Internal financial controls for charities CC8

The Charity Commission issued updated guidance on 26 April 2023. The guidance has been significantly updated to look at more detailed financial controls that a charity should be expected to have, including advice and practical guidance, as well as details of changes to the law.

Therefore, the main changes are to redesign the guidance, update the controls questions and to focus attention on specific charity risk, which means the guidance now references fraud and cybercrime, risk of operating overseas and risks of corruption and bribery as specific operational risks to consider. The use of internal audit and the role of audit committees is updated also.

As expected, there is detailed guidance on expenditure, which not only covers authorisation of invoices but also considers 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, a reminder that this is not only around the payroll costs controls but also with regards to starters, leavers and changes to employees’ data from their contract to their bank details. The guidance is also considering modern methods and issues such as cryptoassets and payment methods like Apple or Google Pay, bank mandates and use of credit cards, as well the basics of undertaking bank reconciliations.

There are now sections, which cover the following:

• Internal financial controls for banking
• Internal financial controls for income
• Internal financial controls for expenditure
• Internal financial controls for payments to related parties
• Internal financial controls for assets and investments
• Internal financial controls for loans
• Internal financial controls for hospitality, including gifts

Finally, 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 hone in on specific areas of internal control risk when reviewing the checklist.

The guidance and checklist can be found here:
https://www.gov.uk/government/publications/internal-financial-controls-for-charities-cc8/internal-financial-controls-for-charities#internal-financial-controls-checklist