18: Trustees’ week – how to be a secret superhero
To coincide with Trustees’ Week this week, the Charity Commission published five new 5-minute guides for charity trustees. The guides cover a ‘core syllabus’ of ‘basics that trustees need to know’, comprising: financial oversight; achieving a charity’s purposes; good decision making; addressing conflicts of interest; and what to file with the Commission and what support is available. The guides are not a replacement for the fuller Charity Commission guidance (for which there are links in the guides) but rather ‘gateway’ documents, to help new trustees get started and to act as a refresher for more experienced trustees.
The press release accompanying the documents states that the ‘Commission stresses that whilst the guides may be basic, they are designed to serve the needs of experienced trustees as well as those new to the role. It says that years of experience cannot immunise even the very best trustees from running into questions or problems’.
An accompanying blog from the Charity Commission CEO Helen Stephenson notes the ‘unprecedented challenges to charities throughout England and Wales’ from this year and the ‘admirable efforts of trustees, the majority of whom are volunteers, to support their charities in responding to the COVID-19 pandemic, giving up even greater amounts of their time in testing personal circumstances’.
In the blog, Helen Stephenson also notes that ‘good governance is not a bureaucratic detail’ and that it ‘is all the more important in the midst of this pandemic when the stresses and strains of running a charity are so much greater’. That is a theme which has been appearing in recent Charity Commission inquiry reports.
Governance, risk management, financial controls
Those reports have been picking up, time and again, some common, and familiar, themes –decision-making, trustee conflicts of interests and benefits and financial controls.
Decision making and recording
- A number of the reports identify failures in decision-making and recording decisions. For example, in the inquiry report on CAWRM Ltd the charity entered into a services agreement with a company where, it turned out later, the trustees appeared to have no clear idea why they entered the agreement. This might sound extreme, but it can be surprisingly easy to go along with a decision, especially if recommended by an influential person within the charity. In the report on Kamyabi, the trustees had not been holding trustee meetings or AGMs, with decisions being made ad hoc by one of the trustees. Again, it may sound extreme but it can be easy to forget that actions by individual trustees or the executive need to be authorised by a quorate trustee decision.
- Problems with decision-making can be compounded if the decision, and reasons for it, are not recorded sufficiently. It is always important to record decisions, but all the more so at present, when trustees are most likely meeting remotely and having to deal with more challenges in their day to day lives as well as in their trustee role.
- The Commission’s quick guide on good decision making and its document It’s your decision offers useful guidance.
Trustee benefits and conflicts of interests
- In a number of recent reports, trustee conflicts of interests were found which were not identified or managed properly. For examples, in Kamyabi there were decisions on transactions with the trustees and/or with companies connected to them. In some cases, these are linked to trustee benefits, e.g. in CWM Harry Land Trust Ltd where one of the trustees received salary payments which were not permitted under the constitution (the trustees apparently misconstruing a provision which permitted payment for professional services to the charity).
- It is important for charities to have processes and policies in place to help them identify, and then manage, conflicts of interests. Failing to do so can cause a transaction to be unravelled and potential regulatory action against the trustees. The quick guide addressing conflicts of interest and the Commission’s guidance on conflicts of interests should help.
- Similarly, it is important that trustees understand what constitutes a benefit under their constitution and what benefits (if any) are permitted for them and/or those connected with them. It also needs to be remembered that benefit received from a charity’s trading subsidiary company can also constitute benefit received ‘from’ the charity, so trustees need to think about trustee benefit more widely than just what the charity is doing – see, for example, the report on the Prince Andrew Charitable Trust. Further guidance can be found in the Commission’s guidance on trustee expenses and payments.
- Where benefit is permitted, it is also important to follow the right process to authorise the benefit, otherwise the trustee can still be accountable for it, even if it would most likely have been authorised if the right process had been followed.
- When dealing with related non-charitable entities, trustees should also consider how to manage that relationship properly (see the Commission’s guidance for charities with a connection to a non-charity). Charities should also be clear about their relationship with, and expectations of, other non-trustee roles, such as ambassadors (as in the CAWRM Ltd report) or patrons.
Financial controls and accounting
- Inadequate financial control is another common feature in inquiry reports. In some cases, problems with the charity’s bank account led to use of an individual’s bank account, with insufficient safeguards to protect charity funds or inadequate processes for dealing with expenses stated to be incurred on the charity’s behalf (see, for example, CAWRM Ltd and Believe in Magic). There can also be a tendency sometimes for charities to be run on trust. For example, in CAWRM Ltd a number of decisions were made which benefited, directly or indirectly, an ambassador of the charity. When questioned about it in the inquiry, the trustees indicated their understanding that donations would be made back to the charity, but it was not clear that that was happening. In another case (Kamyabi), the charity’s bank account had only one signatory who was not a charity trustee.
- Given the reliance of charities on volunteers (including the trustees), the general ethos of ‘doing good’ and the problems which can be experienced in setting up bank accounts, you can see how these things happen. However, whatever the circumstances, the trustees need to remember that they are responsible, and accountable, for the charity’s funds and how they are expended. This is especially important now, where so much of a charity’s operations may be being done remotely.
The need for alertness was emphasised by the Charity Commission recently in Charity Fraud Awareness Week. The Commission set out 3 top tips in fighting fraud:
‘1. Be fraud aware
- All organisations are at risk from fraud – being a charity is no defence.
- Be vigilant – in order to fight fraud, you need to find fraud.
- Be sure your trustees, staff and volunteers know how to spot and report fraud.
2. Take time to check
- Ensure your charity has robust financial controls in place and knows how to enforce them.
- Is there a counter-fraud policy that staff and volunteers are signed up to?
- Trust is exploited by fraudsters – be willing to challenge unusual activity and behaviour, whoever is involved.
3. Keep your charity safe
- Prevention really is better than cure – taking simple steps now will help protect your charity from harm.
- Building a strong counter-fraud culture is vital and will boost your charity’s defences.
- Help is available – seek professional advice if you need to.
- Some charities may not even know they have been defrauded.’
These should all be governance basics, but when trustees are fire-fighting, as so many have been in recent months, it can be hard to step back and think about the basic things. It may not always seem like it, but taking a little time now to review your governance arrangements, processes and policies can help keep any fires under control, or preferably prevent them starting in the first place.
A timely thank you to the secret superheroes
It is not easy being a charity trustee, and 2020 has made it harder than ever. Charity trustees carry out incredibly important roles, carrying enormous responsibility, in thousands of charities across the country and often get little or no thanks for doing so. It is fitting, therefore, that OSCR’s CEO Maureen Mallon has marked Trustees’ Week with a ‘Thank you from OSCR Chief Executive’ in which she calls the week ‘a time to celebrate and support the nation’s secret superheroes’, by which, of course, she means charity trustees – ‘the volunteers who give their energy, passion and expertise to make sure that charities exist and operate to support their members and beneficiaries, and make a difference to the public.’ Amongst all the challenges which have faced charity trustees in 2020 and with more ahead, in Trustees’ Week 2020 the thought that they are the nation’s secret superheroes is perhaps one we should all keep in mind.