Overheads are support and administration costs that Charities incur in delivering their charitable objectives. In a small organisation this may be borne by Trustees with no impact on charity accounts whereas in large charities this cost becomes unavoidable.
Overhead costs and activities either incurred by the charity or by the donors directly are important, as without these costs or activities, it is impossible to deliver charitable objectives.
Trustees and Directors have a legal duty to ensure that charity funds are spent wisely, properly and according to charity objectives. Consequently, robust administration of funds becomes a necessity for Muslim charities and the wider charity sector generally.
Support costs however can be rationalised, if charities are able to effectively capture, control and plan their support costs, for example:
The business case for support costs should be reviewed against the risk management and accountability needs of charities.
Consistent good financial controls and robust year end reporting of support costs through the annual accounts and internal reports;
Effective budget monitoring of support costs through out the year; and
Smart business planning to reduce the impact of support costs on public donations, for example the use of trading income, specific business donors.
By Nasir Rafiq (Founder and Principal Dua Governance)
An Expert in Governance and Internal Control