Who’s afraid of financial controls?

Rachel Cooper, Small Charities Programme trainer looks at the love-hate relationship many small charities have with Financial Controls.

As I’ve been delivering the Small Charities Programme Training, I’ve been very surprised at how much debate and discussion has been provoked the particular challenges posed by financial controls in small organisations.  There have been great exchanges of ideas (and plenty of wry nods of recognition).

Firstly there is the issue of setting them up – what does “segregation of duties” look like when one person does all the finance work?  And then once you have designed a workable system, how on earth do you get everyone else to go along with it?

WHAT?

There are many resources to help you think through the process of designing controls.  You could start with these thoughts from the Small Charities Programme Website or look at the CC8 checklist from the Charity Commission to get you thinking.

The biggest headache in designing controls seemed to be finding more than one person to authorise expenditure in a very small organisation.  Some of the solutions people came up with were:

  • Create a regular routine for payments and make appointments with local trustees or senior staff to drop by and approve
  • Make sure someone senior checks the bank reconciliation monthly
  • Get agreement that you can email or text for approval if you need it in a hurry

But in general people haven’t found it too difficult to understand or identify what controls should be in place, the common experience was the problems with changing people’s behaviour and getting staff to comply with procedures. Often we heard stories about senior staff & Trustees as the worst culprits, and that is very hard to shift.

HOW?

Communication – Although you do need staff just to fill in the right forms and implement the systems, it all works more smoothly if they know why they are doing it, and that it’s not just because you say so.   Communication is therefore so important.  Some organisations had question and answer sessions at team meetings when they introduced new procedures, some made sure the procedures were in the induction process for new staff, and others just factored in time for explanations, knowing that what was obvious to them was not obvious to other people.

Contribution – One organisation was very smartly taking on board the old adage “the best way to cope with change is to help create it” and collecting good practice from colleagues so that staff were presented with a manual that they had contributed to and was an adaptation of what they already did and not something imposed on them.  (I suspect it also saved the finance person a fair bit of drafting time).  The people who work with the processes are often best placed to help design the controls.

Champion – The other factor that people mentioned as crucial to their success was having genuine support from the Director and/or key Trustees.  This might take some negotiation but unless you know that you will be backed up when challenged you are facing an almost impossible task.  If you find you need some leverage, you could always point to the question about reviewing financial controls in the Charity Commission Annual Return, subtly reminding them of their responsibilities.

My final tip is to make judicious use of cake (or other suitable local currency) – over the years I have found that the odd bit of baking has helped many a conversation with tricky customers.