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Charity Commission Updates Its Guidance on Internal Finance Controls | CC8 Controls For Charities Updated

Charity Commission Updates Its Guidance on Internal Finance Controls | CC8 Controls For Charities Updated

Danielle Griffin

The Charity Commission’s Internal Finance Controls (CC8) guidance note is essential reading for all registered charities.

What areas have been changed?
The Charity Commission’s Internal Finance Controls (CC8) guidance note is essential reading for all registered charities. On the 26th of April, 2023, the Commission updated its guidelines for this for the first time since 2012, including new advice and the latest guidance covering areas such as using a mobile payment system and handling donations of crypto assets.

Revisiting the guidance would be advised for all charities, and a recommended agenda item for Finance, Governance, Audit and Risk committees.

Why Are Internal Finance Controls Important?
It is essential for all charities to protect their assets and maximise use of resources, and consequently an effective system of internal financial controls will help. Charities need to identify and manage risks within their finance systems, make more informed decisions about their financial position, and ensure that all their financial reporting aligns with all the relevant legal requirements. 

The internal financial controls should cover all processes the charity has in place for handling its funds. Also, internal financial management should include the wider resources it might control. 

What your Internal Financial Controls Should Cover

For internal financial controls to be successful, it should cover these key areas: -  
  • Banking, income and expenditure;
  • Payments to related parties;
  • Assets and investments;
  • Loans; and
  • hospitality, including gifts.

The Commission’s guide puts in place multiple principles that must be followed, such as: -
  • ​understanding what types of controls are appropriate for the charity;
  • understanding your charity’s financial information;
  • preparing accounts and reports;
  • embedding the financial controls within the charity;
  • monitoring financial performance;
  • reviewing and monitoring internal controls;
  • segregating financial duties between people to provide a more thorough check on transactions; and
  • recording and reporting incidents.
Updates to cybercrime on charities
In addition to these principles set out by the Commission, they also ask charities to be vigilant on cybercrime. Cybercrime on charities has been rising and a key example of where charities have lost out is phishing emails. With new and innovative forms of emails being distributed, the perpetrators have become more credible and sophisticated. 

Small charities often fall victim to cybercrime due to a lack of awareness or online safety. The Commission has guidance that will help you learn about the potential dangers.  

Donations of crypto assets
The continuous development of emerging technologies has pushed the Commission to support charities navigating this ever-changing landscape with the development of new technologies, such as Crypto assets like NFTs and Virtual Currencies. A whole new set of potential risks arise, such as the stability of their value, potential fraud or theft by hackers and the lack of protection compared to traditional currencies.

While it’s currently unlikely, the Commission asks that if your charity decides to accept crypto assets, you must understand the risks involved and ensure they have the right people to manage the risks carefully. 

Further guidance on the use of mobile payment systems
The Commission has made multiple updates to this area, such as updating the current advice on fundraising, holding public collections, making payments to related parties, and operating your charity internationally. 

The updated guidance is accompanied by a new checklist to help charities test their internal financial controls against the legal requirements and good practice recommendations.

Internal financial management should be reviewed regularly to ensure they are up to standard and to identify any areas of improvement to your current Internal financial control processes. 

Read the complete guidance checklist on Internal Financial Controls for Charities (CC8).  

Speak with a charity specialist
If you are looking to understand how to improve your current internal finance controls and how to align with the new guidance from the Commission in 2023, we would recommend speaking to a Charity Partner at Moore (South). Our Charities team will help you organise your Internal Finance controls to help your make wiser decisions about your financial position.