Blog

Governance, regulation and compliance

17 November 2017, 10:15

Investing in financial governance is one of the most cost effective ways to help your charity

As we come to the end of Trustees Week 2017, Charity Finance Group has had a busy week. Yesterday, one of our Member Meetings was focused on how to improve ...

Post byAndrew O'Brien

As we come to the end of Trustees Week 2017, Charity Finance Group has had a busy week. Yesterday, one of our Member Meetings was focused on how to improve governance and explaining the new Charity Governance Code. At the start of the week we launched the findings of a survey that we carried out with MHA MacIntyre Hudson into financial governance. Today, we launch a new free guide for trustees of charities on finance issues, sponsored by MHA MacIntyre Hudson, alongside a glossary of key charity finance terms.

Why is financial governance so important?

It might seem an obvious point to make given the tough financial environment that many charities are operating in, but financial governance is very important to the success of a charity. Trustees have a critical role to play not just in setting the overall direction of the charity, but also in overseeing the financial strategy of the organisation. At a charity seminar, hosted by Quilter Cheviot in Manchester yesterday, I was privileged to listen to James Brooke-Turner, Finance Director of the Nuffield Foundation, speak about the importance of governance. His point was that when times are challenging, and the future is uncertain, the effectiveness of the board is incredibly important. The decisions that trustees make, if they are not thought through properly, can have a significant long term impact on the financial health of the organisation. At difficult times boards may be tempted to make rash decisions or hide away from the big issues. Charities need to have the right structures so that that information can be gathered and informed decision making can take place. Executive teams cannot do this on their own, they need to bring their boards with them.

Investment in governance is critical

Another point that James made was that governance is often one of the cheapest things to invest in yet it often has the biggest returns. A good board will better be able to handle risk, and with the ability to handle financial risk comes the chance for opportunities and growth. The Quilter Cheviot seminar I attended yesterday, for example, was free. CFG’s new guide is free. There are many resources out there for charities that are free or low cost. However, sometimes, investment in training and external support is required – particularly in areas such as finance which can be complex. Getting the right induction process so that trustees have the necessary skills and understanding is critical. This is also something that needs to be shared across the whole board and not just concentrated in a few areas. The Charity Commission’s latest research on trusteeship has really brought home how much boards are depending on a few key individuals such as the Chair and Treasurer. Ultimately boards need to take decisions collectively, and this means that all trustees should be informed decision makers. CFG and MHA MacIntyre Hudson have provided trustee training on finance in the past and we will do so again. But every charity should be checking that their board is up to the required level. Our trustee survey found that 49% of respondents never or only occasionally provided charity finance training for trustees. We’ve got to reduce that figure over the years ahead, otherwise, we will have a big skills gap on our boards.

Start with assessment

The first place to start is by assessing the competence of the board. What skills do you have? What understanding is there? Our new guide is a useful place to start. Do all trustees understand the core responsibilities outlined in the guide and do they know how they can make a contribution? If not, then some form of training or support is probably in order. The guide also a handy matrix which you can use for your trustees on what financial skills they have. Some trustees may not have formal charity knowledge, but they may have other finance skills. Not only does this help to identify gaps, but it can also boost confidence in those trustees that perhaps do not have traditional charity finance experience. Everyone should feel empowered to have a say on finance.

Don’t let things slide

In discussing the new Charity Governance Code with members yesterday, one of the things that came through is the need for charities to not let things slide. We need to be having constructive challenge about board performance both from executive teams but also, and more importantly, from trustees themselves. If you are going to make one pledge this Trustees Week, it should be to go away and bring these issues up at your next board meeting. Now is the time to take action and hopefully by next Trustees Week, both your charity and the sector will be in a stronger position. Â« Back to all blog posts

Blog

Investing in financial governance is one of the most cost effective ways to help your charity

Why is financial governance so important?

Investment in governance is critical

Start with assessment

Don’t let things slide

Related Content

Finance Focus April 2021

Finance Focus January 2021

How to share your story through your annual report

Finance Focus November/December 2020

What does the Spending Review mean for charities?

Are you Brexit ready?

Three-year Comprehensive Spending Review replaced

Welcome to IFR4NPO

Finally, international guidance is within reach

Finance Focus September

Finance Focus August

Finance Focus July

Charity Commission guidance on Serious Incident Reporting during the coronavirus pandemic

How to guide: Covid 19 Charities SORP Committee Guidance

Charities and insolvency

Top ten tips for how to handle the year end in a pandemic

Caron Bradshaw appointed as a member of new SORP Committee

Has the Charity Commission has taken the wrong tone in its election guidance

Why does the narrative around public 'trust' makes me feel so uncomfortable?

Civil society asks of the Spending Review 2019

Five takeaways from August’s Inflation Report

The lessons for Oxfam and the wider sector

Finance Focus July 2019

BEIS Review of the Financial Reporting Council

CFG Annual Handbook 2019

How the best boards do it, from preparation to meeting execution

Seeing the wood for the trees

CFG responds to the Charity Commission’s consultation on the SORP-making process

What the recent SCOTUS judge controversy can teach us about the Charities’ SORP

Annual Report 2017-18: Empowering Your People

Changes to the CFG Board of Trustees

Finance Focus May 2018

The key to good governance - truly understanding the business

Essential Charity Finance for Trustees Guide

Does your charity follow serious incident reporting guidelines?

Charity finance professionals need to be aware of new automatic disqualification rules

How big a threat is property to your charity?

Money is not the issue when it comes to charging for Charity Commission

How can charity investors perform better in a volatile market?

A stairway to heaven on business rates for the charity sector?

Sarah Atkinson - Have your say on the annual return for charities

New report raises concerns about complacency on financial governance

Trustee Survey Report

Time to review your risks? An update from the experts...

Where are the ‘automatic stabilisers’ for charities income?

6 simple steps your charity can take to help protect themselves from fundraising fraud

Do I need a fraud response plan?

Fraud and the 3 C's

Three new Charity Finance Group trustees elected

How can charities ensure they work towards gender equality in their organisation?

What can charities learn from the recent fraud cases?

CFG launches Counter Fraud Campaign

Record Management Toolkit Launch Roundup

What can charities learn from the international cyber attack?

NCVO Almanac points to fundamental shifts in the charity operating environment

Better partnerships needed between finance and fundraising teams

Annual Report 2016-17

We must not see a rush to charging charities for regulation – House of Lords report

IFS 2017 Green Budget – the good, the bad, and the worrying?

Responsible Record Keeping: what do voluntary organisations need to know?

Trustee Week: Working to inspire good leadership

Charging charities for regulation isn’t inevitable but it is risky and inefficient

Let's talk about the F-word

Tony Armstrong looks at Devolution: working with local organisations to transform public services

Devolution is our chance to advocate for the most vulnerable

How will the 'devolution revolution' be financed?

Caron asks: 'Why does the voluntary sector need a devolution summit?'

Do charities need to become social enterprises to survive?

Ten things you should know about the new power to make social investments

New report should prompt major re-evaluation of social investment

EU Referendum: Keep watching this space…

CFG's SORP Survey

Guest blog: Stamp duty increase reinforces case for charity investors to invest in stamp-exempt funds