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:
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Written finance procedures including a procurement policy.
- Board member(s) with specialist financial skills.
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Reserves policy – All organisations should have sufficient reserves. There is no prescribed level of reserves for an organisation to hold. The appropriate amount should be determined and regularly reviewed based on the organisation’s specific circumstances including risk profile, funding model, commitments, financial strategy and future plans. All registered charities are required to explain their reserves policy in their annual report. This must include the level of reserves held (or an explanation if no reserves are held) and the reasons for holding them. While this requirement applies to all charities, larger charities (income £500,000 or above) are expected to provide a more detailed explanation, showing how the reserves level aligns with risk, plans and financial sustainability.
The Charity Commissions 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.
- The Charity Commissions guidance on how to manage a charity’s financial activity and use internal financial controls to reduce the risk of loss (CC8).
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Regular reviews of bank mandates.
