16 August 2019
You might think that internal controls are not that important to your charity - but they are and can make a real difference to how you run your charity and how effective it is.
If you are a large charity then chances are you already know about the importance of internal controls as these will be looked at by your external auditors on an annual basis. But if you are a smaller charity there is often not much emphasis on internal controls and, as such, some charities are not aware of how important they can be and they neglect them.
Simple things can make a big difference.
If you have the same person counting cash and then banking it then there may be a risk of misappropriation. However, if you have one person counting the cash, and another person doing the banking, the risk that cash may go missing reduces. This is known as segregation of duties and should apply to things like authorising expenditure, and actually making payments to suppliers, as well as changing supplier bank details.
The above is a fairly simple control, but for some charities having simple processes and controls like this can be difficult as there are not many people working for the charity.
So what do you do?
Wherever possible you should try to ensure that there is some sort of segregation so that no single person is responsible for a complete process. If this is not possible, then regular reconciliations of bank accounts should be done by someone not involved in the day-to-day processing of transactions - perhaps by a Trustee. Having some internal controls in place is about building a good control environment, which in turn is important in safeguarding the assets of a charity.
Alongside controls, having defined policies and procedures in place can really help a charity to be effective and efficient - it means that everyone who works in the charity knows who can do what, and when something needs further authorisation. This can also save embarrassment and can help cut out errors - as we are human after all.
If you want to know more about internal controls and your charity please contact me or one of our Charity and Not-for-Profit Sector Team.
Alternatively, you can read more about the services we provide to charities here.
