It’s necessary for your charity to have a bank or building society account. This means your money is protected, appropriately managed and allows access to funding and reliefs such as Gift Aid.
On 7 March 2024, the Charity Commission shared the findings of its annual sector survey. The responses received indicated that in the last 12 months:
- 42% of trustees said their experience of banking was poor
- 32% had issues when trying to update their charity’s contact details or signatories
- 18% found opening a new bank account difficult
- 15% had challenges complying with their bank’s identity requirements
- 14% were unsure what their bank required from them
Issues
Whilst the criticism of the service banks provide to charities has been varied, here are some of the more frequently occurring problems…
- General misunderstanding about how charities work, leading to poor customer service, complications and confusion.
- High street branches closed, making communication more difficult, as well as paying in cash or changing the account mandate when new trustees are elected.
- Closing accounts due to ‘compliance risks,’ where sector specific regulations are not recognised.
- Reluctance to provide accounts to particularly small or unincorporated charities.
- Challenges transferring money abroad, especially to areas with political unrest or conflict.
- Providing forms that are not designed for charities and do not ask the right questions.
- Recommending accounts that do not have the appropriate internal controls recommended by the Charity Commission.
- Disproportionate standing and transactional-based charges that are not relevant to the income and transaction volume of smaller charities.
- Requesting signatures from trustees who are no longer on the board, causing administrative delays.
Do any of these issues sound familiar to you?
The response
The Charity Commission has called for urgent action from the UK banking sector to improve the service it offers to charities. It has identified three ways these insufficiencies might affect charities:
1. Inability to meet financial obligations, such as paying staff
2. Encourage unsafe banking and financial practices, such as using trustees’ personal bank accounts
3. Cause volunteers, trustees and staff to resign due to the pressure, or not offer their time at all
The Commission has asked banks to train their employees appropriately, so they better understand what charities need.
In the midst of the cost-of-living crisis, charities are under increased pressure to help their beneficiaries. It’s worth recognising that these organisations are also feeling the strain, where more difficult decisions must be made by staff and trustees.
Reliance on volunteers means the structures of civil society organisations cannot be compared to businesses and they may not have the same level of financial acumen available. Regardless of this, banks subject charities to intense scrutiny because they believe they are at greater risk of financial crime.
You can read the full letter to the Chief Executives of the banks from the Commission, outlining the issues that need resolving here.
What can you do?
Although the issue lies with the service the banks provide, we have some suggestions for interacting with banks that may minimise the chance of any complications.
- Some banks offer tailored ‘community’ bank accounts to unregistered charities and those currently registering with the Commission.
- Tell your bank in advance if any large/international/unusual transactions are going to take place, so they don’t think this is suspicious activity.
- Regularly check the correspondence from your bank and keep them abreast of any administrative alterations your charity makes, such as changes to trustee details, authorised signatories, or addresses. Confusing any important details can lead to delays and even suspension of accounts. You might use the submission of your charity’s annual report as a reminder to inform your bank of any new details. Then, if a bank requires you to verify publicly available information, you can direct them towards the Commission’s official register.
- Follow the Commission’s guidance when setting up an account and read our article on getting to grips with financial controls.
- Additionally, UK Finance have published a Voluntary Organisation’s Banking Guide, including information on how to identify your banking needs, as well as how to open and maintain an account.
Taking action
If you are unhappy with the service your bank provides your first contact should be them. Tell them your issues and give them a chance to resolve them. In light of recent criticism the banks have received, we hope they will be more receptive to the needs of charitable organisations.
Should your bank ignore or dismiss your concerns, you can take your complaint to the Financial Ombudsman, if your charity’s annual income is below £6.5 million.
You can also contact the Financial Conduct Authority, but they are unable to deal with individual complaints and can only act when a number of similar complaints have been made against a bank.
Burton Sweet has a longstanding commitment to charities and civil society organisations, offering practical, professional and passionate support. We want to assist you, so you can deliver effectively for the communities you serve and show the good you do.
If you require some assistance in dealing with your banking and financial operations, please get in touch with us and we will be happy to help…
