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Finance

Guidance for trustees on their financial responsibilities.

This page is free to all

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

  • safe
  • used properly and accounted for.

You also need to be able to show you’ve made the best use of the charity’s money to advance its purpose.

Understanding finances

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 and be involved in reviewing and agreeing the following.

  • Balance sheet: This shows the exact money and value of the charity's assets. It’s also where you find how much unspent income 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. These allow trustees to assess how the charity is doing compared with the budget.
  • Cash flow: 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 cash flow trustees can see how much money will be needed.
  • Annual accounts: Shows the performance of a given financial year. Accounts may need to be checked by an external person or audited. This will depend on the charity's income and any rules in its governing document.

Understanding finances can be complex. Charity accounting is different to other sectors in many ways. If a trustee doesn’t have a finance background or is new to the charity sector, this should be addressed as part of their trustee induction.

This page was last reviewed for accuracy on 04 October 2024

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