How Do I Keep Trustees Financially Accountable

Strong financial accountability is at the heart of every well run charity. Trustees are responsible for safeguarding the charity’s funds overseeing financial decisions and ensuring that money is used in line with charitable purposes. When accountability breaks down even slightly the risks can escalate to financial loss reputational damage poor decision making or intervention by the Charity Commission.

In my opinion trustee accountability is one area that new charities often overlook because founders are focused on passion projects rather than governance structures. I always encourage founders to build robust financial oversight from day one because correcting problems later is much harder and can be costly.

This guide explains how trustee accountability works in UK charity law what trustees are required to do in practice how to create a strong governance system that keeps everyone responsible and how to deal with issues early. I’ll also share practical strategies I use with clients when helping them strengthen their boards and financial processes.

By the end you’ll have a clear road map for keeping your trustees financially accountable so your charity can operate confidently and transparently.

What Trustee Accountability Means in UK Charity Law

Trustees are legally responsible for everything a charity does. They must act in the best interests of the charity use funds properly avoid conflicts of interest and ensure the charity meets its statutory obligations. These duties come from the Charities Act 2011 and Charity Commission guidance which sets the benchmark for good governance.

Financial accountability means trustees must:

Oversee financial planning and budgeting
Approve significant spending decisions
Monitor income and expenditure
Review and understand financial reports
Ensure controls are in place to prevent misuse of funds
Protect the charity’s assets
Ensure funds are used only for charitable purposes

These responsibilities cannot be delegated. Staff or volunteers can carry out the work but trustees remain responsible for ensuring the work is done correctly.

In my opinion many trustees underestimate the seriousness of these duties until they join a board training session and see what HMRC or the Charity Commission expects. Accountability is not optional. It is a legal requirement.

Why Financial Accountability Matters for Charities

Financial accountability protects your charity from:

Fraud
Misuse of funds
Budget overspending
Poor decision making
Regulatory breaches
Loss of public trust
Funding refusals
Charity Commission enforcement action

Funding bodies expect strong governance and donors want reassurance that money is being used responsibly. Without accountability the charity cannot function effectively and risks losing both credibility and impact.

For founders it also matters because a strong accountability framework prevents misunderstandings resentment and disputes between trustees or between trustees and staff.

The Role of Trustees in Financial Oversight

Trustees must take collective responsibility for financial decisions. No individual trustee has greater authority unless the board explicitly grants it. Trustees must read financial reports question decisions and ensure they understand the charity’s financial position.

Key aspects of the trustee role include:

Setting the budget
Approving spending policies
Monitoring cash flow
Ensuring reserves are adequate
Overseeing risk management
Reviewing annual accounts
Meeting the charity’s reporting deadlines
Ensuring internal controls are in place

In my experience some trustees feel intimidated by financial terminology. I always tell boards that you do not need to be an accountant to be an effective trustee but you do need to ask questions until you understand the situation clearly.

What Good Financial Accountability Looks Like in Practice

Accountability is not just about following the law. It is about creating a culture where trustees understand their responsibilities and take them seriously.

Good accountability involves:

Transparent financial reporting
Regular board meetings
Clear delegated authority limits
Documented policies
Separation of duties
Independent oversight
Clear lines of communication

A board that operates with clarity and structure will almost always manage money better than one that relies on informal decision making.

How to Keep Trustees Financially Accountable: A Detailed Framework

The following steps form a complete accountability system for UK charities. This framework works for small newly formed charities and for larger established organisations.

I combine legal requirements with practical insights based on how well run charities operate in the real world.

1. Provide Clear Induction and Training for All Trustees

Trustees need to understand their legal duties before they start making decisions. A strong induction includes:

An overview of the charity’s mission and objects
A summary of trustee duties
A copy of the governing document
The most recent accounts
The budget
The organisation’s policies
An explanation of the internal control system

Training can come from the Charity Commission, local voluntary centres or accountants and governance specialists. In my opinion trustee training is one of the most effective ways to avoid future problems because many accountability issues come from misunderstandings not bad intentions.

2. Create a Strong Financial Policy Framework

Policies provide clarity and consistency. Every charity should have:

A financial procedures manual
A reserves policy
A delegated authority policy
A conflict of interest policy
An expenses policy
A procurement policy
A safeguarding financial controls policy

These documents ensure trustees understand the limits of their authority and how financial processes work. They also protect the charity if leadership changes.

3. Use Clear Delegation Without Removing Accountability

Trustees can delegate tasks but not responsibility. Delegation should be:

Written
Clear
Linked to authority limits
Reviewed regularly

For example a manager may be allowed to approve spending up to a certain amount but anything above that must be approved by trustees.

In my opinion problems arise when delegation happens informally which leads to blurred lines and inconsistent decision making.

4. Hold Regular Board Meetings With Robust Financial Reporting

Good financial accountability requires regular reporting. Trustees should receive:

Monthly or quarterly management accounts
Cash flow forecasts
Budget vs actual reports
Bank reconciliation summaries
Risk register updates

Trustees must read and understand these documents. It is not enough to receive them. I always encourage boards to dedicate part of every meeting to finance and risk.

5. Make Sure Trustees Actively Review and Question Reports

Trustees should not simply accept financial reports. They should ask questions like:

Why has spending increased in this area
Why are donations lower than expected
Are there unexplained variances
Is cash flow secure for the next quarter
Are reserves at the right level
Do we need to adjust the budget

In my opinion the healthiest boards are the ones where trustees feel comfortable asking basic questions because it shows genuine engagement.

6. Maintain Strong Internal Financial Controls

Internal controls prevent misuse of funds and reassure trustees that money is being handled correctly. Controls should include:

At least two people involved in authorising payments
Dual authorisation for online banking
Regular reconciliations
Segregation between authorising and processing transactions
Controlled access to bank accounts
Receipt checking
Expense reviews
Spot checks

Small charities sometimes say controls are difficult because they lack staff. I always explain that even small organisations can implement scaled controls such as two trustee signatures or shared oversight between volunteers.

7. Document All Financial Decisions Clearly

Minutes should record:

What was approved
The rationale for the decision
Who approved it
Any conflicts of interest declared
Any concerns raised

If something goes wrong clear documentation protects trustees and demonstrates responsible governance.

8. Encourage Transparency and Open Communication

Trustees should feel comfortable:

Raising concerns
Flagging unusual spending
Asking for clarification
Challenging decisions
Requesting more information

A culture of silence is dangerous for any charity. In my experience accountability improves quickly when trustees start asking questions early rather than waiting for a crisis.

9. Require Annual External Scrutiny

Charities must prepare annual accounts which may require:

Independent examination
An audit
A review by an accountant

External scrutiny is a key part of accountability. It provides objective oversight and reassurance that the charity is operating as expected. Even micro charities benefit from independent examination because it validates internal processes.

10. Use a Risk Management Framework

Financial accountability includes identifying risks such as:

Fraud
Loss of key income
Overspending
Incorrect financial reporting
Regulatory non compliance

Trustees should review the risk register at least annually. This ensures they think ahead rather than reacting to problems after they occur.

11. Use Digital Tools to Strengthen Transparency

Modern accounting software and digital tools make accountability far easier. Tools that can help include:

Cloud accounting systems
Shared financial dashboards
Digital receipt tracking
Online approval workflows
Document management platforms

In my opinion technology dramatically reduces the likelihood of errors and improves the speed and visibility of financial information.

12. Appoint a Treasurer With the Right Skills

Although all trustees share responsibility the treasurer plays a key role. They should:

Understand financial reports
Support the board in interpreting data
Work closely with the finance officer or accountant
Ensure compliance with deadlines
Highlight financial risks early
Lead the development of budgets

A strong treasurer can transform the board’s confidence in managing money.

13. Set Clear Expectations for Trustee Involvement

Trustees should know:

How often they must attend meetings
What documents they must read
What responsibilities they hold
What behaviours are expected of them

If trustees do not understand expectations they cannot be accountable.

14. Manage Conflicts of Interest Properly

Trustees must declare conflicts of interest which can arise through:

Personal financial benefit
Family relationships
Business relationships
Employment
Volunteering roles

Conflicts do not automatically prevent participation as long as they are managed correctly. However if a conflict affects financial oversight the trustee should be excluded from relevant discussions.

In my experience conflicts of interest are one of the most common risk areas for charities so I always urge boards to maintain a register and update it regularly.

15. Hold Trustees to Account Through Regular Board Evaluations

Annual board evaluations identify weaknesses in:

Financial knowledge
Engagement levels
Meeting participation
Oversight
Decision making

Evaluations can be self assessments or facilitated by an external advisor. They help trustees reflect on whether they are fulfilling their duties effectively.

16. Remove or Replace Trustees Who Fail to Meet Their Obligations

This is sometimes necessary. Trustees who repeatedly:

Miss meetings
Fail to read financial papers
Ignore policies
Act irresponsibly
Breaches duties

can put the charity at serious risk.

Your governing document should outline how trustees can be removed. In my opinion founders often avoid difficult conversations with low performing trustees although removing them is sometimes the best decision for the charity.

17. Communicate Financial Information to Stakeholders

Transparency extends beyond the board. Charities should communicate financial information through:

Annual reports
Impact reports
Summary accounts
Funders’ updates

When stakeholders can see how money is used they are more likely to trust the charity and support its activities.

18. Promote an Ethical Culture

Financial accountability also depends on culture. Trustees must act with:

Integrity
Professionalism
Respect
Commitment
Independence of judgement

A strong ethical culture reduces risk and ensures that decisions are made with the charity’s best interests in mind.

In my opinion culture is often more powerful than policy because it influences behaviour at every level.

Real World Scenarios to Illustrate Accountability

A small community charity with limited experience

Trustees rely on one volunteer who manages all finances. There are no written policies and decisions are informal. Risk level is high.

Solution: Introduce a treasurer, create written policies, set approval limits and implement basic controls.

A medium sized charity expanding quickly

Income grows rapidly but trustees do not fully understand financial reports. Overspending begins.

Solution: Strengthen training, improve reporting and introduce dashboards to improve visibility.

A large charity with multiple income streams

Complex grants, trading subsidiaries and significant staff require strong governance.

Solution: Use committee structures, professional finance support and advanced internal controls.

Conclusion

Keeping trustees financially accountable is not just a regulatory requirement. It is the foundation of a well run charity. By building strong governance structures providing clear training maintaining transparency and encouraging active involvement you create a culture where trustees can make informed responsible and confident decisions.

In my opinion the charities that thrive are the ones that invest early in accountability rather than waiting for a problem to emerge. With a strong framework trustees can protect the charity’s mission safeguard its funds and build lasting trust with donors and communities.