Charities need to take a new approach to Finance

Charities were once renowned for the help and support they provided to those in need. However, in recent years, the sector has faced something of a backlash and now it is more common for the public to refer to them as “tax-dodging enterprises set to make tax-dodging greedy people rich”. (Matter of Trust Report, 2014) The charity sector constantly faces scrutiny over their poor financial decisions: everything from excessive fundraising practices to poor accountancy practices and even the ongoing debate of the overpayment to senior executives.

As a Partner at an accountancy firm that specialises in the charity sector, it disappoints me to see that charities are lagging behind when it comes to financial governance. This has been made apparent through the new laws and provisions, which have highlighted fraud, poor accounting practices and careless governance by trustees.

It is now time to scale back and opt for a new approach.

The story of Olive Cooke shook up the charity sector after claims stated that her death was due to pressures from charity marketing campaigns requesting money. Charities need to explore more sophisticated and alternative methods of funding, such as government and public grants, crowdfunding and investors. There is so much help available to charities that it is time we adopted new methods of funding in order to keep up. In regards to new methods, charity governance also needs to be looked at too. There is an influx of charity statutory inquiries and constant press on poor conduct. It is necessary for charity trustees to be proactive in this area for the sake of their charity. Having timely, accountable and compliant accounts is extremely important due to the dying public trust in the sector. Charities need to have in place effective risk management processes to help tackle fraud and seek advice when it comes to their finances.

I recently read an article in the Guardian called “It’s time to change the definition of charity”, which concluded that charities are no longer what they used to be. This made me think that it is important for charities to remain charitable and maintain their public benefit and purpose (as it is the law). However, this can only be achieved by seeking thorough specialist financial advice and staying compliant before the sector falls even further behind.

It is about time that the sector shed this affiliation as “tax-dodging enterprises” and be as compliant with the law as possible.

If you require any financial advice or have any accountancy queries, please feel free to contact me atsuda.ratnam@raffingers-stuart.co.uk.