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WHAT ARE THE ESSENTIALS OF GOOD FINANCIAL MANAGEMENT?
In the past 25 years, the charity sector as a whole has come under tighter scrutiny and has become increasingly regulated. Religious institute charities are not immune from this additional “red tape”. Requirements for nancial management can be found in the charities acts, the companies acts (for those charities that are also companies), statutory regulations, the guidance set out by the Charity Commission and other regulators in the countries of the United Kingdom, the accounting requirements set out in Accounting and Reporting by Charities: Statement of Recommended Practice (SORP) and so on.
It has become common practice to outsource a number of aspects of the bursary function – payroll and investment management are two common examples. However, it is essential that trustees continue to control the services provided by such organisations and procedures need to be put in place to establish objectives and then to monitor and report on the service provision.
In exercising control over their charity’s affairs, the trustees of religious institute charities must act reasonably and prudently in all nancial matters. Their duciary duties may be summarised as ensuring that their charity:
Obtains all the income that is due to it, including exercising proper control over, and accounting for, all funds raised by the charity or in its name
Applies its income and assets for the purposes set out in its governing document
Safeguards its assets
Takes proper account for its liabilities
Ensures that it has adequate nancial resources to meet its liabilities, including the long term care of the members of the institute for the remainder of their lives; and
Ful ls its statutory obligations regarding the production and ling of annual accounts, trustees’ reports and annual returns etc.
Risk management is dealt with elsewhere in this book. However, nancial management includes the need to consider nancial risks i.e. those risks arising out of failures of budgetary control and nancial reporting, the lack of an appropriate reserves policy, cash ow problems, failure to collect monies due or to carry out proper due diligence on suppliers of goods and services,
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