Our Assurance and Business Services team undertakes projects for not-for-profit and charitable organisations reaching far beyond traditional audit and accountancy services.
Systems And Controls
Charities typically operate with limited resources. The overriding wish of stakeholders and founders is for as much resource as possible to be expended on the relevant charitable activity, with as little leakage as possible on administrative costs.
Therefore, as charities evolve, the development of internal systems and controls can lag behind, resulting in some control weaknesses.
We have worked with organisations helping them to understand their various financial processes and the controls in place to protect the assets. We have identified gaps in controls and suggested ways in which they may be plugged. This has ranged from suggesting that the monthly payroll is reviewed by a suitably senior member of staff to implementing complete systems of budgetary control.
Validation
One problem associated with running a charity with relatively few employees, particularly in the finance department, is a lack of a second opinion or fresh pair of eyes. This is where our validation work has been particularly valued.
An individual who has worked hard at a business plan, anticipating where the charity may be in, say, five years' time and adopting a range of assumptions into a spreadsheet model, will reach a point where no amount of checking will detect a formulaic error which could potentially distort the data on which trustees will rely in taking strategic decisions.
We have been able to carry out validation exercises whereby we check the arithmetical accuracy of a budget or business plan, test whether assumptions have been applied correctly to the model and challenge preparers as to the validity of those assumptions. The result for the organisation is a reliable plan/forecast against which management and trustees can monitor performance and make appropriate decisions. Conversely, a validated business plan may show that in the long run the organisation is not viable – then, based on reliable data, trustees can decide on an appropriate course of action to address the issue.
In one instance, we were called on to validate a business plan to give added comfort to a bank contemplating renewing loan facilities. Without such reassurance there was a risk of loans being called in and the charity being unable to continue in the provision of services to a particularly vulnerable group of individuals.
Role Of Finance Director
Many charities lack financial resources to engage a finance director and, indeed, the scale of operations may not be sufficient to warrant an appointment at that level. Nevertheless, trustees need access to financial expertise that may not be available through their bookkeeper.
We can take on the role of non-executive finance director. This includes presenting management accounts provided by the charity's bookkeeper, highlighting key performance indicators and assisting in understanding trends that will enable informed decisions to be made. We can also advise on the financial implications of a particular strategy.
Risk Management
Charities are required to have regard to risk management. We have assisted trustees in discharging their responsibilities in this area in many ways, depending on the degree of sophistication concerning risk management that already exists within a particular charity.
Examples of assignments which we have undertaken include the following.
- Facilitating a brainstorming session at which the senior management team identified the risks facing the organisation, their respective likelihoods and impacts and the controls in place for mitigating those risks. Compiling the organisation's first draft of a risk register.
- Testing the operation of controls identified as mitigating a charity's 'top ten' risks to give assurance to the trustees that controls are indeed effective.
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