Transparency is vital for charities when it comes to having, and also providing, financial data and information.
Vital as it is the one area that helps to form trust and strong relationships with your donors, trustees, and beneficiaries as well as keeping you compliant with the Charity Commission.
This leads us to financial oversight – who has it, how is it managed, and who’s responsibility is it to own?
As we head into the new financial year and with ongoing scrutiny in the sector and an increase in reports from the Charity Commission over the misuse of funds and reporting of data – how confident are you and your trustees when it comes to transparency and oversight in your charity’s finances?
Knowing where every budget line is going, who is responsible for managing financial activities, and are you reporting correctly?
Financial oversight is a term used to explain how a charity looks after its finances, i.e., how do you monitor and manage the charity’s finances to ensure the proper use of charitable funds?
As a charity, and especially in your role as a trustee, you have a responsibility to ensure that the money received by the charity is used to support its charitable purpose. To help safeguard against misuse and maintain and build public trust.
Trustees must also be in a position to have financial oversight to avoid becoming non-compliant with Charity Commission guidelines.
This means having robust financial governance in places to ensure:
• Compliance with Charity Commission regulations and guidelines
• Accurate reporting
• Appropriate use of funds
• Full transparency
• Accountability.
Trustees must have financial oversight of all charity income and expenditure, understanding and reporting on restricted and unrestricted funds, annual accounts, etc.
Ultimately, trustees hold full accountability for charity money and, as a result, must:
• Comply with all financial regulations
• Manage and monitor all financial data and information
• Not take risks with charity money
• Ensure funds are used responsibly
• Ensure transparency in reporting
• File accounts and financial records on time, every time.
As a charity manager, we know you have numerous roles and responsibilities; however, it’s important to put robust financial controls in place from the beginning so you can have peace of mind that this critical area is managed correctly.
Protecting your charity’s assets and allowing you to get the most out of resources, think about how you plan, manage, account, and report your charity finances.
Best practices should include having processes in place for forecasting, monitoring everyday cash flow, and managing donations and grants. Building robust reporting structures to trustees, planning for filing annual accounts, publishing data, etc.
Improve financial transparency by keeping detailed financial records and being open and honest with key data. Make sure to include key personnel and aim to be organised and up to date with your data processing.
Key regulations and frameworks can also help, such as the Financial Reporting Council’s FRS 102, which focuses on financial statements and financial reporting entities, outlining the principal accounting standard for charities.
There is also SORP (Statement of Recommended Practice) for charities, which provides detailed guidelines for accounting and reporting specific to the charity sector.
Being on top of your financial game allows you to build a charity that people can trust. Showing transparency in your data and the account information that you publish is a critical part of relationship building and expanding your audience base, as this can lead to an increase in donations and grant initiatives, helping the charity to grow and flourish.
By focusing on financial oversight and management, you can protect and grow charitable donations in both the short and long term, managing resources effectively while maximising impact.
Building financial resilience so you can continue serving your community, keeping your services and activities operating uninterrupted.
Providing you with finance support in bookkeeping, compliance services (including annual accounts and VAT returns), payroll, and advisory services; book a discovery call with our team today and see how we can help you and boost your confidence with better financial oversight for your charity.
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