with complex accounting and reporting requirements. This makes it difficult and expensive for charities to comply with the numerous requirements from Charity Commission and keep up with the frequently changing regulations. For small charities with limited resources it becomes increasingly burdensome to run its finance function in house, let alone run its major functions like fundraising and charitable activities.
Finance is crucial for the existence and growth of any organisation and so it demands that it be handled effectively and efficiently.
The common problems charities face in relation to finance and accounting are:
- Deciding which type of set up is best suited, i.e. charity, charitable company or CIC
- Monitoring restricted and unrestricted grants and spending
- Deciding whether you need an audit or independent examination
- Preparing timely management accounts and reports to enable decision making for trustees
- Preparing statutory accounts complying with Statement of Recommended Practices for charities
- Drawing up a sound reserve policy and calculating reserve
- Preparing and monitoring budgets and cash flows
- Identifying trustees’ duties and responsibilities
- Having inefficient and inadequate financial and accounting procedures
- Need for good governance and internal controls