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No matter how aspirational they are, management accountants face a series of roadblocks in the course of building careers in organisations. Experts reveal the four key obstacles that need to be addressed in the course of becoming global leaders

Introduction by Sharon McCue, member of CIMA Council and chair of its Lifelong Learning Committee.

The only certainty in the world today is that it is uncertain. With recession, redundancies and shifts in the global power base, organisations want employees who can demonstrate that they are adaptable enough to apply their skills in a range of different settings and make the best use of scarce resources.

This article proposes that your involvement with the “third sector” is another way in which you can demonstrate that you are capable of applying these skills, and at the same time help to improve your community and give something back. It’s difficult to identify just how big this third sector is and just what it includes.

The National Council for Voluntary Organisations defines it as “people acting together, independently of the state or the market, to make a positive difference to their lives and/or the lives of others”.

Its most recent publication shows that for England and Wales alone the sector amounts to some 900,000 organisations, with a combined income of £157bn and employing 1.6 million paid staff.

Government has been actively encouraging local private/public/third sector partnerships in the design and implementation of services for the community.

CIMA recognises the role that its students and members can play in all sectors. Its mission – “helping people and businesses to succeed” – can also be applied to the third sector.

CIMA supports a range of courses and conferences tailored to this area, helping students and members keep up to date with topics such as VAT and tax relief, while a charities checklist for the recession provides practical advice for those thinking of acting as trustees.

Today we are witnessing a radical shake-up of this sector. With the push for transparency, increasing public confidence/regulation through the review of the Charities Act, and debates looming about the role and remuneration of trustees, the management accountant has an important skillset to offer.

Charities aiming to make good use of scarce resources need to clearly understand the environment in which they operate, keep a close eye on fundraising activities and build partnerships in both the private and public sector.

A management accountant could be directly involved in providing information to support such decisions.

There is no doubt that to operate in this sector you will need to be an excellent communicator. You will be working with many who are non-financially trained so it’s important to be able to express yourself in non-financial terms.

People are likely to look to you for advice and support on how to best manage small, and often reducing, budgets.

Your knowledge of budgetary control and value-for-money initiatives may be put to the test.

There have been many very public examples of charities that have got it wrong. Preserving the reputation of a charity is one of its most important goals in this context. Damage to public confidence can threaten its very survival so the skills that you can bring in terms of financial/cash management and overall good governance should be valued.

There are a number of CIMA students and members of the CIMA Council that play an active role in this work. Here are some of their experiences.

Working for a charity
by Richard Kenilworthy

Charity can describe a wide range of organisations. Some are highly structured, with a formal organisation chart publicly available, others less so.

A charity can also be a small group of volunteers just getting on with the job. Each charity will have a clear mission statement setting out what the organisation is there for and how it aims to meet the needs of those it serves.

Some may hire professional administrators, while others rely entirely on part- or full-time volunteers. Some of these may be people “between jobs”, or who have retired but choose to donate their time to help others less fortunate than themselves.

Others may volunteer on their day off, or spend their holidays volunteering. These may include people who themselves have benefited from the charity in the past and want to give something back.

Often, such people will have a passion for the charity. The biggest assets of the charity are often the volunteers themselves so it is important to maintain their enthusiasm.

Charities rely on those who have many years’ experience and need to find a way to pass on their knowledge to the incoming workers.

Communication of the vision is essential to enable newcomers to understand the work of the charity. The use of stories, in particular how and why the charity was started and how it has grown, can be particularly effective.

Within the charity sector there is a culture that has to be understood. It is not simply a matter of saying: “Here I am, a management accountant, the answer to your needs!” You must at least be sympathetic to the goals of the organisation, and ideally have a burning desire to help the charity meet its goals.

In order to do this you may need to be flexible in terms of the tasks you do and be ready to help out where needed.

A downturn in the economy can hit charities hard. It may restrict both their activities and their ability to recruit and retain staff, particularly accounting staff.

Also, potential volunteers may prefer to remain in full-time employment rather than retire early and volunteer for a charity.

Management accountants working in charities may find that, in addition to their high-end work, they also have to get involved with more routine activities due to a shortage of junior accounting staff.

National charities may have local groups with treasurers who have no financial training producing their own accounts in their spare time that need to be consolidated with the accounts of the head office and, just like in commercial accounting, all intra-group sales need to eliminated and no profit taken for sales within the charity.

In this case, the key is to have very clear instructions on how to complete the pro forma returns. International charities will have operations in other countries that need to be consolidated together and all foreign transactions need to be converted into the reporting currency.

At each year end, all the balance sheet items of the foreign entities need to be revalued at the closing exchange rate. By working for a charity you will learn a wide range of skills that are transferable to the commercial sector, but beware, working in the charitable sector can be habit-forming!

How can I use my skills as an accountant to help a charity?
1 Find out about charities in your local area, but consider national charities too.
2 Offer your accounting services on www.globalhand.org. This is a website designed to match the needs of both UK and international charities with offers to donate goods and services.

Once your offer is posted, individual charities respond and you may be given details of charities who are interested in taking up your offer of services. It is then up to you to choose which, if any of them, you wish to help.

Richard Kenworthy, FCMA, CGMA, is chairman of the CIMA Hong Kong branch.

Working as an accountant in a charity regulator
by Norman McFarlane

My role at the Office of the Scottish Charity Regulator (OSCR) is to manage the monitoring team, which deals with those charities that have an income of at least £25,000 (around one third of the sector in Scotland) and all cross-border charities.

I joined the OSCR in 2006, the year in which the current monitoring programme began. We faced a tough starting point, as previously the majority of charities were not required to submit accounts to a regulator.

Unsurprisingly, the change to submitting accounts to the OSCR was a massive culture shock for the sector, but one of the biggest challenges we have faced has been to improve the compliance level of accounts prepared by charities.

The OSCR has always taken a proportionate approach to accounts compliance. In the early stages, we accepted all accounts that were filed with us, but highlighted basic deficiencies to the charity and asked that they correct these the following year.

While this improved standards in some charities, many continued to make the same mistakes and it was clear that a more stringent approach was needed for those filing accounts that lacked the basic requirements.

In 2008, we therefore introduced our policy of failing non-compliant accounts, initially concentrating on the form and content of the financial statements, and in 2010 moving on to include external scrutiny.

This means that now, we do not accept accounts where the requirements for the primary financial statements and external scrutiny set out in the Charities Accounts (Scotland) Regulations 2006 (the Regulations) have not been met.

This has seen a significant improvement in compliance levels, to a position where 80 per cent of all accounts received are assessed by us as meeting requirements. However, our approach of tackling non-compliance has not been without its difficulties.

We still receive telephone calls asking for assistance to correct errors, including some from qualified accountants. Some question the logic of the reasons given for failing the accounts and seek a dispensation.

We explain that the Regulations are not rules that the OSCR has developed, but are set out in statute. These were subject to public consultation and detail the requirements for receipts and payments accounts, provide the legal backing for the Charities SORP (which contains the requirements for accrued accounts) and set out the rules for independent examination and audit.

The following points may help anyone involved with charity accounts to avoid some of the more common mistakes that we continue to see.

  • For mainstream charities, the income statement is called the Statement of Financial Activities (SOFA), with a corresponding balance sheet, or a receipts and payments account with a corresponding statement of balances. The type of accounts prepared depends on the gross income of the charity, its legal form and constitution, and any decision by the charity trustees.
  • The figure at the bottom of the SOFA should equal the balance sheet total.
  • Capital grants received or receivable are included as income within the SOFA.
  • The Charities SORP sets out strict criteria that must be fulfilled before income can be deferred in accrued accounts.
  • Receipts and payments accounts are a cash-only statement and should not include any accruals or depreciation charges.
  • Always check to see if there is a specific requirement to have the accounts audited in the charity’s governing document.

In June 2012, we launched OSCR Online, our new online filing facility. This provides flexibility, convenience and control for charities in making their submissions. Importantly, the new online forms support charities by only accepting correct and consistent information.

We are actively encouraging charities to sign up to the new service and expect many to do so as they appreciate the benefits.

Norman McFarlane, a Fellow of CIMA, is OSCR’s monitoring manager responsible for monitoring Scottish charities with a gross income greater than £25,000.

The challenges of working with small charities and helping them meet the regulator’s needs
by Alistair Taylor

The first thing to remember when working with charities is that they are there to serve their target community. They will do their best to look after the finance, but it is sometimes viewed as a distraction, or is not fully understood, and is therefore not looked after properly.

As chartered management accountants we can help bring a level of financial discipline to charities by volunteering to be the treasurer, providing assurance as independent examiners, preparing their accounts, or simply providing some good advice.

In my experience, the good advice is the key element that charities often need. For example, one charity I advised thought that it could simply get an empty shop, take donations and use the money. It had no idea of the associated costs and legal implications, as all it could see was the potential to raise money for its cause.

All it needed was a steer in the right direction, which it was delighted to receive. If you are interested, I suggest that you volunteer to work with a local one, perhaps by offering to prepare its accounts for examination or audit.

If you work with charities you will quickly learn negotiation skills (“the mortgage is a loan, not income, and we can’t show it as income because...”), teaching skills (“the hall hire can’t just be paid from the collection and excluded from the total income”), and you will gain a sense of proportion (“but the pennies matter, we have to show them in the multi-thousand pound accounts”).

You also need an ability to produce accounts from bank statements, an exercise jotter, some receipts and sticky-backed plastic! Independent examination of charities is an interesting area. It is not an audit, so CGMAs can undertake them.

The examination is not that rigorous, but is still used to provide reassurance, and is defined by the Charity Commission as “an independent examination is a simpler form of scrutiny than an audit but it still provides trustees, funders, beneficiaries, stakeholders and the public with an assurance that the accounts of the charity have been reviewed by an independent person” (CC32 – Independent Examination of Charity Accounts – Examiners’ Guide).

I can honestly say that working with charities brings a real sense of satisfaction that we don’t always get in the day job.

Alistair Taylor, FCMA, CGMA is a member of CIMA Council, representing Area 7 (Scotland).

Photograph: Getty Images

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