ACCA is calling for charities to ‘shape up’ by placing the finance function at the heart of their decision making.

A report from ACCA and Responsible Finance - State of the non-profit finance function - found that the finance function in charities faces underinvestment and is not a priority for charitable organisations, which focus resources on short-term planning and objectives.

Ben Hughes, chief executive at Responsible Finance said: ‘With short-termism so prevalent and the fact that relatively low numbers of senior managers in the sector currently come from a financial background, it will be a challenge for these organisations to grow in a structured and sustainable way.

‘Unfortunately, when the role of the finance function in a charity is side-lined – be it for reasons related to capacity, funding, staff and management skill sets, or even culture – ultimately the organisation’s ability to fulfil its social mission is compromised.’

ACCA and Responsible Finance argue that charities should take their lead from ‘for-profit’ SMEs, where the finance function plays a central role in phases of growth and transition. The two bodies say that good financial management will enable not-for-profit organisations to carry out their missions efficiently, and achieve value for money, as well as playing a role in securing new funding.

Hughes said: ‘For the finance function to have the intended impact within the organisation, there must be a culture that prioritises finance, driven by the governance of the organisation. In my view, setting finance as a standing item on the board agenda should the minimum requirement for any charity chief executive.

‘Secondly, industry bodies can also offer support, through strengthening knowledge-sharing networks and training opportunities. And finally funders and government, driving much of the environmental change for the non-profit sector, could simplify their requirements to enable non-profit organisations to operate more efficiently.’

The report also identified weak governance, underpinned by a lack of trustees with a finance background, as a major barrier to a strong finance function.

Helen Brand, ACCA’s chief executive said: ‘The crux of the issue is that all charities need money to do their good work. There is nothing shameful in admitting this – after all you can’t cure cancer, put an end to homelessness or give respite to young carers without financial backing.

‘However, these vital funds must be handled in the right and proper way. Following a turbulent year for the sector we now have an opportunity to change things for the better. ACCA is committed to doing all we can to assist in the recruitment of qualified directors with a finance background into the sector, through referring and advertising trustee opportunities to our members and students.’

The full report is available at ACCA and Responsible Finance - State of the non-profit finance function report