Joining the board of a charity or not-for-profit organisation can be an incredibly rewarding experience. It’s an opportunity to contribute your knowledge, experience and expertise to an organisation doing important work in the community.
But with that opportunity comes responsibility. And while most board members understand the importance of good governance, financial oversight can sometimes feel a little daunting. Not everyone who joins a charity or NFP board comes from a financial or accounting background, and skill diversity is an important consideration when assembling a board.
So, how much financial knowledge does a director really need? What questions should they be asking? And what does it mean to be financially responsible for an organisation when you’re not the person managing the day-to-day accounts?
My Co-CEO, Carol Tran, explored some of the more practical questions in a recent episode of the Heart to Smart podcast, facilitated by the experienced and wonderful team at For Purpose Advisory.
Not everyone who joins a charity or NFP board comes from a financial or accounting background.
Carol joined Jen Johannesen from For Purpose Advisory for an insightful discussion about the financial responsibilities of directors serving on charity and NFP boards. The episode, Reading the Numbers: Financial Responsibilities for Charity Directors, explores a subject relevant to every charity and NFP, regardless of size or purpose.
One of the ideas Carol brings to the conversation is that financial statements tell the story of an organisation through numbers, which is an insightful way to look at it.
Financial reports aren’t simply documents prepared for accountants, auditors or regulators. They provide a window into how an organisation is performing, where its money is going and whether it has the financial resources to achieve its mission. And that’s information every board member should understand.
The Australian Charities and Not-for-profits Commission (ACNC), the national regulator responsible for registering and regulating charities and NFPs across Australia, refers to the individuals responsible for governing a registered organisation as Responsible People. While not all charities or NFP organisations are required to register with the ACNC, those that choose not to must still comply with relevant Australian laws and regulations.
The ACNC’s primary role is to promote transparency, accountability and public trust. This requires registered charities and NFP organisations to meet their legal obligations and comply with appropriate governance standards.
The ACNC also provides guidance, education, and resources to help charities and NFPs, and their boards, understand their responsibilities, such as being a Responsible Person.
Under ACNC Governance Standard 5, Responsible People have important duties. These include acting with care and diligence, making decisions in the charity or NFP’s best interests, managing conflicts of interest and ensuring the organisation’s finances are managed responsibly.
They must also take appropriate steps to prevent the charity from operating while insolvent. These aren’t responsibilities that can simply be handed over to the treasurer, CEO or finance manager.
While financial tasks can be delegated, directors still need to understand the organisation’s financial position and exercise appropriate oversight. That doesn’t mean everyone needs an accounting qualification. It does mean being willing to read the reports, ask questions and seek clarification when something doesn’t make sense.
A valuable aspect Carol discusses on the podcast is a practical focus.
For example, what should directors be looking for when reviewing financial statements around the end of the financial year? How can organisations better prepare new directors through onboarding and training? And why are clear financial policies and delegations so important?
These are questions worth considering. Good governance isn’t just about meeting compliance obligations. It’s about creating a board culture where people feel comfortable asking questions and discussing financial risks, enabling informed decisions.
A director who asks why expenditure has increased, whether cash reserves are adequate or how funding restrictions affect future plans is contributing to the organisation’s financial health. Curiosity can’t be underestimated, and asking questions is just as important as knowing the answer.
At Accounting For Good, we work with charities and NFPs to help them understand their financial position, improve their financial management and make better-informed decisions.
We also recognise the important role that directors play in supporting the long-term sustainability of the organisations they serve. That’s why we encourage board members, CEOs and senior NFP leaders to take the time to listen to this conversation.
Whether you’re an experienced director or considering joining your first charity board, you don’t need an accounting degree or a background in finance; however, understanding the numbers is essential to good governance.
Listen to the podcast: Heart to Smart – Reading the Numbers: Financial Responsibilities for Charity Directors.
Because ultimately, good financial governance helps charities and NFPs do what they were established to do: make a positive difference.
Good financial governance helps charities and NFPs do what they were established to do: make a positive difference.
At Accounting For Good, we work with medium to large charities and NFP organisations.
Contact us if your organisation needs expert financial guidance. Let us handle your accounting needs so you can focus on what matters most: serving your community and driving positive change.
Financial oversight is a shared responsibility. Charity and NFP directors are responsible for understanding their organisation’s financial position, even when day-to-day financial management is delegated to others.
You don’t need to be an accountant to be a good director. Financial literacy, curiosity and a willingness to ask questions are essential to effective governance and informed decision-making.
Good governance goes beyond compliance. Clear financial policies, appropriate delegations, regular reporting and effective board training help organisations manage risks and maintain financial sustainability.
Expert financial guidance supports better decisions. Working with specialists such as Accounting For Good helps charities and NFPs strengthen financial management, improve board reporting and focus on achieving their mission.
For many years, WJN maintained all their accounting processes in-house, but when their finance manager left the organisation in 2019, they realised that they needed a new solution.
For many years, WJN maintained all their accounting processes in-house, but when their finance manager left the organisation in 2019, they realised that they needed a new solution.
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We work solely with charity and NFP organisations. Expertise and specialisation is why the sector choose us for their financial management
We work with charities and not for profit organisations. Our specialty as an outsourced partner is with organisations of around $1-10million turnover. If your organisation is seeking professional, customised accounting support and services, we’d love to hear from you. Complete the contact form, and one of the experienced team members will contact you shortly.
If you want to establish a charity or NFP, please read our article “Thinking of starting a charity or NFP.” Accounting For Good cannot assist new entities or start-ups at this time.
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