Why delegated authorities and financial controls matter for charities
Julian Lomas
We frequently get asked by clients to help them “sort out their policy framework”. More often than not what they really want is for us to give them templates to complete either because they somehow “know” that they should have certain policies and/or because they need to provide copies as part of a grant application.
This can lead to the worst “tick box” approach to compliance and completely misses the point of policies, which is to protect the charity, its staff, volunteers and beneficiaries from risks. Policies are pointless unless they reflect day to day practice and vice versa. They must say what you do and you must do what they say.
It is true some policies can easily be put together from templates, and examples or templates are helpful for getting started with some of the more complex policies, like data protection, safeguarding, health and safety and financial management.
However, it is always the case that those more complex policies are also the ones that need to be bespoke to your charity’s situation. When looking at examples or templates in those areas you need to take time and think critically about what it is practical and necessary for you to do to manage the risks involved.
This is especially the case when thinking about financial controls. To give a trivial example, what is the point of adopting policies on cash handling and petty cash if you never have any cash to manage? More seriously, procedures for checking income and payments needed to protect against fraud or misuse of funds, must reflect the staff, volunteer and IT resources available to your organisation, otherwise they won’t make any difference to your actual risk exposure. And yes, even if you completely trust everyone involved it is essential to have procedures for checking and oversight to protect those involved from false allegations of misconduct.
This is equally true of delegated authorities, by which we do not just mean how much money any particular person in the charity is allowed to spend without higher authorisation. This extends to who can execute contracts, submit funding applications and make decisions on operational, strategic and governance matters, including making clear what is reserved to the Board for decision. Being clear about who has authority to do what protects the charity against dominance in charity governance (the single most common factor that leads to fraud, mismanagement and charity failures). And again, it protects each person involved against false allegations (providing they follow the policy).
Of course, taking care of the charities money and assets is, one of the core duties of Trustees, and many consider it to be THE core duty. Having decent financial controls in place is essential to ensure there is no breach of trust on the part of your Trustees, something that could have very serious personal consequence for them if misconduct or maladministration were to be discovered within the charity.
If all this isn’t enough to convince you that your charity needs robust, practical financial controls and delegated authorities, then we suggest you look at the Charity Commission’s consultation on revisions to charity annual returns.
“We plan to retain an existing question on whether the charity has reviewed its financial controls and to supplement this with a new question on the charity’s policies and procedures. We will use this data to help us provide specific advice and guidance where charities appear not to be following relevant requirements. This should be straightforward for a charity to complete, as it does not require additional data monitoring.”
This makes it clear that the Commission plans to start acting on the information provided in response to the question on financial controls in the annual return and they intend to extend this to other policies and procedures. So it makes sense for charities to get things in order before the Commission comes knocking.
Preparing a proportionate, yet robust, financial controls and delegated authorities policy needn’t be a chore and it really can help tighten up your practice and/or reduce reliance on (for example) the Treasurer for making sure the money is looked after properly (which in itself poses substantial risks). The same is true for other keyboarders policies, but take care of the money is a good place to start.
To find out more about the governance support and training we offer, including help to develop policies and procedures, please contact us at julian@almondtreeconsulting.co.uk to arrange free initial telephone discussion.