Strengthening Trust: The Role of Internal Audit for Charitable Organisations

Maintaining public trust and ensuring the effective use of resources are essential for every charitable organisation.

In the Irish charity sector the directors are volunteers who dedicate their private time and expertise without being involved in the day-to-day running of the organisation. They carry significant governance responsibilities, often relying on reports and summaries from the management team without having first-hand visibility into the charity's operations.

Additionally, The Charities Governance Code, outlines the minimum standards for good governance in Irish charities. One of the six core principles of this code is "Being Accountable and Transparent."

Internal audit supports this principle by providing an independent and objective assessment of a charity's internal controls, risk management processes, and governance structures.  It will also validate the information provided to directors and highlight any potential issues that might not be immediately apparent.

Internal audit can:

Identify weaknesses in internal controls: This helps prevent fraud, errors, and inefficiencies in financial and operational processes.

Ensure compliance with policies and regulations: Charities in Ireland must adhere to various legal and regulatory requirements. Internal audit can assess the charity's compliance with all relevant legislation.

Evaluate the effectiveness of risk management: Charities face diverse risks, including financial, operational, and reputational. Internal audit helps identify and assess these risks and recommends strategies to mitigate them effectively. This could involve reviewing the charity's risk register and evaluating the adequacy of its risk mitigation plans.  

Promote transparency and accountability: By providing objective reports to the board of directors or a designated audit committee, internal audit enhances transparency and ensures that management is held accountable for the effective management of the charity's resources.

Identify opportunities for process improvement: Internal auditors can analyse existing processes and recommend ways to streamline operations, reduce costs, and improve efficiency.

Ensure the reliability of financial reporting: While external audits focus on the fair presentation of financial statements, internal audit plays a crucial role in ensuring the accuracy and reliability of the underlying financial data and reporting processes. This includes reviewing accounting policies and procedures and testing financial transactions.

In essence, internal audit can act as a vital link for voluntary directors, providing them with the independent insights and assurance they need to confidently oversee the charity and ensure that it is operating ethically, efficiently, and in line with its mission. It empowers them to make informed decisions and uphold their responsibilities effectively, even without direct involvement in daily operations.

Smaller charities with limited internal knowledge base may benefit from engaging external internal audit consultants to conduct periodic internal audits. By doing this they gain access to specialised expertise without the cost of a full-time internal audit function.  

In summary engaging internal audit function, offers significant benefits that contribute to good governance, accountability, and, ultimately, the successful delivery of a charity's mission.

Should you require any advice on internal audit services, please get in touch with a member of our team.

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Disclaimer: This blog post is intended for informational purposes only and should not be considered legal or professional advice.