We have a charity client that is a fee paying school in London. This charity was set up to provide education to the children of foreign nationals of one particular country living in the UK.
We were approached by the charity’s trustees who were not satisfied with the management letter they had received from another firm of auditors because they felt it did not demonstrate an understanding of the school’s systems. They were also unhappy with the information that the school’s management was distributing to them as they felt it was often out of date and lacking sufficient depth to allow them to perform their role affectively.
We met with two of the trustees who had been selected to oversee this process, together with the school’s headmaster, to agree a work plan and the scope of the work that we were to perform.
As a result of this it was agreed that we would review the internal control processes in place in respect of the financial activities of the charity and produce a report for the trustees on our findings. The report was also required to be as non-technical as possible to reflect the trustees’ less in depth knowledge of the school’s day-to-day activities, compared to the directors of a commercial organisation, and also the fact that English was a second language for them.
We had two principal findings as a result of this process:
- The first of which was that good, detailed management information was produced on a monthly basis. However, it was then filed away, with only summary information being sent to the Treasurer, who in turn summarised it again before sending it on to the other trustees. This resulted in a significant delay and oversimplification of the data.
- Secondly, the school had very careful controls over the payment of cheques, but had recently introduced internet banking on which a single signatory could send out unlimited payments, subject only to funds being available.
As a result of this review the detailed financial information is now passed direct to the trustees as a whole, with the Treasurer producing a more useful summary to emphasise the Key Performance Indicators identified as essential to the school. A formalised process has also been introduced for online payments and BACS to minimise the risk in this area.
If you would like to speak with a member of Vantis' Charity & Not for Profit Group about a review of your internal control processes, please contact us.