Tips and advice: accounting careers in not-for-profit and charity sectors
What is it like playing a financial role in a charity? As issues of trust and governance rumble through the charity sector, Rosemary Spencer, director of finance & resources at Cause4, considers career skills for accountants looking to move into the not-for-profit sphere.
The recent furore around the closure of the charity Kids Company raised governance issues for many charities and put the spotlight on the charity sector putting financial teams and trustees under scrutiny.
If you’re working or seeking financial employment in the charity sector, don’t be distracted by the sometimes ‘off-beat’ nature of the organisation. It’s different to working in a private sector job, but the standards are still rigorous.
There are thousands of registered charities in the UK. And it’s a diverse list - they vary from the small, such as Friends of Sheffield Manor Lodge and The Barn Owl Bill Charitable Trust, to Oxfam and the British Heart Foundation.
The Wellcome Trust, a charity ‘dedicated to improving health by supporting bright minds in science, the humanities and social sciences and public engagement’ is currently making the biggest turnover of any charity. At present, it has an income of £38m annually.
Whatever its size, a charity needs to have strong financial management, whether that be in busy financial departments headed by a financial director or by a trustee ‘doing the books’ in his or her spare time.
Charity versus private sector roles
So how different is the role of a charity financier to one working in the private sector?
It’s mainly about a shift in focus. A shareholder of a private company wants to make a return on their investment, so the aim of the financial department is to increase the shareholder`s value through dividends paid and on the market value of shares. Workers in charities need to be much more cautious and above board in meeting their legal duties to safeguard the charity’s assets.
The UK government’s guidelines for internal financial controls for charities from July 2012 asks that ‘if a charity is to achieve its aims, then the trustees need to ensure that assets are properly used, that its funds are spent effectively and its financial affairs are well managed’.
Employees in this sector need to administer funds in a way that identifies and manages risk and ensure the quality of financial reporting by keeping adequate accounting records and preparing timely and relevant financial information.
Observe the three Es
My main piece of advice to those working in charitable finance is to always observe the three E’s - efficiency, economy and effectiveness. That is, doing the right thing, doing it well and not spending too much doing it.
It’s worth bearing in mind the three E’s when dealing with the tax affairs of your organisation. A charitable company will not pay on funds realised from trading, nor on rental investment income or purchase of property.
Donations can also be tax free and the UK runs tax effective schemes such as Gift Aid. The Charity Commission, set up to ensure that the public can ‘support charities with confidence’, polices most of the charitable enterprises in England and Wales.
They ask that a charity demonstrates public benefit in its annual return and theoretically can strip an organisation of its status if it does not demonstrate aforesaid public benefit with serious implications for its tax return. An accountant working in the charitable sector will need to bear in mind strict guidelines over VAT calculations.
A charity will not have to pay VAT on some goods and services, but VAT needs to be registered when taxable turnover is more than £82,000. Trading guidelines also differ from the public sector. A charity can trade with the purpose of raising funds, but a separate company should be established if trading is being used to carry out the charity’s objectives.
There are a number of websites that will point you in the direction of the accounting and financial jobs in the charity sector and which will give you an idea about salary and emoluments. CharityJob, an online site established in 2000, and Third Sector come to mind.
Most importantly, however, for any charitable employee big or small is that they have a real passion for the organisation they work for. Technical skills are a must, of course, but the crucial element for anyone working in this sector is a broader appreciation of their organisation and its power for change.
Whether you are a financial director, accountant or bookkeeper, whether you are saving your village hall or saving the planet, - passion is key.
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