Blog

Governance, regulation and compliance

22 February 2016, 12:11

Charities need to do the walk, not just the talk and invest in financial leadership

Post byCaron Bradshaw

Where next?

Events »

Monday, 28 September 2020
Large Charities Conference More »

News »

Wednesday, 9 September 2020
'Tax after coronavirus’ – joint charity sector response More »

Last week, ACCA and Responsible Finance, launched an insightful report into the finance function within non-for-profit organisations. The report isn’t too long, and I’d encourage every finance professional in the sector to read it and share it with colleagues. Although many of the points made aren’t new, we need to keep repeating them at all levels if we are going to see change. If it is important, invest in it I don’t think that there is a CEO or trustee that I meet that doesn’t recognise the importance of good financial management. We all know, both finance professionals and non-finance professionals, that without strong financial skills charities cannot achieve their full potential. Pouring money into charities without robust financial management is like pouring water into a leaky bucket. Yet despite this recognition the resources are not being put into finance within charities. As this report says “the finance function is subject to underinvestment and is not prioritise…resources are directed towards short-term planning and objectives.” Some of this is due to the funding that charities receive. As it is noted in this report, a common compliant from charities is that they are not able to practice full cost recovery. This leads to cut backs on finance, IT and other critical enablers. However, there is also a cultural barrier within the sector. When push comes to shove, far too often, charities choose to withhold investment into finance in order to put more resources into the frontline. While this may be understandable in the current climate, this restricts the ability of charities to adapt and serve the long-term interests of their beneficiaries. Investing cannot just be a one-off event, it needs to be continuous as finance is constantly evolving to meet new challenges and new regulatory needs. Worryingly, 44% of respondents to the survey did not have a budget for their finance officers’ CPD. Amongst the small and young non-for-profits this grew to over 75%. This has got to change. Particularly when you consider that organisations like CFG exist and offer huge variety of content in return for modest fees. If we measured success in terms of rhetoric, the battle to put finance at the heart of charities would already be won. But while the investment decisions of charities continue to lag behind the words, we still have a long way to go. Charities can’t do it all on their own A powerful point made by the report is the need for charities to have access to a network of financial support. It would be incredibly inefficient for every charity to build up within its own organisation all the capacity that it needed to support financial decision making. Yet despite this, we have seen important financial infrastructure reduced due to lack of funds. Community Accountants, on which many smaller charities depend for financial advice and expertise, have seen their grants cut or withdrawn completely. CFG has been working with community accountants to support the development of more effective networks, but without funding this will not be enough for many areas. Funders say that they want charities to show value for money and be more efficient. Yet by cutting back on funding for infrastructure like Community Accountants they are forcing more organisations to spend more on getting financial advice and expertise then they would if there was effective infrastructure. Funders need to come together and ensure that these networks, on which so many of their grantees depend, do not wither in the midst of an inhospitable financial environment. Related to this, the report showed a high number of small organisations that are prioritising business planning and raising external finance (although this may be because they were being surveyed by an organisation which helps charities to raise external finance). We welcome charities putting more effort into working out their business plans and thinking about how they can access the resources they need to achieve their objectives. But we have found that within many small charities there is a lack of skills to do this effectively. That is why, with the support of Esmée Fairbairn Foundation, we have launched a Small Charities Finance Programme pilot which will be running in 2016 and early 2017. You can found out more information here. Just one more thing… One thing I did take issue with was the decision in the report to not include end beneficiaries as stakeholders with a direct interest in finance. I think that this is systematic of a misunderstanding about what finance is within an organisation. Even if you take the limited role of function outlined in this report: reporting, planning, governance, culture – these are directly related to beneficiaries. It is an obvious point, but without financial leadership, a charity is not going to achieve its objectives and this directly impacts on beneficiaries. We need to get away from considering finance as just something that we need to do in order to tick boxes for external funders and for regulators. It is at the heart of helping our beneficiaries. Until we move on from this approach, finance will always be subject to a lack of investment. We should consider investing in finance in the same way that we consider investing in any charitable project and it should be understood in the same terms. « Back to all blog posts

Blog

Charities need to do the walk, not just the talk and invest in financial leadership

Related Content

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?

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

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

Guest blog: SAVE Financial Planning

Guest blog: Insights into charity investment practices

EU Referendum: What could this mean for charities?

You don’t need to be a charity to do good…but it helps!

Another day, another opportunity for charities to engage in a consultation

Friday Afternoon Fraud

Is the SORP FRS 102 working for you?

ACF, CFG and NCVO raise concerns on draft guidance for funding non-charities

Annual Report 2015-16

Employment Status 2016

Rethinking Risk: Beyond the tick box

Hunting for the silver lining; the IFS, the economy and charities.