Charities exist to do good but that doesn’t make them immune to financial risks. With growing scrutiny around governance and an increasing number of charity fraud cases making headlines, strong financial safeguarding is more important than ever.
At Holy Brook, we work particularly with small and medium sized charities and we’ve seen the difference that simple, well-planned controls can make. We’re often asked how can charities prevent fraud, and this blog outlines some of the basics of financial safeguarding, and how charities can protect their funds, staff, and reputation.
Why safeguarding matters in finance
When most people think about safeguarding in the charity sector, they think about protecting service users. But safeguarding your finances is of course also important. Poor oversight or gaps in processes can lead to errors, fraud, or misuse of charitable funds – all of which can damage public trust and reduce the impact of your work.
Fraud is often internal and opportunistic, rather than elaborate or planned. A simple lack of oversight or too much trust in one person can lead to big problems down the line, and good practice can both protect the organisation and innocent staff and volunteers from false accusations.
Key Principles of Financial Safeguarding
1. Segregation of duties
Wherever possible, avoid having one person in control of both spending and record-keeping. Even in small teams, introduce checks like having someone review bank statements or introducing second authorisation of payments.
2. Documented policies and procedures
Have a clear written policy that explains how financial decisions are made, who signs off on payments, how expenses are claimed, and what happens if something goes wrong.
If you already have a finance policy — make sure that you have a regular process to review and and update it. Your Independent Examiner will often ask about this
3. Board level oversight
Trustees are ultimately responsible for the charity’s financial health. Make sure the board receives regular, clear financial updates and that trustees are confident reading and questioning the figures.
Training for trustees is available through organisations like NCVO, CFG, and the Charity Commission itself – you might want to consider local training (our director Rachel Eden often delivers inroduction to finance training courses through Reading Voluntary Action) or even the ‘5 minute’ guides offered by the charity commission.
4. Internal reviews and independent examination
Even if your charity is below audit threshold, most charities will have an external Independent Examiner. Do ask them to help you understand the key areas of risk and for their tips on how you might improve. Your examiner’s report also provides confidence to funders.
5. Whistleblowing procedures
Create a safe and confidential way for staff or volunteers to report concerns. Having a clear route to raise red flags can prevent issues from going unchecked.
New and emerging risks
Charity Commission guidance has placed growing emphasis on cybersecurity, digital fraud, and financial mismanagement — particularly as more charities rely on online banking, cloud storage, and digital donation platforms.
Make sure your team knows:
- Never to share login credentials
- How to spot phishing or invoice scams
- When to flag suspicious transactions
If you use online donation systems or crowdfunding, check what security features are in place.
Next steps
As a small charity there are many competing demands on your time, but good financial management can save many headaches later and can help you to build your reputation.
Three steps you can take are:
- Ask your trustees to review your policies and procedures
- Seek advice from your local voluntary action organisation to ensure you’re following good practice.
