Financial Controls charity policy
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Here is a comprehensive “Financial Controls Management Policy” for a registered charity, aligned with the Charity Commission for England & Wales guidelines. Replace “[Charity name] with the actual name of the charity throughout the document.
This policy provides a structured approach to Financial controls put in place for [Charity name], ensuring compliance with Charity Commission guidelines.
Financial Controls Policy
[Charity Name]
Introduction
As a registered charity, [Charity name] is committed to ensuring that its financial resources are managed effectively, transparently, and in accordance with the principles of good governance. Strong financial controls help protect the charity’s assets, ensure compliance with the law, and maintain public trust in its operations.
This policy outlines the financial control procedures that [Charity name] will follow to safeguard its financial assets, prevent fraud, and ensure that funds are used solely for the charitable purposes of the registered charity.
- Purpose
The purpose of this Financial Controls Policy is to:
– Ensure that [Charity name], as a registered charity, has robust financial controls in place to manage and safeguard its assets.
– Establish clear responsibilities and accountability for financial management within the registered charity.
– Prevent fraud, error, and mismanagement of the charity’s financial resources.
– Comply with the financial regulations set out by the Charity Commission for England & Wales and applicable UK laws.
- Scope
2.1 This policy applies to:
– All trustees of [Charity name].
– All staff and volunteers involved in financial management.
– Contractors, third-party service providers, and partners acting on behalf of the registered charity in relation to financial matters.
2.2 Financial controls apply to all aspects of the charity’s financial activities, including but not limited to:
– Income and donations.
– Expenditure and payments.
– Banking and cash handling.
– Financial reporting and record-keeping.
– Budgeting and forecasting.
- Roles and Responsibilities
3.1 Trustees
3.1.1 The trustees of [Charity name] hold ultimate responsibility for the financial management of the registered charity. Their responsibilities include:
– Ensuring the charity operates in compliance with Charity Commission guidelines and relevant financial regulations.
– Approving the charity’s annual budget, financial reports, and audited accounts.
– Regularly reviewing the financial performance of the charity.
– Ensuring that effective financial controls are in place and adhered to across the charity.
3.2 Treasurer
3.2.1 The Treasurer, as a designated officer, is responsible for overseeing day-to-day financial management and providing regular reports to the trustees. The Treasurer’s duties include:
– Monitoring cash flow and financial performance.
– Reviewing the charity’s bank accounts and reconciliation processes.
– Ensuring accurate financial records are maintained.
– Ensuring compliance with tax and regulatory obligations.
3.3 Staff and Volunteers
3.3.1 All staff and volunteers who are involved in financial transactions must:
– Adhere to the financial policies and procedures of [Charity name].
– Maintain accurate and up-to-date financial records.
– Report any suspected financial irregularities or breaches of control to the Treasurer or Trustees.
- Income and Donations
4.1 Receipt of Income
4.1.1 All income received by [Charity name], whether through donations, grants, fundraising, or other sources, must be properly recorded and deposited into the registered charity’s bank account promptly. Procedures for receiving and recording income include:
– Issuing receipts for all cash donations.
– Ensuring donations are accurately recorded in the charity’s accounting system.
– Recording restricted and unrestricted income separately to ensure compliance with donors’ wishes.
4.2 Donation Handling
4.2.1 For cash donations:
– Two staff members or volunteers must count and verify cash donations before they are deposited.
– Cash must be securely stored until it can be deposited into the registered charity’s bank account.
– A record of cash donations must be signed by both individuals handling the cash.
4.2.2 For online donations:
– The charity’s online donation platform must be secure and integrated with the charity’s accounting system.
– Regular reconciliations must be performed between online donation records and the bank account.
- Expenditure Controls
5.1 Approval of Expenditure
5.1.1 All expenditure must be approved in accordance with the registered charity’s financial authority levels:
– The Board of Trustees must approve large or exceptional expenses, as defined by the charity’s financial procedures.
– Smaller routine expenses may be approved by the Treasurer or designated staff members, in line with their delegated authority.
5.1.2 The charity must ensure that all expenditure is properly authorized and supported by relevant documentation, such as invoices or receipts.
5.2 Payments
5.2.1 Payments made by [Charity name] must follow strict controls to prevent fraud or error:
– Payments above a certain threshold, as determined by the trustees, must be authorized by two designated signatories.
– All payments, whether by cheque, direct debit, or electronic transfer, must be recorded accurately in the accounting system.
– Bank accounts must be regularly reconciled to verify that payments match accounting records.
5.3 Use of Charity Credit or Debit Cards
5.3.1 If [Charity name] issues credit or debit cards to staff members:
– Cardholders must only use the cards for legitimate charitable expenses.
– Receipts for all card transactions must be submitted and reviewed by the Treasurer.
– Monthly statements must be reconciled and reviewed by the Treasurer or Trustees.
- Banking and Cash Management
6.1 Bank Accounts
6.1.1 [Charity name] will maintain its bank accounts with reputable banks, and the accounts will be in the name of the registered charity. Procedures include:
– Ensuring that bank accounts are managed with dual signatory controls for withdrawals above certain thresholds.
– Regular bank reconciliations performed by the Treasurer or a designated staff member to ensure accuracy in financial records.
6.2 Cash Handling
6.2.1 [Charity name] aims to minimize the use of cash. However, where cash handling is necessary, the following procedures apply:
– Cash should be counted and recorded by two authorized individuals.
– Cash must be deposited into the charity’s bank account promptly.
– Cash handling should be minimized by encouraging the use of electronic payments where possible.
- Budgeting and Financial Planning
7.1 Budget Preparation
7.1.1 [Charity name] will develop an annual budget, outlining expected income and expenditure, which must be approved by the Board of Trustees before the start of each financial year.
7.1.2 The budget will include projections for core activities and any special projects or initiatives that the registered charity intends to undertake during the financial year.
7.2 Monitoring the Budget
7.2.1 The Treasurer, along with senior management, will monitor income and expenditure against the approved budget on a monthly basis. Variances between actual and budgeted figures must be reported to the Trustees, along with explanations for significant differences.
- Financial Reporting and Auditing
8.1 Financial Statements
8.1.1 [Charity name] will prepare annual financial statements in accordance with the Charity Commission for England & Wales’ requirements and UK financial reporting standards. These statements must include:
– An income and expenditure account.
– A balance sheet showing the charity’s assets and liabilities.
– Notes explaining significant financial activities, including restricted and unrestricted funds.
8.1.2 The financial statements must be reviewed and approved by the Trustees before they are submitted to the Charity Commission.
8.2 Independent Examination or Audit
8.2.1 [Charity name] will appoint an independent examiner or auditor, as required by law, to review the charity’s financial records and provide an objective assessment of its financial health. The Trustees must ensure that:
– The independent examination or audit is completed in a timely manner.
– The registered charity submits its financial returns to the Charity Commission within the required deadlines.
- Internal Financial Controls
9.1 Separation of Duties
9.1.1 To reduce the risk of fraud or error, [Charity name] will ensure that financial duties are appropriately separated. This includes:
– Ensuring that no single individual has complete control over financial transactions, such as approving, processing, and recording payments.
– Designating different individuals to manage bank reconciliations, payment approvals, and cash handling.
9.2 Fraud Prevention
9.2.1 [Charity name] is committed to preventing fraud. Key measures include:
– Implementing robust internal controls to detect and prevent fraud.
– Regular reviews and audits of financial records.
– Reporting any suspected fraud or financial irregularities immediately to the Treasurer or Trustees.
- Record-Keeping and Documentation
10.1 Financial Records
10.1.1 [Charity name] will maintain accurate and up-to-date financial records, including:
– Receipts, invoices, and bank statements.
– Donation records and acknowledgements.
– Records of income and expenditure transactions.
10.1.2 All financial records must be kept for a minimum of six years, in compliance with UK legal requirements and the Charity Commission guidelines.
10.2 Data Protection
10.2.1 All financial records containing personal data will be stored securely in compliance with the General Data Protection Regulation (GDPR). Only authorized individuals will have access to financial and personal records.
- Compliance and Legal Obligations
11.1 [Charity name] is committed to complying with all financial regulations and laws applicable to registered charities in the UK. This includes:
– Meeting the requirements set out by the Charity Commission for England & Wales.
– Filing accurate and timely returns, including annual financial statements and tax returns.
11.2 The charity will seek professional advice when necessary to ensure compliance with changes in legal and financial regulations.
- Review of Policy
12.1 This Financial Controls Policy will be reviewed annually by the Board of Trustees to ensure its effectiveness in safeguarding the financial assets of [Charity name].
12.2 Any amendments to the policy will be approved by the Board of Trustees and communicated to all staff and volunteers involved in financial management.
- Conclusion
13.1 By adhering to this Financial Controls Policy, [Charity name], as a registered charity, ensures that its financial resources are managed with integrity, transparency, and accountability. The charity is committed to maintaining the highest standards of financial management and safeguarding public trust in its charitable operations.
Signed: ………………………………
[Chair of the Board of Trustees]
[Date]
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Disclaimer:
Naail & Co provides these policy templates solely as guidelines or standard templates to assist charities in developing their own policies in accordance with Charity Commission England & Wales compliance. These templates are not intended to serve as legal or professional advice, and Naail & Co cannot be held responsible or liable for any outcomes arising from their use. It is essential that each registered charity carefully tailors and customizes these policies to reflect its specific needs, structure, and legal obligations. We strongly recommend that charities seek independent legal or professional advice to ensure compliance with all relevant laws and regulations.
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