Trustees must do more to understand charity finances Read more at http://thirdforcenews.org.uk/tfn-news/trustees-must-do-more-to-understand-charity-finances#2d7tEuBBYMJF70iz.99

Wednesday, November 21, 2018 4:34 PM | Anne-Marie Barry (Administrator)

First posted in 'Third Force News' 16th November 2019 - Author Gareth Jones

A report has revealed that charity boards must do more to understand the finances of their organisations.

More than 200 trustees were quizzed as part of a study conducted by the Charity Finance Group and accountancy firm MHA MacIntyre Hudson.

The research suggests there are continuing deficiencies in the financial governance competency of charities, as well as a lack of diversity on boards.

While over half of respondents (57%) said they understood strategic financial governance matters well or very well, nearly nine in ten respondents (87%) said their charity could benefit from having a better understanding of strategic financial governance matters, and nearly two thirds (65%) fail to formally assess board competency in charity finance.

In addition, over half (55%) of charities do not formally assess the effectiveness of their financial governance, an increase of 9% from 2017. The authors have said this suggests that many charities are failing to recognise the improvements that should be made to become high performing.

Almost all charities (99%) consider it important to have more than one trustee engaged with their charity’s finances, which would suggest a need for trustee training and development, but only 56% make training available, a reduction from 81% in 2017.

Respondents are honest in recognising that charity boards are not diverse enough in terms of demographics and background, with 44% rating this as poor. Meanwhile, despite this the diversity of thought within boards was considered to be much better and assessed to be poor by only 15% of charities surveyed. 

Caron Bradshaw, chief executive of the Charity Finance Group, said there is work to do to improve financial governance.

She said: “While the survey indicates that there have been some notable improvements in financial governance amongst trustees, there is still a lot more to do to ensure all trustees are engaged in the finances of their charity.

“Help is available, but charities need to commit to using it to unlock the finance skills of their trustees. We encourage trustees not to be complacent over the lack of diversity in the boardroom. It needs to be prioritised to ensure people from diverse backgrounds join our boards - better decision making depends on that diversity of thought and voice.”

Sudhir Singh, partner and head of not for profit for MHA MacIntyre Hudson, said: “I am in not doubt that trustees overwhelmingly are motivated by good intentions. Clearly trustees should do their best when serving their charities, and most seek to do so. But our survey results are consistent with last year in identifying mediocre standards in financial governance and a lack of real commitment to trustee competency and diversity. The inconsistencies in charities’ responses certainly points to a widespread lack of self- awareness, and probably unacceptable complacency. 

“Trustees need a reality check on their own performance, and increasing numbers are undertaking formal assessments. Most would be truly shocked if they understood this is holding back their charities’ impact on beneficiaries. So, I would encourage all to take advantage of the widely available guidance and training that is available through CFG, other sector groups and professional advisers – it would be remiss of them not to do so.”

The Association of Charity Independent Examiners

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