Charity financial controls and governance | England and Wales
A charity can reconcile every transaction on a bank statement and still leave income out of its accounts. The missing item might be an uninvoiced service, an eligible grant claim not submitted, cash waiting to be banked or an account that finance does not know exists. Whether an amount qualifies for recognition still needs its own assessment.
A bank reconciliation checks the relationship between a particular bank account and the accounting records. To assess income completeness, management also needs to start with the activities, agreements and other evidence that generate income, then follow those amounts into the accounts. The useful question is: what should have been recorded, including amounts that have not reached the bank?
This matters to charities funded by grants, service contracts, subscriptions, admissions, property or investments, as well as those receiving donations. Trustees need to understand which sources are supporting their plans and whether apparent shortfalls reflect collection delays, recording errors or a genuine change in activity.
Start outside the bank statement
Build an income map with one row for each material source. Record who owns it, where the original evidence comes from, when amounts become due, how receipts arrive and who investigates differences. A spreadsheet may be sufficient if somebody maintains and reviews it.
For commissioned services, compare delivery records with contract terms, invoices and outstanding debts. For grants, connect the award agreement to conditions, claim dates and reporting requirements. Membership records, room-booking systems and tenancy schedules can identify amounts that finance would otherwise see only when cash arrives. Investment statements should distinguish income from transfers of capital.
The Charity Commission expects controls over receiving and recording income, including invoicing and debt collection where charities trade. That is a useful starting point, but the income map needs to reflect your particular activities. [1]
Check that the account list is complete
A well-prepared reconciliation cannot reveal an omitted bank account if nobody has included that account in the review.
Keep a central register of bank accounts, deposit accounts, payment platforms and other places where the charity holds or receives money. Record the legal account holder, purpose, responsible person and route for obtaining statements. Reconfirm the list when a branch opens, personnel change or a new collection method is introduced.
Ask local managers to confirm the accounts and platforms they operate rather than simply asking whether their paperwork is complete. Where a separately governed charity uses the same name or branding, establish the legal relationship before combining its records. Shared identity does not by itself make its income yours.
Explain gross income, fees and settlement differences
Where a payment provider deducts charges, a net bank receipt is not the whole story. The finance team needs evidence of the gross transaction, charges, refunds and amounts still awaiting settlement.
Illustrative example. A charity sells tickets for an event. Its platform report shows £6,000 of completed sales, £180 of processing charges and £5,420 settled to the bank. With no refunds or other movements, the remaining £400 needs to be explained as a settlement receivable or another supported difference. Posting only the bank receipt would not explain the full activity.
That reconciliation does not decide when event income belongs in the financial statements. An event taking place after year end may require a different recognition treatment. Establish both the movement of money and the underlying accounting treatment; do not assume they are the same task.
For outstanding items, record the cause, expected clearing date and evidence. An old unexplained balance should not be written off merely to make a reconciliation look tidy. Equally, an unresolved difference is not automatically evidence of theft.
Not every receipt is income
A transfer between the charity's own accounts creates no new income. Borrowing creates a repayment obligation. A returned deposit, refund of an overcharge or withdrawal of investment capital needs classification according to its substance, not a convenient income code.
This distinction matters even when a correction leaves the overall surplus unchanged. A refund recorded as fundraising income could make fundraising look stronger while leaving operating costs overstated. Trustees might then draw the wrong conclusion about which activities need attention.
Assign unusual receipts to a named reviewer: identify the counterparty, read the payment advice, establish why the money was paid and decide the appropriate classification. Keep any temporary suspense balance visible until that work is complete. Keep the explanation with the transaction so it survives a staff change.
Recognise income in the appropriate period
Management should not treat the date money enters the bank as a universal income-recognition rule. For accruals accounts, the correct treatment depends on the nature and terms of the arrangement and the applicable accounting requirements. A grant restriction is not automatically a reason to defer income; a contract payment is not automatically earned when received.
The applicable Charities SORP is determined by the reporting period. SORP 2026 applies to periods starting on or after 1 January 2026; the 2019 SORP applies to periods starting before that date. Have the finance team or adviser resolve material recognition questions using the relevant edition. [2]
Cash collections, where relevant, need a separate link between collection records, secure custody, banking and the ledger. Otherwise late banking can obscure when the money was actually received.
What trustees should receive
A useful report identifies income streams not yet reconciled, material unpaid amounts, claims approaching deadlines and unusual receipts awaiting explanation. Include the management action and expected resolution date. A statement that all bank accounts reconcile is valuable, but narrower than confirmation that income is complete.
At the next review, select one material income stream and follow it from its original source through to the records. Choose the stream with the greatest uncertainty, not necessarily the largest bank receipt. Ask management to demonstrate the process, including one late or disputed item. This tests whether the control works when a transaction is less straightforward.
A useful first improvement is a clearer connection between operational staff and finance. A new system is unlikely to identify an unreported service or missing account unless responsibilities change as well.
Sources and further reading
Official guidance checked on 21 October 2026.
[1] Charity Commission, Internal financial controls for charities (CC8)
[2] Charities SORP, applicable editions and full SORP downloads
Frequently asked questions
Does a reconciled bank account prove that all income is recorded?
No. It supports the accuracy of that account's recorded movements and balance, subject to the quality of the reconciliation. It does not establish that every account, invoice, claim or income-generating activity has been included.
Is this relevant to a charity that receives no donations?
Yes. The same principle applies to grants, service contracts, membership fees, admissions, rental and investment income. The supporting records and recognition rules differ, so tailor the checks to each source.
Should payment-processing fees be ignored if the bank receives a net amount?
No. Reconcile the gross activity, charges, refunds and settlement balance. The financial-statement presentation should follow the actual arrangement and applicable reporting requirements rather than treating net cash as a complete record.
Can a grant be recognised only when the money arrives?
Not as a general rule in accruals accounts. Review the agreement, relevant conditions and applicable SORP. Record expected cash timing separately from the accounting conclusion.
What should we do with an unexplained receipt?
Keep it visible, investigate its origin and document the eventual classification. Do not assume it is a donation, a loan or money available for general expenditure merely because it has reached the bank.