Recently the Charity Finance Group held risk and community accounting conferences on consecutive days. For those readers who are unfamiliar with the term, community accounting services provide accounting and financial management support, either on a not-for-profit or subsidised basis, to the small, local, voluntary, charitable and community groups that make up the heart of our sector.
Sadly, it was shocking to hear how many of these services have closed in the past year, either because charities don't have the funds to use the services or local support has gone, or both. According to the Charity Commission's data, the majority of charities have annual incomes of less than £500,000, the level at which they must have their accounts audited. This group will grow further if the audit threshold rises to £1m, as the government proposes.
Removing these charities from this deeper level of accounting scrutiny is attractive, but it doesn't mean charities can do without accounting and financial management services. I fear that, without this grass-roots support, opportunities to drive up efficiency, effectiveness and sustainability in the sector could be missed.
We know that sound financial management matters – not only to the fortunes of individual charities, but in terms of public trust and confidence in the sector as a whole. If we are to create a financially confident, dynamic and trustworthy charity sector, we need to ensure that trust also extends to small charities. Yet frequently those charities lack access to specialist services either because of a lack of provision or because price is prohibitive.
Charities are not set up with financial management in mind; they are set up in response to a social need by founders who have a passion to create change and deliver on a mission. Yet good financial management is central to their success. It goes beyond compliance and is vital to attracting funds and maximising a charity's impact. This need is even greater in the current climate, where charities are under significant financial pressures.
Historically, there has been a lack of investment in supporting the financial capabilities of charities. The Capacitybuilders scheme, which ran between 2008 and 2011, included programmes for everything from governance to equality, but had no focus on finance. The Cabinet Office's Strategic Partners of the Office for Civil Society, a scheme that ran from 2009 to 2014, included nine major infrastructure partners, but did not include any support for financial development. The importance of this part of delivering social change is overlooked time and again. If that were not problem enough, local authority support is also fast disappearing, leaving financial skills support for small charities woefully under-resourced.
Sir Stuart Etherington, chief executive of the National Council for Voluntary Organisations, spoke at the risk conference and drew attention to the difference between clever and stupid commissioners: it would appear there are quite a few stupid local authorities failing to take the long view when considering how to support charities. The impact of a funder – whether it is a grant-maker, foundation or local authority – can be greater when its spending includes plans to instill in the organisations it funds a lasting legacy of greater skills and business acumen.
Even a small investment could help charities to become more sustainable and have more impact. It's time this was seen as essential not only to squeezing every last ounce of impact out of each pound donated, but also to securing the long-term vitality of the charity sector.
Caron Bradshaw is chief executive of the Charity Finance Group