Recently the Charity Finance Group held risk and community accounting conferences on consecutive days. Community accounting services provide accounting and financial management support, either on a not-for-profit or subsidised basis, to the small, local, voluntary, charitable and community groups that make up the heart of the sector.
Many of these services have closed in the past year, either because charities don’t have the funds to use the services or local support has gone, or both. According to the Charity Commission’s data, the majority of charities have annual incomes of less than £500,000, the level at which they must have their accounts audited. This group will grow further if the audit threshold rises to £1m, as the government proposes.
Removing these charities from this deeper level of accounting scrutiny is attractive, but it doesn’t mean charities can do without accounting and financial management services. Without this grass-roots support, opportunities to drive up efficiency, effectiveness and sustainability in the sector could be missed.
We know that sound financial management matters – not only to the fortunes of individual charities, but in terms of public trust and confidence in the sector as a whole. If we are to create a financially confident, dynamic and trustworthy charity sector, we need to ensure that trust also extends to small charities. Yet frequently those charities lack access to specialist services either because of a lack of provision or because price is prohibitive.
Charities are not set up with financial management in mind; they are set up in response to a social need by founders who have a passion to create change and deliver on a mission. Yet good financial management is central to their success. It goes beyond compliance and is vital to attracting funds and maximising a charity’s impact. This need is even greater in the current climate, where charities are under significant financial pressures.
Even a small investment could help charities to become more sustainable and have more impact. This is a topic that needs to be taken seriously to ensure the long-term vitality of the charity sector.
Source: Third Sector (Caron Bradshaw)