Trustees are today being warned to “keep detailed, up-to-date records” after recent examples of charities coming under scrutiny from the regulator.
Last week, a compliance case was launched into Forgotten Veterans UK when an independent examiner was unable to source records to account for £89,000 of expenditure and £151,000 of donations.
And yesterday, the Charity Commission revealed it had opened a statutory inquiry into New Wineskins Charitable Trust over its repeated failure to submit its accounts on time.
Today, the accountancy firm RSM UK, which works with hundreds of charities, published its own reminders for trustees – and flagged up the recently updated official guidance from the commission.
The specific guidance, ‘Internal financial controls for charities’, is known as CC8 and aims to ensure charity finances are properly managed and documented.
Nick Sladden, head of charities and audit partner at RSM UK, said: “Administering a charity’s finances and assets is one of the fundamental responsibilities of a trustee.
“Having robust internal financial controls means charities can be confident they won’t end up the subject of regulatory action, including the potential for trustees to be held personally liable for any losses they have caused or helped to cause.”
Sladden added: “Understanding a charity’s financial position is vital for trustees and this is acknowledged in the updated CC8 guidance. Financial position and performance should be a standing item at trustee meetings, with all being provided the relevant information beforehand.”
He said it needed to be “accurate and up to date, including the latest management accounts, explanations of differences between forecasts and the current financial position, and details of cash flows and bank balances”.
The CC8 guidance recommends:
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Managing corruption and bribery risks by maintaining a register of interest for trustees and having hospitality policies
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Regularly checking tax exemptions are still relevant
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Checking required controls are in place when making payments to related parties
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Ensuring appropriate capitalisation, recording and monitoring of fixed assets, including intangible assets such as intellectual property and software
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Checking procedures for spending, managing and accounting for restricted and endowment funds
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Recording decisions when approving any loans, including assessments of recipients’ ability to repay.
RSM also warned against an “over-reliance on one person when undertaking financial transactions”.
It said: “Segregation of duties is a big part of the online banking guidance in CC8, which recommends the use of dual authorisation systems in any setup or changes to bank mandates.”
Sladden concluded: “Critics have argued that some of the guidance is overly simplistic and too obvious. However, when controls fail, are overridden, when fraud occurs, or the accounting simply goes wrong, it is usually due to a simple weakness in the system that has been overlooked.
“Following the CC8 and CC3 guidance can go a long way to eliminating risks.”