While one trustee may take the lead in overseeing a charity’s finances, all trustees share responsibility for ensuring appropriate internal financial controls are in place.
Effective internal financial controls are not only a matter of regulatory compliance; they also support good governance, protect assets and help maintain public trust.
The Charity Commission’s guidance (CC8) sets out the importance of implementing appropriate and proportionate controls across key financial areas. These include banking arrangements, income and expenditure, payments to related parties, asset and investment management, loans, and oversight arrangements such as audit functions where appropriate.
Trustees must ensure that financial controls are suitable for the size, complexity and activities of the charity.
Internal financial controls extend beyond cash handling. They should address:
Trustees should have a clear understanding of the charity’s financial position, including income streams, obligations and reserves.
Where financial records include personal data, charities must also comply with UK data protection law.
Weak or poorly implemented controls can increase the risk of error, fraud or financial loss, potentially damaging a charity’s reputation and public confidence.
Trustees retain ultimate responsibility for financial governance, even where day-to-day tasks are delegated.
Good practice may include:
While it may be practical for one trustee or staff member to oversee financial administration, oversight should not rest solely with one individual.
Where possible, bank accounts and financial assets should be held in the charity’s legal name. If this is not feasible, trustees should ensure appropriate safeguards and oversight arrangements are in place.
Trustees should remain alert to signs that financial controls may not be operating effectively. These may include:
Addressing issues promptly can help prevent more significant problems developing.
Seeking professional advice can help trustees assess whether their financial controls remain proportionate and effective.
Maintaining appropriate financial controls can be challenging, particularly for charities with limited administrative resources.
Our Charity and Not-for-Profit specialists support organisations in reviewing financial systems, assessing governance arrangements and strengthening internal control environments. We can also help trustees ensure their processes remain proportionate, effective and aligned with regulatory expectations.
If you would like to discuss financial governance or internal control systems within your charity, our team would be happy to help.
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