Overheads in Charities – Good Governance

Overheads are support and administration costs that Charities incur in delivering their charitable objectives. In a small organisation this may be borne by Trustees with no impact on charity accounts whereas in large charities this cost becomes unavoidable.

Overhead costs and activities either incurred by the charity or by the donors directly are important, as without these costs or activities, it is impossible to deliver charitable objectives.

Trustees and Directors have a legal and a moral duty to ensure that charity funds are spent wisely, properly and according to charity objectives. Consequently, robust administration of funds becomes a necessity for the charity sector and the not-for-profit sector generally.

Support costs however can be rationalised, if charities are able to effectively capture, control and plan their support costs, for example:

• The business case for support costs should be reviewed against the risk management and accountability needs of charities.
• Consistent good financial controls and robust year end reporting of support costs through the annual accounts and internal reports;
• Effective budget monitoring of support costs through out the year; and
• Smart business planning to reduce the impact of support costs on public donations, for example the use of trading income, specific business donors.

By Nasir Rafiq ACA - Director HW Controls & Assurance LLP

An Expert in Governance and Internal Control within the Charity and Government Sectors.

http://www.hw-ca.com/