Financial Responsibilities of Charity Trustees

Charity trustees are responsible for the overall management and control of a charity, including its financial stewardship. All charity trustees share collective responsibility for ensuring that a charity’s finances are properly managed, transparent, and used solely to advance its charitable purposes.

Financial responsibility and oversight is not limited to a treasurer or finance officer. Every charity trustee must understand the charity’s financial position and ensure appropriate oversight and accountability.

Financial reporting, external scrutiny, and accurate accounting as key mechanisms for maintaining public trust and confidence in charities.

Core financial duties

Charity trustees must ensure that all financial decisions are made in the best interests of the charity and its beneficiaries. Charity funds and assets must only be used to further the organisation’s stated purposes, as set out in its governing document. Charity trustees are legally required to manage the charity’s finances with a high standard of care, analogous to managing another person’s affairs. This includes making prudent financial decisions, assessing risks, and avoiding inappropriate or overly risky use of charitable funds.

Maintaining financial awareness

Charity trustees must maintain a clear and up-to-date understanding of the charity’s financial position. This includes:

Knowing what resources and assets belong to the charity
Monitoring income and expenditure
Understanding any restrictions on funds

All charity trustees must have access to financial records and be able to interpret them. At meetings everyone should be encouraged to ask questions, seeking clarity from people holding information to help them better understand the charity’s finances. Financial reporting should be a regular agenda item at board/management committee meetings and should inform the charity trustees about both the current and projected financial situation. A culture of transparency is essential for charity trustees to fulfil their duties.

Charity trustees must safeguard the charity’s assets and ensure appropriate financial controls are in place. This includes identifying and managing financial risks, preventing misuse of funds, and ensuring accountability in financial processes.

Budgeting and financial planning

Charity trustees are responsible for ensuring that the charity is financially viable. They must:

Agree and monitor budgets
Ensure the charity has sufficient funds to meet its obligations (e.g. staff costs and operational expenses)
Regularly review financial performance against plans and budgets

Fundraising and income control

Charity trustees are responsible for overseeing how the charity raises funds. They must ensure that:

Fundraising activities are properly controlled and in the charity’s interests
Any professional fundraisers operate under clear agreements, including payment terms

Financial record keeping and annual reporting

Charities must keep proper accounting records, including all income and expenditure. These records must be accurate, complete, and retained for at least six years. Charity trustees remain responsible for maintaining accounting records and preparing the accounts even where someone else does the bookkeeping, and records should be detailed enough to show day-to-day receipts and payments, assets and liabilities, and the charity’s financial position at any time. Every year, charity trustees must:

Prepare a statement of account
Produce a Trustees’ Annual Report
Arrange for independent examination or audit
Submit accounts and an annual return to OSCR and other regulators (e.g. Companies House for charitable companies)

These requirements ensure accountability and transparency to regulators and the public.

Internal financial controls

Charity trustees must ensure appropriate financial procedures and controls are in place and are regularly reviewed. This includes:

Clear financial policies and processes
Separation of duties where possible
Regular review of financial information
Ensuring financial information is shared among the charity trustees

Strong internal controls help prevent error, fraud, and misuse of funds. (OSCR)

Further resources and links

OSCR - Charity finances

OSCR - A guide to charity accounts

SCVO (Scottish Council for Voluntary Organisations)- Accounts and financial reporting

Engage Renfrewahire - Financial Controls Template

Highland TSI – Introduction to finance

The TSI learning Portal includes an online course - Nuts and Bolts – Financial Management