What financial tools does a board need?

All boards should receive the following financial information monthly or quarterly:

  • Management accounts (including year to date actual/year to date budget/original budget/re-forecast).

  • Cashflow forecast.

  • Balance sheet.

  • A narrative finance report explaining variance and the projections in the re-forecast.

Additionally, the following tools are important elements in a board ensuring effective financial governance:

  • Written finance procedures including a procurement policy.

  • Board member(s) with specialist financial skills.

  • Reserves policy – what type and what quantity of reserves the organisation should have. The charity trustees of all registered charities are required to explain their policy on reserves in their annual report, and should state the level of reserves held and explain why they are held. More detailed reporting is expected of larger charities with an income over £500,000.

    The Charity Commission recently updated its guidance in relation to trustees’ duties regarding charitable reserves

  • 3–5 year business plan.

  • Sensitivity analysis – numerical analysis of risk in the planned activities.

  • An annual management letter from the auditors.

  • On 26 April 2023, the Charity Commission published updated guidance on how to manage a charity’s financial activity and use internal financial controls to reduce the risk of loss (CC8). It now includes using mobile payments systems and receiving donations of cryptoassets.

  • Regular reviews of bank mandates.

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