Without stating the obvious, charities exist to pursue their charitable purposes in a way that delivers public benefit rather than private gain. It is therefore important that charities have robust financial policies and procedures to ensure that donations are protected, spending is transparent, and trustees remain in control of how money is used. Without them, even well-meaning charities can run into serious trouble, putting their reputation and mission at risk.

Financial policies should cover key areas such as:

• Cheque and payment authorisation – Ensuring that all payments are reviewed, approved, and recorded properly, ideally with dual signatories for cheques (yes, some charities still use them - see below) and dual authorisations for online banking.
• Cash handling procedures – Keeping cash use to a minimum and having strict documentation and security controls where it’s unavoidable.
• Bank account management – Regular reconciliations and restricted access to prevent misuse.
• Trustee oversight – Trustees should understand the charity's finances and feel confident to challenge anything that seems off.
• Internal audits and reviews – Regular checks help detect issues early and show funders and regulators that you’re serious about accountability.

These policies are the foundation of good governance and public trust.

What happens when things go wrong: the £22 million example

The Charity Commission has launched a statutory class inquiry into a group of ten charities. Between December 2021 and March 2023, they were part of 105 charities that issued cheques totalling £22 million, which were then exchanged for cash via a company based in Hackney. The Commission is investigating how the charities' trustees had oversight of the use of the cash and whether it was used to further the charities' objects.  

This raised serious red flags:

• Cash is hard to trace. When a cheque is cashed, there is no clear record of who received the money or how it was spent. That is a big problem for charities that are supposed to be transparent.
• It’s risky and open to misuse. Unlike digital payments or direct bank transfers, cash can be easily lost, stolen, or spent inappropriately, and it’s difficult to prove otherwise.
• It looks suspicious. Moving such large amounts into cash with no obvious reason can appear like an attempt to hide activity. This can suggest potential fraud or mismanagement, even if that wasn’t the intention.

The Charity Commission is investigating whether the trustees exercised proper financial oversight and whether the money was used in line with the charities’ stated purposes. You can read the official announcement here.

The takeaway: prevention is better than investigation

This case should be a wake-up call for all charities. Strong financial controls are critical. They protect your funds, your team, your beneficiaries, and your reputation.

If you’re a trustee, staff member, or volunteer, ask yourself:

• Do we have clear financial policies in place?
• Are payments properly authorised and documented?
• Is cash usage monitored and justified?
• Are we confident we can account for every penny if asked?

If not, now is the time to act. Putting financial procedures and policies in place will prevent issues further down the line. For assistance with drafting or reviewing policies, please speak to me, Edwina Turner.