Don’t leave it to your treasurer to understand your finances, says Neil Robertson of the Charity Commission.

Would you be able to explain your charity’s financial controls? Just recently a colleague met the trustees of a charity, and asked about their financial controls. She was told that she would need to talk to the treasurer, who hadn’t been able to come to the meeting. None of the other trustees could help.

This isn’t good practice, though it didn’t surprise us. So often anything financial is left to the charity’s treasurer or, in larger organisations, the finance director and those trustees who are part of the finance committee.

And yet all of the trustees are responsible for ensuring that their charity’s resources are protected and properly managed. As so often is the case in ensuring a healthy organisation, it starts at the top with the trustees. If they are seen to be serious about effective controls, then it is more likely that this culture will be embedded throughout the organisation.

So what are healthy internal financial controls? A couple of examples: a charity providing regular updates about the charity’s financial position and performance to trustees. Making sure that more than one signature is needed for financial transactions. Making sure that there are two unrelated people present counting and recording income from donations.

Looking back over some of the cases in the last year, we’ve seen examples of extremely poor practice. In some organisations, blank cheques countersigned in advance; in others funds collected in a bucket from the public and the expenses taken out before the money was counted and banked. Payments to suppliers not being supported by an original invoice. Salaries paid in cash. Unmanaged conflicts of interest with trustee expenses authorised by the individual’s spouse. In some we’ve seen trustees duped by a story that should have been recognised as a scam.

One example for you: we were alerted to a playgroup where large sums of cash were regularly being withdrawn from the charity’s bank account. When asked, we were told it was needed for petty cash, but the trustees could not explain to us what it was used for and there was no trail to show us how it had been spent. This is not good enough. Some of the trustees clearly had their eye off the ball; they did not know what was happening and expressed surprise when we told them.

From time to time we learn of situations where the trustees of a charity have put their trust in a single individual who has handled all of their financial matters and may have been in post for a number of years. The trustees then discover that the individual had abused their trust. Usually few or no checks will have taken place that could have discovered the fraud and the charity will have a serious lack of financial controls.

I would recommend putting financial controls on the agenda for your next meeting or awayday and consider whether you have proper financial controls and procedures to protect your charity’s funds. Our internal financial controls checklist is a good starting point, providing a self-assessment checklist for use by trustees. Not all of these things will be relevant to you but some of them will be.

It’s true that however good the controls, a charity cannot be totally protected. But should there be any problems, you’ll know and be able to demonstrate that you did the right thing.

Neil Robertson is head of caseworking at the Charity Commission.