Good governance is not just about rules, or ticking boxes. It is about attitudes and culture, and whether a charity puts its values into practice. More than that, it is about minimising bad practice, about realising an organisation’s potential and helping it reach that in a sustainable manner. This article helps you understand how charities can improve their effectiveness and the role of a trustee in doing so.
Trustees hold responsibility and power for the strategic vision and management of charities. It is a position with legal responsibilities. A trustee must ensure they are committed to the charity’s cause, recognise that meeting a charity’s stated public benefit is an ongoing requirement, and are committed to good governance. They should read the Charity Commission’s The Essential Trustee document and well understand their charity’s governing document.
Trustees may be well-meaning, but may lack sufficient knowledge about their responsibilities. Often, they may not have read these documents or, if they have been trustees for a long time, ensured they refresh their memories on a regular basis.One of the biggest responsibilities of a trustee is the legal responsibility for the charity’s management and administration. Trustees are expected to identify and assess risks, determine funding and resource requirements, and fundraise legally and responsibly. Trustees should ensure the charity has clearly articulated Investment and Reserves policies. A charity cannot take undue risk with funds, but equally, if they have substantial Unrestricted Funds, should avoid holding them just as Cash At Bank (which yields a poor return at the bank).If they deal with cash on a regular basis (such as template donations) good governance dictates having a robust process in place to handle such funds.A good charity anticipates and resolves potential disputes before they happen. The Charity Governance Code specifically says a board’s culture, behaviours and processes must help it to be effective. This includes accepting and resolving challenges or different views. There must be a culture where different views can be shared and disputes can be resolved. One trustee must not be able to unilaterally take decisions without consulting others.
The Code says that small charities should have a good mix in its trustee appointments – in other words, people of different backgrounds, but also ages. It says that a Board of five to 12 trustees is considered good practice; but more could be too big. New appointments should be made on merit, and with a formal, rigorous procedure. Many Hindu charities fail in this regard – trustees tend to be family members or friends, and often of an older age group. By contrast, South Asian arts charity Akademi has ten trustees from across a range of backgrounds, and a defined process for identifying and onboarding additions.
The public’s trust that a charity is delivering public benefit is fundamental to its reputation and success, and by extension, the success of the wider sector. Therefore, a charity must be clear and coherent in giving out information to other stakeholders. Trustees must ensure the charity collaborates with stakeholders to promote ethical conduct. The board should make sure it speaks to stakeholders about significant changes to the charity’s services or policies. Financial scandals related to mismanagement and misappropriation of funds by charities can shake public confidence in charities. Any breach of financial reporting obligations can compel the Charity Commission to take drastic steps. The Tamil charity Sivayogam was ordered by the Charity Commission to suspend its founder-trustee for not being able to account for the proper use of all grants and donations, and for other regulatory issues. Kid’s Company was closed last year due to mismanagement of funds.All trustees collectively need to decide, plan and review how the charity will carry out its activities and keep themselves updated about the legal and regulatory requirements that need to be followed. For a membership organisation, if there are insufficient members attending the AGM, non-members should not be provided voting rights by default.Every trustee should be clear about the charity’s aims and ensure these are being delivered effectively and sustainably. It is necessary that a trustee devotes enough time and energy to prepare and participate actively in all the trustee meetings. For example, a leading Hindu community charity has over £2m as their fund balances, but provide only unaudited accounts, and two of their three trustees rarely come to the UK, making best practice governance a challenge.Many of the tips in this article should how good governance could be done. It may differ for larger and smaller charities. But the overall principles should be universal.
If you want to find out more, or want to be a part of our upcoming charity trustee training sessions, then email us at [email protected].