Employing people with financial skills is often far down the list of priorities for smaller charities. In fact, it is not until charities employ at least 10 staff that they think of hiring anyone with financial expertise, according to John O' Brien, chief executive of the sector training organisation CA Plus.
"They don't have the resources to employ specialists," he says. "If they are lucky, they might have a trustee with financial skills. When it comes to paid staff, finance is a necessarily evil add-on that someone gets lumbered with."
In May, a report from the Charity Finance Group and the Small Charities Coalition, Making it Count, said that financial skills had improved over the past decade among charities with incomes of less than £1m, but "a step change in financial management" was still required (see panel below). But achieving such a change poses problems. A survey of 323 small charities, carried out for the report, found that most charities were willing to pay only between £40 and £60 for a one-day training course, which is considerably less than the prices charged by many providers. O'Brien says: "If you say to small charities 'yes I can train you, but it's going to cost £50 an hour', they will walk away," he says.
But when it comes to affordable training, small charities face a postcode lottery. O'Brien's Nottingham-based CA Plus is mostly able to offer free advice to smaller charities in the area because it is subsidised by grants from councils and charges for services to larger organisations. It offers advice on subjects such as setting up an accounting system and VAT rules. "We prefer face-to-face support," says O'Brien. "We deliver classroom-style courses, but it's better to focus on the needs of the individual and the group."
Indeed, many small charities seem to crave one-to-one training, says Alex Swallow, chief executive of the Small Charities Coalition. "Quite often, they really need somebody who has the time to go through a few things line by line."
But the kind of community accountancy service that CA Plus offers is not available in most other parts of the UK. There are similar organisations, such as the Community Accounting Network North Yorkshire, and many councils for voluntary service employ a community accountant who offers practical help in setting up financial systems and gives advice by phone or email. But with a further 10 per cent cut in local authority support from central government, announced in June's spending review, community accountancy services are more likely to shrink than grow. So small charities are going to have to think on their feet to secure the financial guidance they need. Doug Hull, policy and membership officer at the CFG, suggests that they could persuade the accountant they pay to do their annual independent audit to offer pro bono financial advice when required. "A similar idea would be for local accountants to run a weekly 'charity hour', for example from 3pm to 4pm every Friday, when a small charity could either phone up or come in to obtain free support," he says.
The human element
Online support is another source. Know How Non-Profit, for example, has a section on its site dedicated to financial management, with guides to the basics of finance strategy, budgets and measuring financial performance. Community accountancy organisations, the CFG and the Charity Commission also offer online support.
But online resources lack the human element. Skills matching is one way to bring together volunteers who have financial knowledge and the charities that need their input.
The Institute of Chartered Accountants in England and Wales, for example, runs a volunteering website for accountants, and the Small Charities Coalition has a skills-sharing service.
"It might be somebody who can offer financial support but doesn't want to be a treasurer,"
says Swallow. "But they can still help a small charity to understand finance or get their finances back on track. Financial management is about surviving and, hopefully, thriving."
The report Making it Count, published by the Charity Finance Group and the Small Charities Coalition, found that there are five key financial management challenges facing small charities:
1. Charities with annual incomes of less than £1m frequently encounter complex issues similar to those of larger charities, such as trading subsidiaries, VAT regulations and contract management.
2. Many small charities can't afford to employ someone with finance as a primary responsibility, and rely heavily on trustees, employees and volunteers who have little financial expertise.
3. Many trustee boards seek to leave all financial management to a treasurer, who might lack confidence. Financial information might not be used effectively, which might result in ill-informed decisions being taken.
4. Training is often inaccessible because of cost and time limits, so online resources can be used by small charities to increase their skills. But it can be hard for them to know where to look for definitive and appropriate guidance and support.
5. Small charities tend to struggle most with sector-specific finance issues, such as restricted funds and VAT exemptions. Many rely heavily on staff, trustees and advisers with financial expertise from other sectors but who have limited knowledge of the charity sector.
- We speak to four charities to find out how they provide staff with training
- Read our interview with Keith Mogford of Skills – Third Sector
- Find out how to make better use of digital technology