controls is vitally important for charities of all shapes and sizes. Putting meaningful checks and procedures in place will help ensure trustees protect their charity’s assets and finances, as well as enhancing the quality of their decision making, as they seek to put those assets to work for the public benefit.

Good trustees recognise that no charity is immune from the risks of fraud or financial mismanagement. Creating a positive culture of financial responsibility, where everyone understands and follows key financial controls, is at the heart of running a successful charity.

After a long wait, the Charity Commission have recently updated their guidance CC8 ‘Internal Financial Controls for Charities’ (Internal financial controls for charities – GOV.UK), along with a helpful checklist which now references up-to-date banking, payment and accounting methods.

What’s involved?

Whilst the detailed work to design and implement financial controls might be delegated to others, the ultimate responsibility for financial management always rests with the trustee board. Trustees need to be content that the controls deployed are fit for purpose. Additionally, they should be regularly monitoring and reviewing their design to check they are operating properly.

Whilst the financial checks and procedures may vary from charity to charity, there are some principles common to all:

1.  Your charity’s governing document may specify particular controls that should be in place. If so, make sure you follow these!

2.  All trustees should have access to accurate and up-to-date financial information about the charity and understand its relevance. Regularly reviewing and discussing this information is important, as is documenting financial decisions rigorously.

3.  All trustees, staff and volunteers should understand and follow the charity’s controls and know what to do if they are breached. How should this be recorded and reported?

4.  It takes a team. Ensure financial duties are not in the hands of one person alone; involve multiple people in the handling, recording and reporting of financial transactions. In small charities, this may mean that trustees must be actively involved in some level of day-to-day financial administration.

5.  Minimise the use of cash in the charity, where possible.

6.  Review and monitor your controls on at least an annual basis (use the checklist).

Financial controls should be in place across all the key areas of your charity’s finances (i.e. banking, income, expenditure, physical assets, investments, loans). The CC8 guidance gives lots of helpful examples of key controls that charities can consider putting in place across these areas.

As well as using the guidance to review the adequacy of existing financial controls, it’s also a useful tool for whenever the charity is going through a change in its activities or operations. For example, when setting up a new bank account, trustees should review CC8 and evaluate whether the new account is capable of providing dual authorisation of payments, alongside who should have access to the account and be able to make changes to recipient details, among other important considerations.

Need some support?

Burton Sweet has a longstanding commitment to charities and civil society organisations, offering practical, professional and passionate support. We want to assist you, so you can deliver effectively for the communities you serve and show the good you do. If you would like some guidance on implementing internal financial controls for your charity, or perhaps you are interested in our bookkeeping and management accounts preparation services, please get in touch with our Head of Charity Development, Ed Marsh:

© Burton Sweet Ltd 2023

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