Almost as frequent as the Charity Commission’s investigations into charities up and down the country is the advice given to Trustees from different quarters about what steps to take to ensure a Charity Commission investigation doesn’t happen.
Kids’ Company is the most frequently cited example of where procedures go wrong – but sad to say, there are cases almost every week in the reports sent out by the Commission.
The most frequent incidents which lead to investigations include:
- Governance failures on the part of Trustees
- Lack of a mix of Trustees with the necessary skillsets
- Too few Trustees; and those being related to one another or connected in other ways such as business partnership
- Unresolved conflicts of interest
- Inappropriate financial transactions by Trustees, eg: trustees taking interest-free loans from the charity; trustees diverting charitable funds into their businesses; trustees using the charity’s funds to purchases buildings for their own use – to name but a few.
So how to avoid the problems in the first place?
Let’s start with the recruitment of Trustees.
Some charities Minerva has worked with in past years have tended to recruit on the basic of “I know a very good person who ………” – with the result that the Board is made up of friends of existing Trustees. Whilst superficially attractive, this does not represent good governance. A proper recruitment process with Trustee vacancies advertised and documented interviews is the best way of ensuring a representative and inclusive Board – and avoiding storing up problems for the future.
Skillset is important – but equally important is the need for Trustees to understand the basics of all the Charity’s operations. There may be only one Trustee who is a Chartered Accountant – but the others need to learn about accounting in sufficient detail that they can make their own judgements and, if necessary, challenge the Executive.
All Trustees need to participate – and to be effective, that requires a substantial amount of work outside Board meetings. Too often decision-making rests in the hands of the expert – or vociferous – few: but a Board where only a minority of Trustees are engaged and contributing to policies and strategic planning is a Board with future problems.
There is no reason why your charity should be the subject of a Commission investigation, providing that you have strong procedures in place for every aspect of the charity’s activities – and that these procedures are followed!