Although independent examination (or audit) is an annual requirement, it does not mean to say that your charity couldn’t also benefit from an external financial assurance professional’s scrutiny at points during the year.

There is limited guidance on internal audit for charities, with mostly only large organisations in the sector having established, year-round provisions and cyclical reviews.

Small and medium-sized charities however can still draw valuable assurance drawn from the report of a third-party scrutineer. Such reviews can be particularly advantageous, for example:

1. If there are areas of activity which your Board has less sight over — for example, branches or events;

2. If there is a significant change to the charity’s risk profile — for example due to staff turnover, new activities, new legislation or regulatory requirements, or indeed a misdemeanour or fraud;

3. Where regularity and propriety must be demonstrated to a donor or funder.

Assignments for internal assurance (1 & 2).

For your small or medium-sized charity, engage an external assurance consultant to:

• Design programmes of testing to give Trustees assurance that day-to-day finances are conducted with appropriate controls in place, which reduce the risk of impropriety, non-compliance or fraud.

• Make useful recommendations for improvements in the design or operation of controls.

• Report on instances where controls had broken down or there was non-adherence with established policies and procedures.

Areas of potential scope for scrutiny reviews and consulting include:

• Financial oversight — review of the format of management accounts for improvement, assessment as to the quality (timeliness, accuracy, relevance) of financial data presented to Trustee Boards and any relevant Sub-Committees. This could include a review of branch-level activity if your charity operates over a number of different locations, for example schools, parishes or community groups.

• Financial planning and budgeting — review of the sufficiency of forward planning, whether cash flow forecasts are appropriately prepared and to what extent underlying assumptions are prudent, and the effectiveness of budgetary control.

• Related party transactions — review of the adequacy and effectiveness of controls around conflicts of interest, policies around declarations of interest and the extent to which staff and Trustees engage with these, how the entity ensures related party transactions are identified and disclosed where appropriate.

• Payroll — procedures for authorisation of amendments, sufficiency of review of payroll prior to payment, oversight by senior staff or Trustees, any considerations around the use of temporary staff and how they are procured, any informal working arrangements which give rise to risk, sufficiency of HR salary-related documentation.

• Non-payroll expenditure — effective delegation of authority, tender procedures, payment controls and mitigation of fraudulent payment risk.

• Income streams — assessment of controls in place around collecting and recording income, to prevent fraud or loss, or error in the financial statements.

• Fixed assets — review of the fixed asset register kept for accounting purposes, consideration of wider controls around physically security, and monitoring for asset impairment.

• Other balance sheet accounting — controls around cut-off, reconciliations, credit control, accurate recording of liabilities, adequacy of credit control procedures to ensure validity of debtor balances.

Assurance conclusions for a third party (3).

Some examples of common third party assurance engagements in the third sector include:

• Donor-commission grant audits.

• Regulator-imposed scrutiny obligations.

• Due diligence in advance of potential merger, imminent close working or joint venture.

As prescribed assurance conclusions and ‘agreed procedures’ vary hugely dependent on the exercise, it is best to utilise a charity specialist financial or other professional, who has experience conducting similar engagements in the past.

Fee quotes might typically be constructed on the basis of budgeted time to be spent in conjunction with an established daily / hourly rate, which ranges from £300 to £1,000 per day, dependent on the experience of the consultant involved.