Trustees should use essential finance guidance to help improve compliance.
It was announced last night by Chief Executive Paula Sussex that the Charity Commission has updated a key piece of its financial guidance - Charity finances: trustee essentials (CC25) - in a drive to ensure trustees understand their basic financial responsibilities when running a charity.
Speaking at the ICAEW’s annual dinner in London, Sussex confirmed that trustees’ legal duties regarding financial management haven’t changed but that the Commission is making a conscious push to ensure trustees are best placed to protect their charity’s assets and resources. As part of this, it is urging trustees to read Charity finances: trustee essentials (CC25) which has been refreshed and made more accessible and readable.
In her speech last night Sussex also called on financial professionals and accountants to take a leadership role in the renewal of financial governance in the charity sector.
Paula Sussex, Chief Executive at the Charity Commission said:
Robust financial management is vital to ensure that charities are able to meet the needs of their beneficiaries and also to increase public trust and confidence in the charitable sector. We’ve seen in our casework that weak financial governance can be extremely destabilising for charities, affect their ability to operate, and leave them vulnerable to fraud and abuse. It is vital that trustees are familiar with the charity’s governing document, understand the finances, ensure control and procedures are in place and work, and ask the right - and sometimes difficult - questions.
We are making a concerted and deliberate effort to support trustees where we identify weaknesses and providing readable and easily understandable guidance is vital to this. We also recognise that trustees often don’t have the time or resources to read multiple lengthy documents on good practice. Charity finances: trustee essentials will act as the ‘go-to’ financial publication that trustees and charity staff can refer to, to address any knowledge gaps or get assurances on whether they are doing the right thing.
Addressing attendees at the event, she added:
I am asking ICAEW members, trustees and those engaged with charities as auditors, advisers, or supporters, to play your part in improving standards and stewardship. We want to see you helping raise trustees’ game, really making a difference to charity governance and financial management. Our expectations are in line with the Institute’s work in this area and broader ambitions. Your manifesto for charities calls for the same improvements in trustee competence that we are trying to bring about. Another of the Institute’s calls to action is to provide effective education for all trustees via online modules. We have already had some valuable discussions with the Institute about how we can support this work. We are also talking together about how the Institute as a professional membership body can do more to support and promote adherence to the revised Code of Good Governance for the Voluntary Sector. Our partnership is important and we value it.
Charity finances: trustee essentials (CC25), originally published in 2011 as Managing charity assets and resources (CC25), covers the most common areas of managing charity resources including internal financial controls, charity reserves, and staff and volunteers, signposting further reading where required. Charity governance, finance and resilience: 15 questions trustees should ask has also been re-published today. The Commission is conducting a wider ongoing review of how it supports trustees in this area, including working with external partners and umbrella bodies and improving navigation to its online guidance.
Caron Bradshaw, Chief Executive of the Charity Finance Group said:
While most charities manage their resources well, we know that there are gaps in skills and knowledge, particular for smaller organisations. Charities must put financial management and leadership at the heart of their organisation in the years ahead. As we face choppy waters with continued funding pressures and the risk of economic instability, it is more important than ever that charities have the capacity to manage their finances and adapt their business models. Accountants and auditors have a critical role to play. Financial professionals and charities must keep working together to ensure that our sector has the skills and support they need to meet future challenges.
I warmly welcome the collaborative approach to CC25 from the Charity Commission, which is the right approach. We can give better support to charities if we can draw on the expertise and knowledge from across the sector.