Financial Controls for Nonprofits

Strong financial management is vital for nonprofits of all sizes. Having the right checks and balances protects your assets, ensures accountability, and aids informed decision-making.

What Are Financial Controls?

Financial controls are systems and processes designed to:

  • Prevent misappropriation of funds
  • Support accurate and transparent financial reporting
  • Align financial management with budgets, objectives, and compliance obligations.

Who is Responsible for Financial Controls?

Your board has ultimate responsibility for managing the organisation’s finances. While staff or an accountancy firm may handle daily tasks, the board must ensure controls are in place and followed.

You can achieve this through several methods:

  • Regularly review financial reports at board meetings. We suggest making financial updates a standing item.
  • Formally approve financial policies, procedures, and any updates.
  • Approve the annual budget, including mid-year reforecasting.
  • Conduct periodic internal reviews of financial controls and compliance.
  • Arrange for independent examination or audit when needed.

Proportional Approach: Tailored to Your Size

  • Smaller organisations may use simple Excel spreadsheets to track finances.
  • Larger organisations need more robust systems, such as dedicated budgeting and reporting software.

Regardless of your size, document policies and procedures to protect your finances.

The Wheel offers its Financial Policies & Procedures for free for members. These serve as a useful reference when creating your own. Access them here.

Core Elements of Effective Controls

Authorisation & Segregation of Duties

No single person should control all aspects of a financial transaction. Require dual authorisation for payments like payroll and supplier invoices.

Expenditure Processes

Use standard procedures for purchasing, credit card use, and expense claims. Support all expenditure with invoices and receipts.

Approval Levels

Set clear sign-off authorities for invoices and reimbursements, detailing who can approve spending at different levels.

Banking Controls

Use dual signatories for bank accounts, restrict online banking access to named individuals, and conduct regular independent bank reconciliations.

Budgeting

Get board approval for annual budgets and conduct ongoing reviews

Management Reporting

Provide timely financial information to management and trustees. Include variance analysis between budget and actual income and expenditure.

Income Management

Track all income sources, like donations and grants.

Accounting Systems

Maintain accurate ledgers and banking records; use software that provides audit trails.

Funder Reporting

Follow reporting rules set by your funders.

Record Retention

Store financial records securely and keep them in line with Revenue or funder requirements (generally at least six years).

Fraud Response

Establish procedures for whistleblowing and investigations. If you discover financial impropriety, you must report it to the Charities Regulator.

Guidelines from the Charities Regulator

The Charities Regulator provides detailed guidance on Internal Financial Controls for Charities, covering:

  • Procedures for income, expenditure, banking, assets, investments, and fraud
  • Monitoring mechanisms and fraud prevention advice

General guidance is available for all organisations, along with a separate guide for smaller charities.
This reference is ideal for trustees and finance teams reviewing system robustness.

You can find these guidelines and other resources on their website.

Note

These guidelines were recently updated in 2025. Ensure you follow the most current versions.

Join The Wheel today and avail of membership deals

Find out how you can cut your costs, and maybe even avail of FREE membership, by joining The Wheel today.

Become a member