Opportunities and concerns for Finance teams from the Charities Regulator Annual 2021 report
It’s been a very unusual few years for charities in Ireland. With fundraising events cancelled, fierce competition for donor spend and external challenges across the pandemic years, many charities have been trying hard to evolve with the new dispersed working norm to keep their organisations running and managed.
The Charities Regulator Annual Report for 2021 released this month, highlights some of their accounting and finance-related concerns that would add to the challenges of all charities. It echoes some of the internal and external pressures that we regularly discuss with charities eager to adopt best practice technology & processes to distinguish themselves and boost public confidence and trust.
So how does this key report touch on the lives and roles of the finance department? Several aspects were highlighted specifically, from public trust in the running & finance aspects of charities, increased governance, and the correct accounting functions.
The number of annual reports submitted on time fell to only 64% of charities being able to file them within 10 months of the charity’s financial year-end. This is down from 79% in the previous year. There are of course many registered charities who are very small entities without full-time accounting functions, however, the drop in compliance could be understandably linked to the covid-related challenges for accounting departments who have been more dispersed due to recent remote/hybrid working challenges.
Many organisations have struggled with “same-office” based processes and technology in the new world. In pre-pandemic life, office-based colleagues were able to complete their accounting functions by close liaison and personal interaction. The added logistics of remote working now contribute to greater delays, cumbersome additional processes, disjointed workflows, less timely processing & approvals, and even lack of staff retention due to the frustrations and cumbersome old-style processes in a new-style world.
The Charities Regulator “intends to adopt a stricter approach to enforcing compliance in future to ensure charities can demonstrate greater accountability to the public in relation to their finance and activities in the previous year.”
A further striking statistic from the report is that only “36% of public respondents have a high level of trust and confidence in charities” despite “86% believing charities and the work they do are important.” A surprising and worrying insight.
This is a fact that is guaranteed to affect fundraising into the future. It is essential that charities who fundraise or are in receipt of external funds can prove to themselves and to external parties that they have the systems, accounting processes, workflow approvals, and fund management processes in place to give confidence to possible donors who will be in greater scarcity, and with growing numbers of charities also competing for the same donor funds.
This puts even further burdens on finance and management as the important aspect of fundraising is no longer solely the domain of the fundraising and marketing teams. Their processes and financial controls are now even more critical to help reassure the 64% of respondents who do not have trust and confidence in charities.
“The survey highlighted the publics’ desire for a greater level of transparency and accountability by charities regarding their finances and activities confirming the central role that transparency plays” according to the Report.
You can’t easily have transparency and financial trust in a non-digital world. The legacy paper or excel based processes, manual and repetitive data entry, disjointed approval systems and separate data silos and budget fiefdoms relied on the care and immense efforts of separated and disparate teams and functions historically. This loyalty, human endeavour, and pride in their work by your finance colleagues now need to be backed by fully integrated and accountable systems.
The introduction of fully integrated workflow approval systems, essential integrated budgeting, SORP and SOFA reporting is not to be seen as a burden for your dispersed colleagues or the broader staff base. It is a sign of trust and investment in their roles and a willingness to empower them with better more streamlined systems that reduce costs & manual data entry, reduce repetition & human error, reduce the time it takes to close off a period or a year, and provides a streamlined, informative, fully digital trail across the various aspects of your charity.
Whilst the Regulator has acknowledged that increased regulation and the introduction of the Charities Governance Code have been good for the sector there is a recognition that the Regulator does need to “adopt a stricter approach to enforcing compliance in future in order to ensure that all registered charities meet their annual reporting obligations and demonstrate greater accountability to the public in relation to their finances and activities in the previous year.”
This sets the scene and paints a concern for all charities who rely on external funds whether corporate, individual donors or government. There is a need to distinguish your charity to be demonstrably prudent, accountable, and transparent. To increase your fundraising, trust in your organisation, avoid regulator penalties and improve processes that will help retain your valued staff and deliver a better service charity-wide for staff and service users alike.
Similar to SORP compliance, it’s not just a software “fix”. Full transparency, accountability, fund management and efficient accounting processes, require an enlightened mindset with joined-up processes, a team approach across all departments, and the right accounting software to be that lean organisation that is transparent to the world.
With our 25 years of working closely with Irish charities, we do understand the pressures and the disparate nature of so many charities across their services, challenges, and processes.
iplicit specialises in fund management and accruals, SORP and SOFA reporting, dispersed purchase requisition and expense workflow approvals, in a truly innovative True-Cloud experience, and with a range of monthly or transaction price permutations to suit all medium to large-sized charities. Automate repetitive tasks, have one secure version of the truth, reduce inter-departmental queries, streamline your time-consuming bank reconciliations, month ends and year ends. In short, it can transform the way you work.
You might be surprised at the time and cost savings you could make with iplicit and how bright the finance function and transparency of your organisation could be. We would love to find out more about your own challenges, so please do contact us and help us understand your needs.