A key responsibility for those governing a charity is to make sure that the charity has the resources it needs to carry out its work. The governing body (such as a board or committee of management) must ensure the charity has the finances or other resources to do its work, as well as ensure that these resources are protected from abuse and used appropriately.
What understanding of finances must a charity’s responsible person have?
A charity's responsible persons must have a level of financial understanding that will enable them to make informed decisions about their charity’s finances. While many boards appoint treasurers and board members with financial expertise, every board member must be able to read and understand a charity’s financial information.
If you are a responsible person you can participate in training to improve your understanding of finances, as part of your role. You must be appropriately informed about the matters on which you may make a decision. You cannot make informed decisions about your charity’s finances without an understanding of the concepts that relate to them. At the very least, you should be able to determine whether your charity is solvent and what the impact of any decision you make will be on your charity’s financial health.
Governance Standards and financial management
Charity board members have duties under the ACNC Governance Standards. These duties, set out in governance standard 5, include to:
- ensure that the financial affairs of the charity are managed responsibly (Duty 6)
- not to allow the charity to operate while it is insolvent (Duty 7)
A related duty under this standard is to disclose conflicts of interest.
- CPA Australia: A Guide to Understanding Financial Reports of NFP entities
- CPA Australia: Charities A guide to financial reporting and assurance requirements
- Accounting for Good - financial management support for NFPs
- ATO: Manage your invoices, payments and records
- Business Victoria: Cash flow forecasting
- Institute of Community Directors: Free financial help sheets
- Our Community: Damn Good Advice for Treasurers
- Our Community: Damn Good Advice for Board Members