Small Charities Finance Bulletin June 2016

Welcome to the Small Charities Finance Bulletin for June 2016


Welcome to CFG’s Small Charities Finance Bulletin.

This bulletin focuses on the importance of small charities having good financial management, and some of the different ways this can be achieved. 

We hope this bulletin is a useful tool - it is sent out regularly to small charities and financial infrastructure organisations via email, and aims highlight best practice and signposts to a number of practical resources. 

Please do pass this bulletin onto others who work and or volunteer in small charities. 

Sign up to receive this bulletin by email, or find out more about CFG's Small Charities Finance Programme.

We are keen to hear your thoughts on this bulletin - please email us on with any feedback.

Small charities need good financial management too

Caron Bradshaw, CEO of Charity Finance Group

Good financial management goes beyond compliance and is vital to attracting funds and maximising a charity's impact, writes our columnist.

Not so long ago CFG held a risk and community accounting conferences on consecutive days. For those readers who are unfamiliar with the term, community accounting services provide accounting and financial management support, either on a not-for-profit or subsidised basis, to the small, local, voluntary, charitable and community groups that make up the heart of our sector.

Sadly, it was shocking to hear how many of these services have closed in the past years, either because charities don't have the funds to use the services or local support has gone, or both.

According to the Charity Commission's data, the majority of charities have annual incomes of between £25,000 and £500,000 must have an Independent Examination. This group will grow  further as the audit threshold has risen to £1m. Removing these charities from this deeper level of accounting scrutiny is attractive, but it doesn't mean charities can do without accounting and financial management services. I fear that, without this grass-roots support, opportunities to drive up efficiency, effectiveness and sustainability in the sector could be missed.

We know that sound financial management matters – not only to the fortunes of individual charities, but in terms of public trust and confidence in the sector as a whole. If we are to create a financially confident, dynamic and trustworthy charity sector, we need to ensure that trust also extends to small charities. Yet frequently those charities lack access to specialist services either because of a lack of provision or because price is prohibitive.

Charities are not set up with financial management in mind; they are set up in response to a social need by founders who have a passion to create change and deliver on a mission. Yet good financial management is central to their success. It goes beyond compliance and is vital to attracting funds and maximising a charity's impact. This need is even greater in the current climate, where charities are under significant financial pressures.

Sir Stuart Etherington, chief executive of the National Council for Voluntary Organisations, spoke at the risk conference and drew attention to the difference between clever and stupid commissioners: it would appear there are quite a few stupid local authorities failing to take the long view when considering how to support charities. The impact of a funder – whether it is a grant-maker, foundation or local authority – can be greater when its spending includes plans to instill in the organisations it funds a lasting legacy of greater skills and business acumen.

Even a small investment could help charities to become more sustainable and have more impact. It's time this was seen as essential not only to squeezing every last ounce of impact out of each pound donated, but also to securing the long-term vitality of the charity sector.

Find out more about Community Accountants, and what services are available in your area.

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Moving towards sustainability: the top key issues for small charities

Kelly Ventress, Communications Manager of Charity Finance Group

Times are tough for charities, it’s been that way for a while, and things don’t look likely to improve any time soon. It’s also fair to say that small organisations are especially feeling the pinch. Competing against big charities and companies for contracts, the near total disappearance of grant funding, and dealing with complex issues like pensions and outcomes reporting are all conspiring to make things even tougher for small charities.

Having worked with and volunteered in a number of small charities over the years, the thing that always strikes me is how one or two members of staff invariably end up taking on multiple roles, and are incredibly busy (and often over-worked) as a result. It’s been my experience that in smaller organisations it’s not that unusual to find a Chief Exec trying to fix a fire alarm or an administrator completing invitations to tender.

With both of those in mind, I have come up with a couple key issues that small charities need to be aware of (and trying to find the time to deal with) in 2016. In this issue I will be sharing a few of these keys.

1. Auto-enrolment

Small organisations will be moving towards their staging dates for auto-enrolling in a workplace pension scheme in 2016. If there’s one thing I’ve heard repeated by experts in the field, it’s that it is vital to start planning for this at least six months before your staging date.

Do you have an existing pension scheme? If so your existing pension provider may be able to assist by extending pension provision to auto-enrolled staff.  But don’t just assume it will be compliant – not all are – so start looking into it now.

You’ll need to set a budget for setting up a compliant pension scheme, changing payroll arrangements and so on, so don’t let these costs surprise you later.

CFG have produced a free guide to auto-enrolment for small charities, which will tell you all you need to know. 

2. Risk management

From experience, this is something a lot of smaller charities simply don’t prioritise, don’t make time to think about and don’t really understand the importance of. But what would you do if you suddenly lost a contract, were the victim of fraud, or if your IT systems failed? It’s worth thinking about how you would manage key risks like these for your organisation, how you would mitigate them, and what controls you can put in place to minimise the chances of something happening that would prevent you from achieving your objectives.

The Institute of Risk Management have a couple of free guides – one of which, ‘Risk Management for Charities: Getting Started’ is, as the name suggests, an excellent place to start!

Resource: to find out more, please have a look at CFG's Banking guide.

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Managing risk and preventing fraud: Turning strategy into success 

Strategic planning and risk management should be considered simultaneously, says Alyson Pepperill of IRM, who talks through the conclusions from IRM’s ‘Getting Started’ campaign.

The Institute of Risk Management (IRM)’s Charities Special Interest Group (SIG) launched the ‘Getting Started’ campaign at the CFG Risk Conference in January. The campaign was designed to help charities start managing their risks, and since then, we’ve been amazed at the level of appetite for the subject.

The IRM Charities SIG team took part in a series of roadshows across England recently, which were hosted by Price Bailey. This gave us the opportunity to introduce the Getting Started campaign to a wider audience, and link it to strategic planning. The workshops were headlined ‘Planning your Strategy’. One of the key conclusions was that strategic planning and risk management should be considered simultaneously. Some of the other key issues that came out of the roadshows are outlined here.

The dangers of the drawer
Helena Wilkinson of Price Bailey outlined that when done properly, the strategic management process is a practical, living thing of great use to your organisation. But all too often, once a charity has ‘got started’ this is followed by a ‘job done’ approach which then consigns the document to a drawer to languish forgotten. Keep it on the agenda, and it remains relevant and useful.

Chasing the money
We learned that some charities are now ‘chasing projects’ in order to generate income, rather than sticking to their core mission. Some might say that this has been driven by necessity - i.e. the understanding that ‘no money = no service to beneficiaries’. But as Helena said, you can end up with lots of restricted funds and projects that end when the money runs out, potentially leaving you high and dry.

The IRM Charities SIG had been noting that charities were bidding for more contracts, either in isolation or in collaboration with others, but that comment brought everything firmly into focus. There is a blog on this subject on our IRM website which provides a bit more background. /p>

Making the most of your shop window
We discussed how sections in your Trustees Annual Report can be used as a way of communicating with stakeholders. Some saw the Report as a ‘shop window’, some as just a chore, and others saw that Annual Reports provide a great opportunity to set the scene for the future rather than focussing on the past.

Once the audience realised that risk management was all about successful strategic planning and not a horribly complex thing to do, they really engaged with the ideas, with often energetic debate and good questions.

Resource: IRM's risk guide

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What's new in fraud?

Alan Bryce, Senior Development Manager at the Charity Commission provides latest developments in fraud, and an update on how the Commission are working to counter charity fraud.

As Senior Development Manager at the Charity Commission, with a specific role in relation to counter fraud, I am often asked “so what’s new in fraud?” Actually, the answer is quite a lot. There are big stories that have grabbed the headlines, but plenty of other recent developments and initiatives in the charity sector also deserve attention.

Has there been a huge increase in fraud recently?
Early October 2015 saw the publication of a jaw-dropping report from the Office for National Statistics (ONS), highlighting that crime had increased by an incredible 100 per cent in the last year. This was based on survey research, previously known as the British Crime Survey, rather than crime reports made to the police.

However, upon further reading, the headline message was perhaps slightly misleading: 2015 was the first year that this ONS research had included fraud. For the first time, the ONS reported that over 5 million cases of fraud (including cyber-enabled fraud) had been committed, with a further 2.1 million cases under the Computer Misuse Act, in the last year. No wonder the total crime figures had doubled.

This does raise some interesting questions. Perhaps the most obvious is whether fraud has suddenly appeared from almost nowhere in the last year to be a major crime threat to the country? I very much doubt it has. It’s more likely that by not asking questions as to the amount of fraud that the public were suffering, the ONS survey had hitherto not provided a complete picture as to the total amount of crime actually being committed.

How can we better understand the risk?
Undoubtedly, data on fraud committed against charities can inform our understanding, but such data has to be accurate, timely and complete if it is to be of value. Both charities and the Charity Commission have a part to play to provide that complete picture.

One of the first steps all charities can take is to ensure they report frauds, and other serious incidents, to the Charity Commission through the Reporting Serious Incidents (RSI) system. The Commission has a role to play in ensuring RSI guidance is clear, concise and encourages appropriate, timely reporting. To that end, we are updating our RSI guidance and will be seeking your views on the changes we intend to make.

We have published RSI data, including fraud, in our Tackling Abuse and Mismanagement 2015 report. It is encouraging to note that the number of RSI reports we receive is on the increase.

However, the relatively small number of such reports suggests there may still be some way to go until we have a complete picture of fraud committed against the charity sector.

Latest resources and reports on fraud
October also saw publication of the UK National Risk Assessment of Money Laundering and Terrorist Financing. This report included the National Crime Agency (NCA) view that “individuals, the private sector and the charity sector lose billions of pounds each year to fraud”. The NCA comments are a welcome contribution, suggesting the scale of the fraud problem we now face. Further research is however needed to better understand the scale and nature of charity fraud.

October also saw three new charity-specific initiatives. Firstly, and in partnership with the Fraud Advisory Panel (FAP), the Charity Commission held the Tackling Fraud in the Charity Sector conference. Over 150 attendees heard a series of expert speakers consider current fraud risks and developments in the first national conference of this kind for charities.

The Charity Commission reconfigured and launched a new Charity Sector Counter Fraud Group (CSCFG), formerly known as the Voluntary Sector Fraud Group. With over 30 members from charities, professional bodies and key stakeholders, the CSCFG seeks to support and develop counter fraud activities to reduce the harm and loss to charities as the result of fraud. Two immediate priority areas have been identified: “professionalisation” and “cyber fraud threat to charities”.

If you want to know more about the CSCFG, or any of the other issues and initiatives raised in this article, please contact me at

Resource:Tackling abuse and mismanagement 2014-15 - full report

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How to record the money with free resource by WYCAS

By Claire Welling, Leeds Community Accountant at WYCAS

Anyone who has been involved in a community group or charity will have had it drummed into them how important it is to record the group’s financial activity (money coming in and going out).  But how to do that in structured way that works for the person recording things as well as the person who has to prepare the year end reports (presentation of a charity, small groups accounts for the preceding year)?

Let’s consider the options. Contrary to popular belief paper has not gone out of fashion. It is still a portable way of recording the transactions, as long as receipt and payment categories are used and it’s marked when from a restricted fund, restricted funds are funds in use, which can only be lawfully used for a specific charitable purpose (multi-coloured highlighter pens are marvellous). When a report needs to be prepared it is just a matter of totalling. At WYCAS we have a template which is as simple as we could make it, with a calculated balance that can be checked against the bank statements. Cash transactions are recorded on a completely separate sheet. We have about 100 clients using this method (mainly tenants and residents groups).

Being numbers people, we LOVE spreadsheets.  Why wouldn’t you harness that arithmetical power to make recording and reporting so much easier?  (It is what spreadsheets were invented for.) Stick in a column for different restricted funds, set up your receipt and payment categories sensibly (e.g. by looking at the previous year’s accounts) and off you go. You don’t even need to build a template, this WYCAS one will link through to reports for you (see link below).

If your group has more than 10 restricted funds (or wants to use more than 10 receipt categories etc.) it is probably time to consider some bookkeeping software. This will give a structure to your records, facilitate bank reconciliation and provide reports to your fingertips. You do need to invest some time to get familiar with the software. Our experience has been that QuickBooks serves this purpose well, with desktop software or a subscription online service.

Resources on bookkeeping
WYCAS Paper recording system (.xlsx file)
WYCAS Cashbook with year end reporting – excel format  

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How to record the money: case study by WYCAS

Sunshine & Smiles is a parent-led charity that provides a support network in Leeds for children and young people who have Down syndrome and their families. The charity offers speech and language therapy, regular groups and activities, individual support and advocacy for families, as well as raising awareness and challenging preconceptions in the wider community.

Formed as a charitable incorporated organisation (CIO)  in 2013 and starting with no accounting or finance experience, the charity was supported to use the spread sheet cashbook to record all transactions. The cashbook system has coped with the charity’s development and growth in income and also the increasing complexity, for example handling the use of restricted funds. 

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Training and resources

Updated Charity Commission guidance on ‘Managing a charity’s finances: planning, managing difficulties and insolvency’

The Common Reporting Standards are being introduced for HMRC and will impact charitable foundations (and any charity that gets more than 50% of its income from investments) from May 2017 onwards. Charities will be required to collect information on all grant holders (both individuals and other charities) including Name of person/organisation, Address, Date of Birth, Tax Identification Number (i.e. a social security number or whatever appropriate number is available). CFG would like to know from Community Accountants if they have been approached by charities on this issue and what kind of support they would like to receive. Please contact

The Charity Commission has launched a consultation (closing on 11th December 2016) on the SORP FRS 102. The Commission is seeking views on various areas of the SORP and welcome discussion. CFG will be engaging with members and the wider sector during the consultation period - have a look at our blog on the topic for more information.

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