Financial Controls

5.1  Financial controls are a critical part of any financial system. They ensure that the resources of the Housing Association are being correctly and effectively used and that activities are correctly and accurately reported. Poor controls can lead to the risk that resources are used inefficiently or are subject to theft, fraud or abuse.

5.2  It is the responsibility of the Board of the Association to ensure that good financial controls are in place. It is the responsibility of management to ensure that the controls are operating effectively.

5.3  When establishing what controls are necessary, the Association should consider:

5.4  Controls protect both the Association and its staff. These controls should:

5.5  Even when a good system of Financial Controls is in place and is fully utilised, it can only provide reasonable, and not absolute, assurance against material misstatement of accounts, loss or misuse of resources and non-compliance with laws or regulations.

5.6  There are several areas where Associations should consider putting controls in place. The type and extent of controls will vary from one Association to another depending on their individual requirements. The Associations should consider taking professional advice when deciding on relevant controls. A brief description of some controls which should be considered is given below. This list is not exhaustive. It is the responsibility of the Board to ensure that adequate appropriate controls are in place. Further information on controls is available from CIPFA (Internal Control in Housing Associations).

5.7  Segregation of duties
It is important, where ever possible to separate those responsibilities or duties which if combined would enable one person to record and process a complete transaction. This reduces the scope for errors and omissions and for deliberate manipulation or abuse.

5.8  Qualification of staff and advisors
Staff should be properly trained, qualified and competent for the tasks that they are required to perform. This reduces the scope for errors.  It is also important that regular contact should be maintained with professional advisers. Procedures should be established to ensure that general or specific independent advice received is brought to the attention of management and the Board.

A useful free financial management e-learning tool for non-financial staff, including Board members is available from the Audit Commission

When registering for the e-learning tool you will be required to provide some information. Where it asks you to select Department choose ‘Housing Services’ from the drop down list and for Body, select ‘Other’. Although some of the information in the training is only relevant in England, most of the basic financial information is relevant for all.

5.10  Bank and Cash Controls
Controls are required to ensure that all monies received are recorded, safeguarded against loss or theft and banked. In relation to payments, controls should ensure that all payments are correctly authorised, made to the correct payees and recorded. Bank reconciliations and other cash controls will highlight issues relating to cash balances including errors, loss, theft or other misstatement.

All money due to the Association should be recorded, pursued and properly accounted for.

5.11  Expenditure and Purchasing Controls
All Associations should have procedures for the authorisation of expenditure. Controls can ensure that only those goods required are ordered, that purchases are at the best prices and all transactions are recorded. They can also ensure that goods received are undamaged, have all been received and that the price invoiced matches the original orders. The provision of external goods and services procured on an ongoing basis should be tendered for on a regular basis ensuring best value for money.

5.12  Investment Appraisal
To inform Board decisions on capital/ revenue schemes, Associations should carry out an investment appraisal before committing to any capital or revenue investment, to ensure that their funds will be spent in the most efficient way and provide the greatest benefit possible. Further information is available in the Scheme Approval guide

5.13  Payroll and Personnel Controls
Controls are required to ensure that salary and expense payments are properly authorised and statutory payments such as PAYE are correctly deducted and paid to the required timescales.  Controls over recruitment and personnel are also necessary to protect the Association from the possibility of errors or ‘ghost’ employees.

5.14  Controls over Assets
This area covers such items as land, housing, offices, vehicles, fixtures and fittings, and equipment (e.g. computers) which are used in the Associations activities.  Controls, such as Asset Registers, are required to confirm the existence and value of assets and ensure their safe keeping.

5.15  Treasury Management
Treasury Management involves the optimum management of cash flows, banking, money-market and capital-market transactions and the control of risk associated with these activities.  It covers an organisation’s use of working capital and scheme financing, borrowing, investment and hedging instruments and techniques.  Effective controls are vital in this area and guidance can be obtained from CIPFA

Further information is available from:

5.16  Internal Audit
Housing Associations must use Internal Audits to appraise and evaluate compliance with their policies and procedures. This can give an indication of the reliability of their financial reporting, the security of assets and compliance with statutory requirements etc. The Internal Auditors can then provide the Board with recommendations for improvements to their systems.

5.17  Insurance
It is important that Associations have all relevant insurances in place.