Financial management in small charities

Research published by the Charity Finance Group and the Small Charities Coalition has found that small charities face significant difficulties with effective financial management, including staff and trustees who do not have enough financial expertise.

Making it Count: A Report into Financial Management in Small Charities, which can be downloaded www.cfg.org.uk/resources/Publications/cfg-publications.aspx, is based on interviews with charity trustees and financial experts and a survey of 323 small charities, who have an annual incomes of less than £1million.

The report states that many small charities are unable to afford to employ people with finance as a primary responsibility, and that finance staff are often under-qualified for their roles despite having to deal with a number of very complex issues.

It also states that many charities receive multiple restricted grants from several funders and must account for each of those funding streams separately, face problems acquiring required accounting packages and have issues accessing available support, including community accounting services.

According to the report the areas with which small charities struggle most tend to be specific to the charity sector, including restricted funds and VAT exemptions. Many small charities rely heavily on staff, trustees and advisers with financial expertise from other sectors, who may often struggle to adapt their knowledge to a charity context.

The Charity Finance Group want to hear ideas from others about what could be done to help small charities improve their financial management. To contact them visit www.cfg.org.uk/about-us/contact-us.aspx.