Responsibility for overseeing the financial affairs of charities rests with trustees who must safeguard the resources entrusted to them.
Charities and not-for-profit enterprises must operate effectively and to the highest financial and ethical propriety standards. Financial transparency is essential for an organisation that wishes to remain with the law but maintain public trust and confidence.
Charlotte Willmore explores key trustees’ responsibilities and how they can ensure financial transparency and accountability for their organisations.
Acting in the Best Interests of your Charity
Trustees have a legal responsibility to act in the best interests of the charity and its beneficiaries. In practice, this means that trustees are required to exercise due diligence, integrity and prudence when making decisions about the organisation’s finances.
Trustees must ensure that accurate and up-to-date financial records are kept, that financial statements are prepared, and reporting requirements are complied with.
Establishing Effective Financial Governance
Responsibility for establishing and maintaining effective financial governance within charities lies with the trustees. This includes implementing robust internal control, sound financial policies and effective procedures to reduce risk and prevent fraud.
Trustees are required to regularly review and monitor financial performance, ensuring that budgets are met, and financial resources are used efficiently. By developing transparent and accountable governance frameworks, trustees help to build stakeholder confidence in the integrity of the organisation, reduce the risk of fraud and meet regulatory requirements.
Transparent Financial Reporting
Trustees should ensure that the charity is acting with complete transparency in its fundraising activities. They should ensure that best practices are deployed when it comes to soliciting and receiving donations, and clear information of how funds will be used should be established.
Trustees must also comply with statutory requirements for reporting fundraising activities and expenditures. Comprehensive financial reporting to stakeholders and the Charity Commission is vital in building trust and demonstrating accountability. In practice, this means trustees will be proactive in disclosing information on expenses such as administrative costs, fundraising expenses, and management compensation, to ensure transparency in resource allocation.
External Auditing
Trustees also have responsibility for arranging external audits or independent examinations of the charity’s financial statements where the relevant thresholds are met or where required by the governing document, funder, or the regulator. These provide an unbiased assessment of the charity’s financial position and ensure compliance with accounting standards.
Charlotte explains “some grant providers may separately require that a mini-audit or check of records is undertaken specifically on the funding they are providing and how this is utilised to ensure it is line with the terms agreed.”
Trustees are required to ensure that their chosen auditors or independent examiners have the required expertise and can act with impartiality. This external assessment can be used to reinforce transparency, building trust, and maintaining the integrity of the organisation.
Helping Charities achieve their goals
Remaining compliant, and ensuring financial transparency and effectiveness is a key factor in helping charities and not-for-profits achieve their organisational goals. At Wilder Coe, we work with many charitable organisations and social enterprises to improve their operations and maximise their impact in a complex world.
If you would like to arrange a discussion with our our experienced team, contact us today.
