There are a number of areas where charities must apply a keen focus to keep their overall operations running smoothly and efficiently. Two important aspects of this relate to managing charity finances properly and keeping on top of legally required administrative requirements.
There are various ways to improve charity financial management that trustees and managers might wish to consider. Furthermore, an important new structure was introduced in England and Wales in 2013 with the creation of the Charitable Incorporated Organisation, which aims to ease administrative costs for charities.
Charities’ Financial Management
One of the best ways to keep charities’ financial management efficient is by making the most of the available resources i.e. people. Smaller charities may need to share the burden of financial responsibility between appropriately qualified trustees and volunteers. Charities that have designated financial managers need to ensure that person has adequate support from the trustees.
Whatever the size or nature of the charity, it is important that a strategic approach is taken to financial management so that established principles can be referred to in the event of disagreements. Trustees, staff and volunteers should be involved in the creation of policies so that everyone involved understands the objectives, responsibilities, limitations and controls placed upon charity finances.
Having an external adviser appointed to refer to for objective advice can also be helpful as a means for supporting financial managers and also to unlock disagreements.
Would Your Charity Benefit from Being a Charitable Incorporated Organisation?
Charities have typically been created in various structures such as unincorporated associations, trusts or companies limited by guarantee. Although the latter have offered some protection for volunteer trustees from the debt of the charity, the two former structures have not. Furthermore companies limited by guarantee have suffered from the disadvantage of regulation under two different sets of legislation, that for companies and that for charities.
In January 2013 the Charitable Incorporated Organisation (CIO) became available in England and Wales to those setting up new charities or those wishing to convert from trusts or unincorporated associations. The CIO is tailored to the needs of charities and makes them solely subject to regulation by the Charity Commission. Trustees are better protected from liability than the traditional structures and the single regulatory environment means lower administrative costs.
By Autumn 2014 over 2,000 charities have registered as Charitable Incorporated Organisations according to the Charity Commission’s website. Converting from charitable companies limited by guarantee is not yet possible but a new mechanism is expected before the end of 2014.
For specialist advice regarding management of charity finances or the creation of a Charitable Incorporated Organisation contact Neil Cundale or call 0330 024 3200.