Charity Commission for England and Wales guidance on improving your charity finances

The Charity Commission for England and Wales (CCEW) has updated its guidance on Improving your charity finances (CC12).

The guidance is directed towards charity trustees and consists of three parts:

•    Improving your charity’s finances - what to do if your charity is in financial difficulty.
•    What to do if your charitable company or Charitable Incorporated Organisation (CIO) is insolvent or at risk of insolvency.
•    What to do if your unincorporated association or charitable trust is insolvent or at risk of insolvency.

CC12 is also accompanied by a checklist that charity trustees can use to assess insolvency risk.

This is a timely update for the trustees of charities in England and Wales and will be especially useful for medium-sized charities preparing their financial statements in accordance with the Charities SORP.

Charity trustees have collective responsibility for the financial management of their charity and for taking steps to minimise the risk of their charity getting into financial difficulty. Irrespective of their level of financial expertise, each trustee should understand their charity’s finances, so that the trustee board can act together to identify and address early indications of financial problems.

CC12 sets out practical steps that trustee boards can take to improve their charity’s financial situation before it becomes insolvent. However, when in doubt about what to do next, the trustee board of a charity in financial difficulty should seek professional advice. 

Considerations for charities in Scotland and Northern Ireland referring to CC12

The messaging in CC12 is simple and practical, and in broad terms it will be useful to the trustees of charities in Scotland and in Northern Ireland too. However, it is important that the trustees of charities not based in England and Wales, are mindful that the underlying legal and regulatory requirements are different. 

While company law is UK-wide, charity law and regulation are devolved in Scotland and in Northern Ireland and their legal systems are different, including differences in the law around insolvency. It is important that trustees understand this. 

Trustees must comply with their legal duties under the relevant charity legislation, and, where the charity is a company, their directors’ duties under UK company law. Understanding that different legal systems operate across the UK is highly relevant to trustees if their charity is insolvent or at risk of insolvency. 

Also, important to note is that the CIO legal form is only available to charities based in England and Wales. In Scotland, there is the Scottish Charitable Incorporated Organisation (SCIO) legal form. There is no equivalent legal form available under charity law in Northern Ireland.

ICAS members directing charity clients in Scotland and in Northern Ireland to CC12 should highlight that there are differences in the legal and regulatory environment compared to England and Wales.

Read the CCEW’s guidance Improving your charity finances (CC12).