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Charity probe highlights need for robust record keeping, says adviser

This news post is 10 months old

Experts on audit and tax have shared the warning after regulator opens compliance case. 

RSM UK is reminding trustees of the importance of keeping detailed, up to date records to avoid regulatory action and hefty fines.

The leading audit, tax and consulting adviser shared the warning as the Charity Commission launches a probe into an armed forces charity’s unaccounted funds

In this case, auditors were unable to source records to account for £89,000 of expenditure and £151,000 of donations. 

Charities are now being advised to follow the recently updated Charity Commission guidance, ‘Internal financial controls for charities’, known as CC8, to ensure 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. 

“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. 

“This needs 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.”

RSM recommends trustees should review their charity’s financial controls annually as a minimum, using the downloadable checklist provided on the Government’s website. 

It’s also important to be familiar with the Charity Commission’s CC3 guidance - the essential trustee: what you need to know, what you need to do.

An over-reliance on one person when undertaking financial transactions is also a major cause of issues for charities and should be avoided, RSM warned. 

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. 

Nick Sladden added: “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.”



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