Charity governance, or for this blog post, non-compliance of charity governance, has been hitting the headlines what seems like month after month, with the Charity Commission carrying out more and more investigations and holding charities and, in particular, trustees to account.
For all these reports may put a negative spin on charity governance, we can learn lessons from them and ensure your charity doesn’t fall into the same dark holes.
So what is charity governance, and why is it important?
Responsible for managing a charity’s governance…trustees.
It is your team of trustees who are responsible for managing the direction of the charity, setting strategy, managing the effectiveness of the charity and the work it delivers, ensuring compliance with legal guidance, and that, above all, the charity is following its charitable purpose.
Governance, in this sense, is vital.
It is a way to ensure that charities are set up and doing what they say they will do. They are benefitting the communities that they say they will support. They manage finances, report, and provide challenge at all stages and in all the right ways.
However, as we know, being a trustee means taking on a lot of responsibilities and duties, and these must be followed at all times (make sure to check out our blog post on Roles and Responsibilities of a Trustee).
Unfortunately, managing these duties and responsibilities has led to several high-profile charities and trustees being investigated by the Commission for governance failings.
Lessons to learn and how to prevent similar issues from happening
Case 1
The Charity Commission launched an enquiry after it was highlighted that there had been a repeated pattern of failure to submit accounting information from a particular charity.
The Charity Commission investigates charities who default on their accounting submissions and fail to provide the correct accounting information more than twice in 5 years.
This can result in serious consequences and, when reported in the media, has an incredibly detrimental effect on a charity’s reputation.
Learnings:
• Trustees have a statutory administrative duty to prepare and file accounts and annual returns.
• Make sure you know what type of accounts you need to prepare, if you need an independent examination or audit. We have a handy guide here
• Review all financial controls and have the processes to record and review all financial information as required.
Case 2
Another high-profile charity that has been in the press for a lot of positive reasons has now found itself on the wrong side of the Charity Commission.
After an investigation into the charity, the Commission has since reported that they believe the charity has been mismanaged with repeated instances of misconduct and that people responsible for the charity (trustees) benefitted personally in some capacity.
The report also states that there were serious failings in the trustees acting in the best interests of the charity, and some trustees did not have sufficient oversight and control of the administration of the charity, making them, too, responsible for the mismanagement.
This has led to the closure of this particular charity.
Learnings:
• The trustees are collectively responsible for acting in the best interests of the charity they serve and effectively identifying and managing conflicts of interest.
• Trustees must have full oversight of all charity activities and ensure these align with the charity’s purpose – holding regular trustee meetings and ensuring everyone has oversight and is aware of their role and responsibility is key.
• Trustees must manage conflicts of interest effectively – no matter how difficult the conversation.
Case 3
An enquiry into a youth charity in 2024 found this charity suffering from poor governance leading to mismanagement and the charity not being governed to the standards that the Commission expects.
Highlighting problems with culture, operational management, and processes, as well as a failure to address internal issues. The charity also didn’t carry out due diligence checks when recruiting trustees, parts/some information on their website was thought to be unclear, and it was reported that there was no adherence to their own HR policies.
Learnings:
• Trustees are responsible for ensuring the charity’s governance, culture, and practices keep pace with the size of the charity and the demand for its services.
• Due diligence MUST be carried out on recruitment of all new Trustees.
• Internal checks and management must be reviewed regularly.
• Governance documents must be fit for purpose.
• Information communicated to service users must be educational.
Case 4
This case was incredibly high-profile as it was the first time a local authority had received an official warning from the Charity Commission for failing to comply with its duties as a trustee for 13 charities.
The warning comes for the misconduct/mismanagement of filing returns.
Learnings:
• It is the trustee’s responsibility to ensure accounts are produced, monitored, reported on, and filed within appropriate timescales.
Importance of charity governance
We haven’t highlighted these recent cases to scare charities or put people off from becoming trustees but instead highlight the importance of charity governance.
All of the cases mentioned above link to trustee mismanagement, which, to me, ties in with the importance of ensuring your trustees know their roles and responsibilities inside and out.
The Charity Commission is always on hand to help with charity governance, and they have some great resources online, which you can find here.
We also have some great blog posts to support trustees in their roles, which you can find on our website here.