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Charity Community

Navigating financial governance challenges as a small charity

Author: Kristina Kopic, Head of Charity and Voluntary Sector

Published: 30 Sep 2024

Over 80 percent of Charity Community members working with small charities report that financial difficulties are one of the three most pressing issues for their charity. This was followed by nearly 60 percent reporting that they struggled to recruit trustees with diverse skills to their charities’ boards.

We recently added a free half-day webinar for the trustees and treasurers of small charities to our autumn Community programme to help you refine your financial governance practices in a way that is proportionate to your small charity’s resources. If you haven’t registered yet, there is still time, so please join us on 22 October or catch up afterwards with our recordings. Over 800 of you have already signed up and we encourage you to invite your trustee colleagues or finance teams to join, as the event is also free for non-members.

Financial pressures – refreshed CC12 guide and forecasting masterclass

The Charity Commission’s recent blog post acknowledges the financial pressures in the sector, citing them as a key current risk and reporting on rising charity closures. 

The refreshed Commission’s guide, Improving your charity’s finances (CC12), now comes in three parts, making it easier for trustees to find relevant information quickly. The first part focuses on improving charity finances and outlines steps trustees can take to avoid financial difficulties, such as monitoring and reviewing their charity’s financial position. If insolvency risks arise, the remaining two sections cover legal requirements based on charity type and the importance of seeking professional advice. The guide also includes a helpful checklist for trustees to assess if their charity is at risk of insolvency.

I would also recommend revisiting a webinar recording to raise your forecasting game: Forecasting masterclass for charities – navigating going concern reviews in an inflationary environment. You can find the slides and the Excel worksheet accompanying the webinar in our library of webinars (scroll down to 12 April 2023).

Digital filing – ECCTA updates

If you are a trustee or finance professional of a charitable company, you will be aware of the changes arising from the Economic Crime and Corporate Transparency Act (ECCTA), including a transition to digital filing of their annual accounts. While the timeline for this has not yet been confirmed, this will be a significant shift as it requires specialist software, i.e. charitable companies are likely to require 3rd party support. We will discuss ECCTA at the next Charity Conference on 23 & 24 January 2025, but ICAEW members can already access a free webinar recording from our Corporate Reporting Faculty, Companies House reform: accounts and filing aspects.

Does your board need upskilling?

Our survey showed that, alongside financial and fundraising pressures, small charities also reported challenges with recruiting staff and trustees with a diverse skillset. Some charities reported that their trustees did not understand regulatory requirements and their legal responsibilities. If this is topical for you, why not suggest to your trustee colleagues to add the ICAEW’s (free) Trustee Training Modules to your annual board training programme? This is free for non-members too and you can show off your ICAEW certificate at the end of the online course (boasting encouraged!).

Some members mentioned the burden of regulation on small charities as a major challenge for their charity and reported increasing demands on the time of volunteer-trustees. This can be especially true for the treasurer who is often tasked with all manner of risk and compliance related tasks in addition to their financial responsibilities and wider trustee role. Helping to upskill the rest of the board through training and targeted recruitment may alleviate these pressures.

Charities are almost always set up in good faith by people who want to make a positive difference. However, where trustees don’t understand their responsibilities, they can make decisions that are not in the charity’s best interests.

Naomi Campbell – not a model trustee

When public figures are involved, such as Naomi Campbell’s recent disqualification as a trustee following a statutory investigation into her poverty relief charity, Fashion for Relief, media attention follows and reminds us that trust has to be earned by the sector, for the sector.

The Charity Commission’s investigation report highlights a myriad of issues including late filings, unauthorised payments to trustees, and inadequate record-keeping, and concluded “that there had been serious misconduct and/or mismanagement in the administration of the charity by its trustees since it was established.”

If you want to hear about governance pitfalls from an insider, listen to Edwina Turner’s advice at our upcoming event. She regularly acts as Interim Manager for the Charity Commission and will share common areas of governance shortfalls in smaller charities and tips on how to get it right.