Linking to the Charity Governance Code, this practical breakout session will help you understand the financial responsibilities of being a trustee and how these connect with your wider governance role. Working from case studies, the session will help you understand some important fundamental concepts whilst building your confidence to ask insightful questions about such things as sustainability, risk and the links between the past and the future via the present. The session will also create mutual understanding of respective roles and responsibilities, and no accounting experience is assumed!

1. ASKING THE RIGHT QUESTIONS:
AN INTRODUCTION TO CHARITY
FINANCE FOR TRUSTEES
HOWARD EXTON-SMITH
JUDITH MILLER
4 NOVEMBER 2019
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2. WELCOME
WHAT WE WILL TRY TO COVER
TODAY…
• Responsibilities
• Case study
• What you need in place
• Things to think about
• Self-assessment
• Signposting
• Q & A
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3. RESPONSIBILITIES
CC3 THE ESSENTIAL TRUSTEE & THE
GOVERNANCE CODE

4. CC25: CHARITY FINANCES: TRUSTEE ESSENTIALS
1. Financial management
2. Identifying and managing risk
3. Sound internal financial controls
4. Charity reserves
5. Managing financial difficulties &
insolvency
1. MAKING THE MOST OF YOUR
FINANCES

5. CC25: CHARITY FINANCES: TRUSTEE ESSENTIALS
1. Financial investment
2. Charities and fundraising
3. Charities and trading
2. INCOME GENERATION
3. USING OTHER RESOURCES
1. Staff and volunteers
2. Charities and insurance
3. Buying and selling land
4. Trustee expenses and payments

6. CASE STUDY
• What gives you comfort?
• What gives your cause for concern?
PUT YOURSELF IN THE SHOES OF A NEW
TRUSTEE

7. Intelligence
Looking
in
Looking
forward
Looking
out
Looking
back

8. THINGS TO THINK ABOUT
• Your strategy and the choices you make
• Surplus vs. deficit
• Your business model
• Cost/income flexibility/rigidity
• Cross subsidy
• Risks
• Reserves
• Link between financial information and other
indicators
• Policies and procedures

9. THE PAST
• Annual report
• Statutory accounts
1. Statement of Financial Activities (SOFA)
2. Balance sheet
3. Statement of cash flows
FINANCIAL STATEMENTS

10. THE ACCOUNTS
• What are the numbers telling you?
• Historical – reflect past choices
• Don’t reflect cash
• Look for changes, ask why?
• Interrogate the numbers – risks
• Other performance indicators
• What was achieved?
• Ratios and margins
• Reserves
THINGS TO THINK ABOUT

11. THE FUTURE
• Planning
• Strategic plan – what will you achieve?
• Business plan – what will you do?
• Budgeting
• Expectations
• Income
• Expenditure
• Surplus or deficit
• Accountability and responsibility
BUDGETING

12. BUDGETING
• Basis
• Where did the budget numbers come from?
• Assumptions
• Do you know and understand them?
• Risks
• How much do you know about the situation?
• How well can you predict the outcome of any
action?
• Your business model
THINGS TO THINK ABOUT

13. FUNDS OF A CHARITY
Restricted
Funds have to be spent on
specified purpose:
• Restriction imposed by donor
• Restricted funds may be
for a specified project,
specific geographical area
or raised in an appeal
Unrestricted
Funds received for any purpose
within your charitable objects:
• General donations
• General legacies
• Self-generated income
Designated
Funds earmarked by trustees
to be used for particular
purposes in the future
General
Unrestricted,
undesignated funds

14. CHOICES
Adjust
spend to
fit income
Use
reserves
Regularly
monitor
income
and adjust
Danger
zone
Predictable income
Flexible
cost base
Inflexible
cost base
Unpredictable income
With thanks to Kate Sayer, Sayer Vincent

15. UNDERSTANDING YOUR BUSINESS MODEL
15
Maintain
financial
performance
Implement
differently?
Keep going
Stop
Use funds
more
effectively
elsewhere?
High strategic importance
Low strategic importance
£ performance
poor
£ performance
good
With thanks to Sayer Vincent

16. THE PRESENT
• How are we doing?
• Information – management accounts
• Periodic
• Compare actual with budget = variance
• For the period andYTD
• Forecast and outturn
• Accountability and confidence
MONITORING

17. MANAGEMENT ACCOUNTS
• Information and decision support
• Ignorance and/or incompetence
• Grip
• Cash implications
THINGS TO THINK ABOUT

18. ROLES AND RESPONSIBILITIES
• Delegated powers – are they defined, clear and used?
• Levels of scrutiny
• Treasurer
• Sub-committee
• Individual trustees
• The meeting
• Who is in the room?
• What is on the agenda?
• What information do you get and when?
• Chairing skills
WHO DOES WHAT AND WHEN?

19. WHAT?
Cheerleading
CorporateChallenging
HOW DO YOU BEHAVE? THE 3 CS

20. THINGS TO GIVE YOU COMFORT
OR CAUSE FOR CONCERN
Strong – comfort Weak - concern
• Diverse income streams
• Predictable income streams
• Flexible costs
• Positive cashflow, net current assets,
able to pay debts as they fall due
• Positive unrestricted funds
• Clear reserves policy that is met
• Programmes and projects cover their
direct costs and contribute to
covering overhead costs
• Clarity and strategy for loss making
core activities
• Full cost recovery
• Few income streams
• Unpredictable income streams
• Fixed cost base
• Trouble paying debts, declining or
negative net current assets
• Declining proportion of unrestricted
funds
• Lack of reserves policy
• Lack of clarity around financial
performance of programmes and
projects and underlying structural
deficit
• Unable to cover full costs from
funders

21. AND, AS ALWAYS, THE BUSINESS MODEL…
DECISION MAKING, RISK AND CONTROL
With thanks to Sayer Vincent

22. SELF ASSESSMENT
• What do you know about what happens at
your charity?
• What might be priorities for you?
HOW ARE YOU DOING?

23. SIGNPOSTING
• Charity Commission
• C25 Charity Finance: trustee essentials
• CC12 Managing a charity’s finances: planning, managing difficulties
and insolvency
• CC8 Internal controls for charities
• CC19 Charity Reserves: Building resilience
• NCVO
• KnowHow, StudyZone,Tools & Resources
• SayerVincent
• HonoraryTreasurers’ Handbook
• Made simple guides
RESOURCES TO HELP

24. WRAP UP
QUESTIONS?
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25. THANK YOU Co-sponsor:
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