MANAGING CHARITY MONEY: A GUIDE FOR RESPONSIBLE PEOPLE

By Australian Charities and Not-For-Profits Commission

This guide has been developed to help charities understand their obligations to the ACNC regarding financial management, reporting on transactions and the use charity funds.

It looks at the main reporting and record-keeping obligations, as well as what the term ‘not‑for‑profit’ means in practice.

It also explains charities’ obligations to the ACNC when it comes to finances – including the provision of financial reports and ensuring that they operate as not-for-profits – and focuses on practical steps charities can take to ensure their finances are used appropriately and protected from misuse.

This guide is particularly aimed at those people who are, or who are thinking about becoming, Responsible People of a registered charity. Responsible People are those on a charity’s governing body. In your charity, these people may be called board or committee members, directors, trustees or members of the management committee.

Responsible People and charity money

The responsible management of a charity’s financial affairs is vital to good charity governance, and charities’ Responsible People have a key role in ensuring this occurs.

Duties of Responsible People

Under Governance Standard 5, Responsible People have duties to:

act with reasonable care and diligence
act honestly and fairly in the best interests of the charity and for its charitable purposes
not misuse their position or information they gain as a Responsible Person
disclose conflicts of interest
ensure that the financial affairs of the charity are managed responsibly
not allow the charity to operate while it is insolvent.

Level of financial understanding Responsible People require

Responsible People 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 – although it is important the financial information is presented to Responsible People in a way they understand.

Responsible People need to be appropriately informed about the matters on which they may make a decision, and they should be encouraged to ask questions about charity finances and accounts.

It is a good idea to participate in training to improve your understanding of finances as part of your role. Financial literacy training may help Responsible People become more familiar with financial terminology and financial concepts, as well as help them become more aware of some of the problems which poor financial practices may cause, and how they can be remedied.

Responsible People cannot make informed decisions about charity finances without a basic understanding of the concepts.

At the very least, Responsible People should be able to determine whether the charity is solvent and what the impact of any decision they make will be on the charity’s financial health.

Managing money and other resources

An important responsibility for a charity’s board is to ensure the charity has the resources it needs to carry out its work and fulfil its charitable purpose.

Responsible People have an important role in gaining and maintaining charity funds, as well as in ensuring those funds are protected from abuse and used in an efficient and lawful way.

As part of the duties outlined in Governance Standard 5, Responsible People must ensure that a charity’s financial affairs are managed responsibly – including not allowing the charity to operate while insolvent. Responsible People also have a related duty to disclose any conflicts of interest.

Responsible People need to ensure their own accountability, as well as implementing structures and processes to guarantee accountability throughout the charity.

This accountability must also extend to any arrangements the charity has with other organisations, such as ‘third-party’ agencies that fundraise or deliver services.

Responsible People must be able to identify major strategic risks – for example, fraud – and ensure there are systems in place so the charity can identify, manage and respond to them.

Raising money

Fundraising can be undertaken in a variety of ways, such as:

seeking public donations (such as through door knock appeals or highway collections)
holding public events for which you charge an admission fee
running fundraising events (including events in partnership with others)
running raffles (or other games, such as bingo)
raising money via online appeals or through crowdfunding.

Charities also raise money in other ways, including through: