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In chapter 8 we discussed the use of budgeting.  One of the charities that I am involved with, the Friends of Shelby Newstead (FOSN), is a very good example of why budgeting is critical to small organisations as well are large multi-national organisations. The FOSN charity raises money for sick children and is registered with the Charity Commission for England and Wales. As part of the governance of being a charity it is necessary to identify and manage all risks.  One of the biggest risks facing small charities relates to their cash-flow; ensuring they can offer support and donations to suitable causes but also have enough reserves in place to financially support the next fund raising event.

 

The FOSN charity is involved in many types of fundraising events with an autumn ball being the main revenue source.  The charity is required to budget the cost of the next fundraising event by predicting the sponsorships they will receive and ticket revenue for the event and this cash-inflow is analysed against the costs.  As part of the budgeting process the trustees of the committee have to consider how they will manage the risks of not gaining enough sponsorships or ticket sales.  This example highlights how budgeting can inform part of the governance process and incorporates issues of risk management.