1. Engaging Trustees in Financial Management
Heather McLoughlin Policy and Public Affairs Officer Charity Finance Group

2. How do you engage trustee boards about financial governance?
What should boards ultimately interested

3. Things to do: There are two approaches to help boards: The carrot:
Help boards set out a clear vision. Encourage early conservations on budgets and policy development in key areas (e.g. fraud, investment, asset management etc.)
Invest time in working 1 to 1 with all trustees, not just the Treasurer, to encourage ownership of their financial decisions.
Ask Trustees in private what they don’t know or understand. Many people will be shy in speaking up in meetings when they are unsure.
The stick:
Force Trustees to understand their legal responsibility. Encourage them to read reports, new regulation etc.
Encourage a diverse board and ensure complacency does not set in.
Trustees should be supported to ask difficult questions of the Treasurer about actions they are taking.

4. Things not to do:
Financial decisions should not all be left to the Treasurer – no man is an island and the board needs to work as a team.
Patronise the Treasurer. Anyone can understand charity finance, it is not a specific code.
Give up! Being a Treasurer is a hard job (and this needs to be recognised across the board) but it has to be done and the benefits of good financial governance are immense.

5. The new normal for charities

6. New Challenges in financial governance for boards
Pre-Kids Company - Under the ‘old’ approach to governance, trustees would focus on making decisions for the best interests of their beneficiaries knowing that they may be treated kindly if they made mistakes or organisations failed.
Post-Kids Company- Under the ‘new’ approach trustees are not only asked to make decisions in the best interests of their beneficiaries, but need to consider a ‘Daily Mail test’ – what would people think about your decisions, policies and procedures, if your charity was on the front page of a national newspaper?

7. Pitfalls Trustees need to avoid
Taking too much on trust
Not adapting your processes as you grow (or shrink)
Not having enough expertise at board level
Relying too much on processes
Ignoring advice from auditors/independent examiners
A lack of clear ‘vision’ for the organisation

8. Further challenges boards can face:
New regulation, higher levels of scrutiny. Many boards now fear falling foul of Charity Commission regulation.
Boards need to think carefully about balancing back office and frontline costs. How do you can encourage trustees to invest time in financial expertise and governance?
For small charities surviving is difficult. How do you get them to focus on governance and management with limited funds and resources?
Most charities feel overwhelmed with what they have to do to be compliant. It’s important to remind charities of their benefits, e.g. tax breaks.
There can be a lack of clarity for small charities in what is appropriate for them to report on. Often guidance is designed for ‘big’ charities and is too comprehensive for the wider sector.

9. Question: Who do trustees govern for?

10. How can IE’s help?
Challenge boards to make them do the work themselves.
Educate Trustees. Provide resources, guides, training etc.
Try and engage throughout the financial year, not just at the end. Encourage them to keep finances on the agenda throughout the year.
Break things up. Don’t let Trustees get demoralised by the weight of responsibility, try and make the work load manageable.
Remind them who they’re helping with good financial governance.

11. IE’s can help build these foundations of good financial governance:
‘Buy in’ from the top of the organisation
Regular review of controls
Segregation of duties
Effective budgeting and cash flow management
Appropriate risk management
Regular flow of information to trustees
Access to expert advice
A diverse range of board expertise
A clear understanding of legal and regulatory responsibilities
Remember to ensure that these are appropriate for the size of the organisation

12. How should the Treasurer manage their charity’s resources?
They should act responsibly, reasonably and honestly in managing your charity’s resources.
They must:
make sure the charity’s assets are only used to support or carry out its purposes
avoid exposing the charity’s assets, beneficiaries or reputation to undue risk
not over-commit the charity
take special care when investing or borrowing
comply with any restrictions on spending funds or selling land
Having appropriate procedures and safeguards in place and taking reasonable steps to ensure that these are followed.
Good financial governance is ensuring that the board has strong procedures and safeguards to protect their charity’s resources.

13. Questions for the charity board
Who is responsible for financial management in the charity? Hint: Its everyone!
Do they have the financial information they need to make informed decisions?
When was the last time they reviewed their internal financial controls?
How must trust/confidence do they have in your executive and finance staff?
When was the last time they discussed their approach to risk at board level?
Do they get the most out of you as an independent examiner?
When was the last time they reviewed their financial controls against Charity Commission expectations?

14. Things you should read…
CC3 – The Essential Trustee
CC8 – Internal Financial Controls
CC19 – Reserves
CC26 – Charities & Risk Management
Public Administration and Constitutional Affairs Committee Report on the Collapse of Kids Company
CFG’s Essential Charity Finance for Trustees training in October
CFG will be producing a guide to charity finance for Trustees at the end of this year

15. CFG is developing our Small Charities Finance Programme
CFG is developing our Small Charities Finance Programme. The aim of the programme is to develop the knowledge and financial capabilities of small charities, helping them to inform their decision making, improve their resilience and maximise the difference they make in their communities. A vital part of the programme is to support financial infrastructure services across England and Wales to strengthen networks and sign post small charities and funders to the already existing services As part of the process CFG is producing a map of the financial services that are available for small charities across England and Wales with a view to making data available so that small charities can easily identify and access what services are local to them. This survey will help us to populate this map. The survey also seeks to identify whether training organisations providing financial services to small charities need any support to strengthen what they are doing. We therefore want to hear from those who currently provide financial services (or would like to) and support to small charities. So this can include any provider that looks to improve charities’ handling, planning, governance, use of finances or accounting services. Would you be able to take a few minutes to fill in the survey and please do share the link with any other organisations who you feel would benefit from this programme. The link is:

16. Thank you! Charity Finance Group
CFG is a charity that supports all charities to make the biggest difference possible. We do this by supporting them to make the most of their money and resources, by putting financial leadership at the heart of their decisions.
Heather McLoughlin
Policy and Public
Affairs Officer