Over the last few months, the Charity Commission has released new guidance in a couple of areas relating to Charity finances, namely in respect of internal controls and investments. In this article we take a brief look at each.
Internal Controls
At the end of April 2023 the Charity Commission published updated guidance on internal controls for charities “Internal Financal Controls for Charities (CC8)”. The guidance has been updated to reflect changes in legislation and practice over the last few years, particularly brought about by more modern payment methods and changes to operating practices because of the pandemic.
The guidance has been significantly updated to look at more detailed financial controls that a charity should have in place. The guidance also now covers fraud and cybercrime, the risk of operating overseas and the risks of corruption and bribery. Guidance on internal audit and the role of the audit committee has also been updated with a specific direction that if a charity is required to have an external audit it should have an internal audit committee.
In addition, there is detailed practical guidance on expenditure, which not only covers authorisation of invoices but also considers other controls that may be required such as purchase ledger reconciliations, authority limits, purchase orders and whether invoices are paid on time, as well as the need to have appropriate controls for any reimbursed expenses. For payroll, the guidance includes a reminder that this is not only around the payroll cost controls but also covers controls around starters, leavers and changes to employees’ data from their contract to their bank details. As mentioned, the guidance also provides advice on modern methods and issues such as cryptoassets and payment methods like Apple or Google Pay, bank mandates and use of credit cards.
There are also now sections which cover:
The internal control checklist has also been updated and follows the updated sections and guidance of CC8. The breakdown of the checklist into these sections means it is easier to focus on specific areas of internal control risk when reviewing the checklist.
Financial controls are an area that trustees should take seriously and given the various changes to operating practices the controls required today are very different from those required in the past. Therefore, the publication of this new guidance is very timely and now is a good time for charities to review how they operate in this area.
Investments
At the beginning of August, the Charity Commission also announced renewed guidance on charity investments with the publication of “Investing charity money: guidance for trustees (CC14)”.
The Charity Commission stated “CC14 has been redesigned to offer greater clarity and to give trustees confidence to make investment decisions that are right for their charity”. The guidance makes it clear that trustees have discretion to choose what is best in their circumstances and have a range of investment options open to them – provided the investment ultimately furthers the charity’s purposes.
Amongst other things the guidance:
The guidance provides several examples to help trustees identify the factors that are relevant to their own charity’s situation and then use this to determine how to approach their investment decisions.
For more information on this, please contact our Charities and Education team.
