As part of OSCR’s (the Scottish charity regulator) inquiries work (investigating concerns raised about charities), it has identified a number of common themes appearing.

The first ‘common theme’ identified is in relation to financial management. OSCR has, just this week, released its report focussing on this area and has identified ten key lessons to support good financial governance.

Charity trustees have a number of duties and some of those pertain specifically to the management of a charity’s funds and financial affairs. Charity trustees must ensure that the charity’s funds are stored safely, used appropriately, and that financial information is shared effectively across the organisation, or more widely, if necessary. They must also ensure that decision-making affecting finances is carried out in a transparent and collective manner.

Common areas of concern in financial management

OSCR’s recent report (which can be found here  OSCR | Learning from OSCR's inquiries: Financial Management) identified four common problems which emerged from its recent investigations into alleged charity financial mismanagement:

• Lack of clarity
• Poor understanding of the decision-making process
• Lack of effective communication (trustees keeping information to themselves)
• Decision making that was not collective

OSCR recommendations

The report formulated ten recommendations which largely focus on transparency, organisational awareness and collaboration, effective communication, and straightforward procedural safeguards.

In particular, organisational awareness of financial decision-making and good knowledge of the processes in place from all trustees is highly encouraged. This is something which we frequently see in our practice and it is good to see reference to this in OSCR’s report. It is not sufficient for one charity trustee to be identified as the ‘treasurer’ and for all other trustees to play no role in financial management. Similarly, it is not enough for charity trustees to simply defer to those employed in financial management positions within the charity - trustee scrutiny of financial information is essential. OSCR’s report also emphasises the importance of clarity and uniformity when communicating, reporting, and devising the organisation’s processes.

We welcome this report, which, together with OSCR’s guidance, provides valuable insight into best financial management practices for charity trustees. We also welcome this approach from OSCR in sharing its experiences gleaned from undertaking these inquiries, to inform and educate the sector.

The Burness Paull charity law team is ideally placed to assist your charity in navigating governance best practice. Please do get in touch with a member of our team should you have any questions or require support around governance issues relating to your charity.

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