The failing of a charity with the public profile and popularity of Kids Company came as a shock to both the sector and the wider public, and has prompted much to be written about the lessons that can be learned from these events, including a report by the Public Administration and Constitutional Affairs Committee.

But in many ways there aren’t any new lessons to learn – these lessons are more of a reminder to trustees about the need for good governance and financial management. After all, the legal responsibilities of trustees are not new – they are long established in law and explained in Charity Commission in their guidance notes.

So let’s look at some of the key financial management and governance matters of which trustees (and CEOs and FDs) should be aware:

1. Financial Management – don’t shun responsibility

Don’t forget the financial management side of running a charity, or think that this responsibility lies with the treasurer, financial controller, bookkeeper, professional advisor, etc.

As trustees you are ultimately responsible and may (in certain circumstances) be personally financially liable – so make sure you are happy that the organisation is being managed well and you are getting the information you require to monitor performance. This information should be complete to the extent that you are able to gain an understanding on the financial position of the charity, but not so detailed that you cannot see the wood for the trees and you get bogged down in the detail. By no means an exhaustive list, but consider the need for full management accounts, variance analysis, KPIs, forecasts, scenario planning (for example if some future funding is uncertain), etc.

If you don’t feel you getting answers to your questions, keep asking them!

2. What are your charitable objectives?

The world is an ever changing place and the needs of your beneficiaries may also change. Or you may find resources are more readily available for funding different types of projects. Mission creep can take hold perhaps without noticing.

But a charity’s resources should be spent on meeting its charitable aims as set out in its governing document. Are you happy that expenditure is being incurred on meeting the organisation’s objectives and are there controls to ensure this? For example:

• Are fully budgeted projects approved by management and trustees before activities are carried out?
• Is all expenditure approved by management to ensure in line with objectives, strategy, and the approved projects?

In other words, making sure that resources are spent as planned and not on an ad-hoc basis.

3. Systems, Procedures, and Controls

Fully documented systems, procedures, and controls should be in place. These should be communicated to all staff, and subject to regular review.

Ensure that they are meaningful and relevant to the charity – if all income is received under contract, is there a need for systems and controls over cash donations?

It is also worth considering whether annual external audit review of controls is sufficient – or whether an internal audit would provide wider ranging coverage and more immediate feedback of the charity’s activities.

The above suggestions are by no means exhaustive and not necessarily the best approach for each charity. Making sure the processes are specific to your own organisation and reflective of its specific needs and circumstances are essential. In my next blog, I will look at more financial specific matters including budgeting, reserves levels, and cash management.