Strong financial systems and controls are very important in helping protect you and your charity, and in ensuring your charity runs effectively.

This factsheet provides guidance on some relatively straightforward ways your charity can establish strong financial controls.

Require more than one signature or approval for payments and receipts

For any money leaving your charity or coming into it, it is a good idea to ensure that more than one person has the responsibility for authorising and completing the transaction. Similarly, any sign-offs or access to your charity’s online banking and banking statements should not be limited to just one person.

Having multiple people involved in this approvals process means there is a higher level of supervision of your charity’s financial transactions.

Establish clear financial delegations

Your charity should ensure that it limits the authority for people to approve purchases or other transactions through the use of financial delegations.

Financial delegations can be established based on the value of the purchase or transaction. Once a delegation is in place, only certain people within the charity have the authority to approve spending that exceeds that value.

Such delegations and limits can reduce the risk of loss or fraud.

Ensure your charity’s accounts are secure

There are several basic precautions you can take to ensure your charity’s accounts are security. A couple of relatively straightforward ones are to:

  • keep your online banking passwords secure
  • know who has access to your bank accounts.

If someone who has access to your charity’s accounts leaves the organisation, make sure the passwords are changed.

If your charity has a petty cash tin or stray cash kept somewhere, keep the keys to the tin safe and secure.

Constantly monitor your charity’s performance against its budget

A budget is a document that shows a prediction of how much money you expect you will receive and how much money you will spend within a given period.

Your charity should look ahead and plan accordingly, so it is not only important it establishes an annual budget, but that it tracks its performance against that budget throughout the year.

You should consider how much money your charity is likely to receive during the year and whether your charity needs to plan for or save funds for any unexpected expenses, or to cover possible gaps in donations or funding.

You should also look into any significant variations against your charity’s expected budget. If you see a significant variation in your charity’s expenditure or income, ask for more information.

Ensure receipt of financial information before each board or committee meeting

Your charity’s board or committee should receive regular financial information for consideration.

This information may include the latest financial accounts, a comparison of actual figures against the budget, an explanation of any variations from the budget, or details of cash flow and closing bank balances.

The information may be presented as a written report for discussion and approval at each board or committee meeting, or may be a standing item on the agenda of your charity’s financial sub-committee meeting.

Either way the regular presentation of this financial information helps your charity and its board or committee stay informed and can help it pick up discrepancies or issues early.

Ensure financials are presented in a way that is easy for everyone to understand

Your charity’s financial information and financial reports must be accessible and easy for everyone to understand

They should be written in a way that allows understanding and clarity for everyone, not just board or committee members, or financial experts.

Fostering this clarity and understanding allows people to meaningfully examine your charity’s financials and promotes transparency around your charity’s financials.

It also helps to create a culture where board members – and others – are not embarrassed to ask questions about charity finances or accounts.