Prevent and deal with financial problems and fraud: how trustees can meet their legal duty to look after their charity’s money.
Protect your charity’s money
Effective processes for handling money can help you avoid bad decisions and accidental errors, as well as deliberate theft and fraud.
Trustees have a legal duty to look after their charity’s money and other assets.
Processes for handling money include:
- setting a budget and keeping track of it
- having clear policies to deal with money coming in and out
- keeping accurate accounting records
Use this checklist to make sure your charity has the right controls over its money:
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Set a budget and follow it
You should have a budget for your charity – a plan that sets out:
- how much money your charity has
- how much it plans to make
- how much it plans to spend in a given year
Check how much your charity spends against how much it planned to spend in any given month and report on this at trustee meetings. Raise any issues - like a significant over or under-spend - as soon as possible.
The National Council for Voluntary Organisations’s budgeting guide explains charity budgeting and planning in more detail.
Deal with money coming in promptly
Your charity may receive money from a number of sources, such as donations, legacies, or fundraising. You need to make sure that all money coming in is:
- secure – for example, putting unopened post in a locked drawer in case it contains donations
- recorded – for example, numbering collection boxes and recording when they are issued and returned
- banked as soon as possible
Keep records of any payments you make
You must be able to account for all the money you spend to help your charity meet its aims. For example, you must make sure that:
- anyone making payments or buying goods for the charity is authorised to do so
- your charity has budgeted to spend this money
- you check the prices in invoices against the quotes in your original order
It’s harder to keep track of cash payments so only use petty cash for small amounts.
Have an expenses policy
Set an expenses policy for your charity and tell everyone who will be claiming or signing off expenses. For example, your policy could state that expenses claims must:
- be authorised by someone else
- make sure the claimant certifies the claim is accurate and for money spent on charity business
- be paid by cheque or bank transfer, not cash
- pay mileage at HM Revenue and Customs rates
Keep accurate accounting records
All charities must prepare accounts and trustees’ annual reports.
You have a legal duty to:
- prepare accounts for your charity each year
- prepare a trustees’ annual report each year
- keep accurate accounting records for at least six years (three years if your charity is a company)
Deal with financial problems quickly
If your company charity or charitable incorporated organisation can’t pay its debts, it could become insolvent and face administration or closure.
If your charity is an unincorporated association or trust, you and the other trustees could be liable for its debts.
Act quickly if your charity won’t be able to pay its debts, either with its income or with its assets. Take professional advice as early as possible – this will help you work out what action to take.
- developing alternative sources of funding or launching an emergency appeal
- borrowing money from banks, members or stakeholders
- reducing actual or planned spending
- stopping doing some of your charity’s activities