Charities play a vital role in addressing all manner of social issues, and in supporting many different populations and demographics.
As organisations that rely upon a number of different streams of income, often including donations from the public, maintaining a high level of transparency and accountability is essential.
Financial mismanagement within charities is something we’ve seen hitting headlines recently, and knowing how to protect against this is really paramount to ensuring that resources are being used appropriately and responsibly.
Strategies to protect against financial mismanagement
In this article, we thought it would be useful to explore some of the things that charities can do to safeguard against financial mismanagement.
Robust governance
Implementing robust governance can be key to running a successful charity; regardless of its size, or purpose.
The Charity Governance Code outlines a set of standards that all charities in England and Wales should aspire to, and a board that adheres to this will undoubtedly be in a position to improve its approach to financial management, risk-management and decision-making.
Furthermore, it can also help to gain the trust and respect of potential donors and volunteers.
Transparent financial reporting and the role of auditing
Talking of gaining and maintaining the trust of donors, stakeholders and the general public, transparent financial reporting is paramount.
Adopting standardised accounting practices, and ensuring annual accounts and financial reports are both timely and accessible can demonstrate your commitment to properly managing your financial responsibilities.
Auditing also plays an important role here, as regular internal audit can help trustees to identify irregularities, weaknesses in controls and opportunities for improvement.
Issues can be addressed before they become something bigger, and trustees can be confident in the knowledge that they are compliant with financial policies and procedures.
The need for internal financial controls
Implementing the right internal financial controls for your charity is really important, to help you protect your charity’s assets and maximise your resources.
The controls that suit your organisation will depend on the nature of your charity, its size and where it operates; if you’re unsure about what controls you should have in place, it would be wise to seek professional advice.
Once you’ve decided on the appropriate controls, all trustees and members of staff should be actively engaged with these and understand how to follow them.
This, in itself, should help to foster a culture where financial integrity is valued and where staff know how to raise related issues that might be troubling them.
Staff training and engagement
Staff who are well trained and knowledgeable about their responsibilities can contribute to the prevention of financial mismanagement. Providing opportunities for training and development on an ongoing basis can ensure that staff are up-to-date with best practice and any new regulations.
In addition, open communication between all those involved with your charity is key. Keeping everyone on the same page, and aligned with the organisations financial goals and principles can be achieved with regular discussion, and by promoting a culture that prioritises staff concerns.
Technology and automation
Utilising modern financial management tools and software can enhance accuracy, streamline processes, and reduce the likelihood of human error. Adopting accounting systems that offer real-time reporting and automatic reconciliations can significantly improve the efficiency of financial operations.
Specialist accountancy and advisory support for the charity sector
Preventing financial mismanagement within a charity is a collective responsibility, but one that can be achieved with successful implementation of the strategies discussed in this article.
In all our work with the Third sector, our proactive and practical advice is designed to help you find financial stability whilst also achieving your core objectives, and we are perfectly placed to help you with the practicalities of putting financial management controls in place.
To talk to us about your requirements, or to find out more about how we could support your charitable organisation, contact us today.
