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Financial health checks

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Why do it?

Voluntary organisations need good financial systems to avoid running out of money and to avoid allegations of fraud. Good financial systems enable the charity to spot problems quickly and adjust activities to maximise the effectiveness of their funding.

Poor financial systems can exist for a number of reasons. In small organisations it may be that this area has never received any real attention. The volunteers who run the charity may have focused their efforts on the main task of the charity – such as arranging summer holidays for disadvantaged children – and no one has ever had the energy to sort out the book-keeping on a regular basis. Financial papers are given to the Independent Examiner every year who “sorts it all out”.

This type of approach is fraught with risk. It is easy for money to be misappropriated. Twelve months after the event pieces of paper are often missing and verbal explanations have to be given which are frequently little more than guesses. Funders, understandably, would be unhappy if they knew that there was very little control over the finances – and they could withdraw their funding. People with grievances can make allegations to funders – true or false – about poor financial management and fraud.

Large organisations

In larger organisations financial health checks are useful because staff may not have relevant training or may not be aware of the specialist accountancy needs of voluntary organisations. The charity might have expanded over time with no one focusing on whether the financial systems have been strengthened to reflect the greater demands being placed on them.

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Last updated: Mon, Mar 31 2008 - 02:59:42 PM

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