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Trustees must take steps to make sure that your charity’s money is:

  • safe
  • properly used and accounted for.

You also need to be able to show that you’ve made the best use of your money in advancing your charity's purpose.

Understanding finances

Every trustee shares this responsibility. Even if your charity has an expert to manage its finances, every trustee shares responsibility for overseeing your charity’s money. All trustees need to understand, be involved in reviewing and agreeing the:

  • Balance sheet: This shows the exact money and value of the assets the charity has. It’s also where you find the figure of unspent income which is held in reserves.
  • Budget: Sets out what income you hope to receive and how you plan to spend the charity’s money typically over a year.
  • Management accounts: Shows the actual income and spending for a period up until a certain date. These allow trustees to assess how the charity is doing compared with the budget.
  • Cashflow: The combination of the balance sheet, budget and management accounts allows trustees to make sure the charity can meet its financial commitments and avoid insolvency. By monitoring ‘cashflow’ trustees can see how much money will be needed.
  • Annual accounts: Shows the performance of a given financial year and may need to be checked by an external person or audited depending on the charity's income.

Understanding finances can be complex and charity accounting has many aspects different to other sectors. If a trustee doesn’t have a finance background or is new to the charity sector, time should be made as part of any trustee induction.

The charity commission has a five-minute guide on trustee financial responsibilities.

Further guidance

This page was last reviewed for accuracy on 29 April 2022

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