In recent months, the Charity Commission has brought attention to the challenges affecting charities and non-profit organisations. The regulatory body took unprecedented action when it published an open letter to the leading banking providers and the industry as a whole, calling for rapid improvements.
Backed by other organisations engaged in the charitable space, including the Institute of Chartered Accountants in England and Wales, and the Charity Finance Group, this was the result of prevalent concerns, from accounts closed without notice, substandard customer service and significant delays in processing transactions.
James Todd & Co, a long-established team of accounting professionals with a specialism in business planning and financial management for charitable entities has explained what the concerns are all about, and why the regulator has decided to get involved.
What Are the Issues With UK Banking Provision for Charitable Organisations?
While it was rare for the Charity Commission to publicly lay out the failings of the banking sector, this was owing to consistent and widespread challenges, some of which had begun to have a profound impact on the ability of charities to survive.
Many reported finding their accounts closed or frozen without notice, problems trying to update banking information, and inadequate support including administrative delays which should have been easy to manage.
Other charities complained about the limited and outdated online banking and app-based services made available, which in many cases weren’t advanced or responsive enough to cater to the needs of fast-growing charities and the modern-day governance structures they operate within.
Providers also cited reasons they could not take on new charitable clients. However, many suspected this was indicative of a lack of interest in offering banking services for non-profit clients. This particular issue predominantly impacted certain groups, such as those not registered with the Charity Commission or charities that needed assistance with international transactions.
Why Did the Charity Commission Publish an Open Letter to the British Banking Industry?
The regulator stepped in, recognising the threat to swathes of the charitable sector. Some charities, for instance, found themselves suddenly without banking facilities and unable to pay staff or volunteer expenses, unable to receive donations, and without the capacity to deliver the services they exist to provide.
Aside from the obvious levels of stress, financial hardship and disruption this caused, the regulator identified that these issues were putting charitable services, including those in vital roles such as mental health support and social care in a position of vulnerability that could have a direct impact on widespread public infrastructure.
It also chose to act due to reports that showed there may have been an intention to dissuade charities from opening or retaining accounts with UK banks. Complaints provided evidence of scenarios such as charities being offered only basic banking services compared to advanced banking apps available to profit-making businesses.
The Charity Commission stated that the challenge of trying to manage banking and finances in these circumstances could mean only large, well-established charities with accounting and finance professionals behind them would be able to cope.
This was putting thousands of smaller charities and those without an enhanced level of know-how in danger of permanent closure.
Have Banking Services Now Improved for Charities Operating in the UK?
Alongside the open letter, the Commission shared a set of guidance for charities. This was in a bid to help charities understand how and to whom to complain, and what to do to take control of the situation when encountering issues with banking services.
This has proven useful to many of our clients, and UK Finance, which represents the banking sector, also responded with a guide intended to support charities in managing relationships with their chosen banking providers.
However, as an accountancy team that has collaborated with charitable clients for many years, we acknowledge that many charities were put in an impossible position and having guidance to hand may not have made any real difference to the outcomes of those discussions.
For instance, banks have been known to request information that isn’t relevant or that only applies to for-profit companies, or to give a charity a few days’ notice to submit large amounts of data or information available only from volunteer trustees.
Charities may have then received a statement that they had failed to respond, or missed the set deadline, and therefore foregone their eligibility for an account, or were facing the immediate closure of previously live accounts or banking features.
How Can Charitable and Non-Profit Organisations Deal Proactively With Banking Issues?
It has been positive that powerful voices in the charity sector have taken a stand to bring attention to poor practice and to the importance of charitable organisations, many of which provide lifesaving, welfare and social services, and make enormous contributions to communities and vulnerable groups.
That said, we’ve yet to see the level of sustained improvements we’d like. We continue to liaise with our charity accounting clients to ensure they have professional, independent and direct advice whenever problems arise, related to their banking services or other aspects of financial management.
Our suggestion would be for all charities to remain aware of the options, and to reach out to the James Todd & Co team for more tailored assistance without making assumptions that a rejection from one bank may apply to all, or that limited banking features mean they have to make compromises in the quality and detail of their stakeholder reporting.
We can happily discuss our accounting and charity financial management services, specifically created for clients working in the non-profit space, compare financial products or terms to ensure charities make informed, confident choices, and even manage communications where necessary to challenge issues quickly.
In the meantime, we’d suggest any charity that is struggling with their banking provider to refer their bank to the public register available through the Commission if they need to verify any of the background details about the charity.
They can also access formal complaints processes through the Commission, the Financial Ombudsman, or the Financial Conduct Authority if they come across poor service and would like this to be investigated.
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About James Todd & Co
James Todd & Co have been providing accounting services for more than 30 years across Chichester, Fareham, and Portsmouth for businesses across the South East. Their clients trust them to provide bookkeeping, financial auditing and compliance, management accounting and financial advisory services.
