Financial Management

Making the most of your financial resources

Financial management is about:

• Operating appropriate financial policies, systems and procedures - the ‘tools’ of financial management.
• Meeting compliance requirements - usually the annual financial statements, annual report and independent examination/audit. Charities have to conform to the Charity Commission’s Statement of Recommended Practice 2005 (SORP 2005).
• Steering the funding requirement of your organisation’s strategy - which gives your fundraisers their targets.

Greengage Associates has substantial experience in each of these areas and offers services that range from a healthcheck (with associated action plan) to project work.

The ‘Tools’ of Financial Management

These ‘tools’ include budgeting, cash flow management, the accounting system and some internal controls (purchasing, anti-fraud etc); they help your organisation to demonstrate effective use of resources to your funders. Greengage Associates’ services include:

• Review of existing finance procedures - and drafting workable procedures where required. ‘Workable’ means engaging with the relevant staff to derive appropriate, understandable procedures.
• Advice on the adequacy of your internal controls to the nature and size of your business - to give alignment with your organisation’s risk management policy and register.
• Explanation of your organisation’s financial structure to non-finance staff: do they understand the accounts and are they getting the information they need?

SORP 2005 Compliance Requirements

This section is geared to charities and compliance with SORP 2005; however, the principles also apply to other organisations. Services offered by Greengage Associates include:

• Advice on setting the activities structure. As the annual financial statements and trustees’ annual report are structured around a charity’s main activities, an essential early step is ensuring that the activities appropriately emphasise your charity’s purpose. Your operational aims - and not the finance staff - should determine your charity’s activities.
• Review of the activity cost calculation - similar to full cost recovery. Deriving the activity costs from the input costs (staff pay, utilities, materials etc) should be a straightforward process with a simple audit trail.
• Advice on - and, if required, undertaking - the preparation of the annual financial statements for independent examination/audit. Effective preparation limits the fees for the external scrutiny.
• Appraisal of the trustees’ annual report for effectiveness, consistency & compliance. This includes the public benefit reporting requirement needed in reports appearing after March 2009. The required information on objectives, achievements, performance etc will be accessible by all on the Charity Commission and Guidestar websites.
• Review of reserves policy. Charities are coming under pressure to justify their holdings of reserve funds. The usual purpose of these funds is to allow a charity to operate for a certain period without any income - and thus the funds are not available to current beneficiaries.
• Comment on the cost ratios for charitable activities and fundraising shown on the Summary Information Return and the Charity Commission website register entry for your charity. These key ratios are generated from the annual accounts.

Strategy Issues

A sound financial input to the strategic plan is a key element in achieving sustainability. Areas where Greengage Associates can assist include:

• Review of the integration of the finance staff in the strategic planning process to ensure both accuracy of assumptions and appreciation of business requirements.
• Development of a strategic cost model to enable strategic plan income estimates and full cost recovery assessment.
• Alignment of your charity’s activities as reported under SORP 2005 with the strategic plan - the annual report and performance management system will then reflect what your charity needs to achieve.

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