Charity Finances - Why Financial Controls are So Important

For many smaller charities, financial controls might seem like unnecessary “red tape.” When trustees, staff, and volunteers know each other personally, there’s often a sense of trust that makes formal systems feel redundant. However, Financial controls are the policies and procedures that protect your charity’s resources and ensure they’re used appropriately. These measures help prevent fraud, errors, and mismanagement.

For unincorporated charities, the stakes are even higher. Trustees and committee members could be held personally and collectively liable for financial misconduct or losses. Without strong financial systems, your charity may also struggle to meet its legal obligations or satisfy funders and donors, who expect transparency and accountability.

Practical Steps to Strengthen Financial Controls

Implementing financial controls doesn’t have to mean layers of bureaucracy. Simple, practical steps can make a big difference:

• Separation of Duties: Ensure no single person has control over all aspects of financial transactions (e.g., one person raises funds, another records them, and a third approves spending).
• Regular Monitoring: Establish a process for reviewing bank statements, receipts, and budgets regularly.
• Written Policies: Document procedures for handling cash, approving expenses, and managing donations.
• Financial Training: Make sure trustees and volunteers understand basic financial management and their responsibilities.
• Independent Reviews: Arrange for an external review of your accounts periodically, even if it’s not legally required.

You can read more about Internal Financial Controls for Charities on the Charity Commission website here.

The Growing Threat of Cyber Crime

Cyber-crime is on the rise, and charities are increasingly becoming targets. Criminals seek to exploit charities’ reliance on digital tools to steal money, sensitive data, or disrupt operations.

Cyber threats include:

Phishing: Fraudulent emails or messages tricking individuals into revealing sensitive information or installing malware.

Ransomware: Malicious software that locks your systems until a ransom is paid.

Data Breaches: Theft of donor, staff, or beneficiary data, potentially leading to fines and loss of trust.

Charities that fail to take cybersecurity seriously risk not only financial loss but also the exposure of sensitive information, which can be devastating for their reputation and stakeholders.

Guidance on how to protect your charity from Cyber Crime is available here. 

Safeguarding Your Charity’s Future

Financial controls aren’t just about preventing problems—they’re about building a resilient charity that can weather challenges. Transparent and robust systems inspire confidence among donors, funders, and beneficiaries. They also free up your time to focus on your charity’s mission, rather than firefighting avoidable crises.

By taking the time to implement and maintain strong financial controls, your charity is investing in its own sustainability.

If you need further help and guidance on this or any other matters affecting your organisation then you can contact our experienced Community Development Team for assistance by email here or by calling 01362 698216.