A series of revisions were issued in 2010 to the Charity Commission guidance notes covering the following areas:
Internal Financial Controls (CC8)
Managing Financial Difficulties and Insolvency (CC12)
Charity Reserves (CC19)
Risk Management (CC26)
For some of the revisions it merely a case of updating for changes in the Charities Act 2006 and therefore little has changed in the guidance, but with changes in technology and the difficult economic environment, a couple of the revised guidance notes will be more relevant to the school sector:
- Internal Financial Controls (CC8)
Whilst most school charities have good financial controls, the revised guidance on Internal Financial Controls in CC8 highlights areas such as use of electronic banking where controls may need reviewing. Schools can be good about ensuring appropriate limits for cheque signing, but it is not uncommon to find weaker controls over electronic banking such that, sometimes, the biggest monthly outgoing in a school’s bank account, the salary BACS transfer, is all transacted by one person in the finance team, which could pose a greater risk of fraud or error than when cheques were more prevalent.
CC8 has a suggested self- assessment checklist on financial controls, which may help to indicate where financial controls are weak and where procedures need tightening.
- Managing Financial Difficulties and Insolvency (CC12)
The guidance note is helpful in providing advice and information for trustees of charities facing financial difficulties, but also considers how to minimise the risk of insolvency for any charity by putting effective financial management in place.
At Alliotts we have seen very clearly amongst our school clients that those schools that have effective management and financial control in place, tend to be the ones which have coped better with drops in school numbers, or have barely suffered at all from the current economic climate.
From our experience, the key areas of focus for school charity trustees as shown in CC12 include:
- Preparation of budgets and projections
- Establishing effective internal financial controls
- Monitoring of budgets and year end forecasts
- Diversifying income streams (perhaps through trading subsidiaries)
- Identifying and managing risk
- Setting clear a policy on reserves and their utilisation
- Monitoring investments performance (where held)
- Seeking appropriate professional advice when looking at significant financial commitments
- Considering mergers to spread overhead costs or increase income streams
If you need any help with any of these areas please do not hesitate to contact us.