Charity Commission delivers updated guidance on internal financial controls

In an effort to support charitable organizations in an ever-evolving digital landscape, the Charity Commission has released updated guidance on internal financial controls (CC8).

Internal financial controls play a pivotal role in safeguarding charities and their valuable resources, which is a key responsibility for all trustees. Recognising the diverse operational methods charities use, the Charity Commission has streamlined and enhanced the clarity of its guidance.

So what’s new?

The Charity Commission has restructured the guidance and simplified the language so readers can easily find the information they’re looking for. As trustees very often manage their duties alongside other work and personal commitments, the new CC8 is also shorter to make it easier to read and put into practice.

They’ve also added new sections to reflect the dynamic ways charities operate. These cover issues such as:

• using mobile payments systems, such as Google Pay and Apple Pay
• accepting gifts and hospitality
• dealing with donations of cryptoassets

Why is this important?

Trustees have a legal duty to manage their charity’s resources and ensure their charity is accountable. While certain financial considerations can be delegated, trustees ultimately remain responsible for their charity’s finances and for making sure it has suitable internal financial controls in place.

Finances aren’t just for the treasurer or a finance sub-committee – if a charity even has one. Robust and well-understood internal financial controls support trustees in meeting their legal duties and help them make sure their charity operates effectively and efficiently. They also help protect the charity’s assets from internal and external risks.

Adapting to a changing landscape

Following the Covid-19 pandemic, numerous charities took to providing their services online or using online services themselves. This marked many trustees’ first encounter with online payment systems and the management of potential cyber risks. While some may have been familiar with online payments, cryptoassets are a new frontier. The revised CC8 guidance now covers these emerging areas, reflecting the increasing digitalisation of donation processes and asset management within charities.

Cryptoassets in particular are rapidly evolving technologies. The Charity Commission published a blog last year aiming to clarify the nature of cryptoassets and whether charities should accept them.

Charity resources remain under strain as the difficult economic climate continues.

As money gets tighter, you can protect your precious resources by ensuring your charity’s internal financial controls cover the right areas and are properly followed.

What should trustees do?

The Charity Commission encourages trustees to take the opportunity to read through their new guidance and discuss their charity’s internal financial controls at their next meeting. Trustees can use the accompanying checklist to help identify any gaps their charity may have and take action to address them.

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