Governance crisis? Help is at hand!

This week the press have jumped on the news that the Charity Commission has given an official warning to the National Hereditary Breast Cancer Helpline. There has been a massive conflict of interest that hasn’t been managed properly – the founder and her daughter have been paid – and some exceptionally poor financial management.

Here I look at the problems faced by smaller charities and those with relatively inexperienced Boards, and note what support is out there.

 

How has this happened?

Many are posing the question, “how has this gone unnoticed for so long?” after the charity’s annual accounts show a decline in spending on charitable activities in three consecutive years from 6% to 3.4% to 2.8%. To give a sense of perspective, the average spend on charitable activities is 83%.

Perhaps this wasn’t spotted because the Charity Commission is underfunded to deal with the increase in inquiries and investigations, nevermind proactively seeking out poor governance practice? Or perhaps the Board weren’t equipped to managing the charity? Or perhaps there was a change in accounting method – how did charitable spend jump from 2.8% of total expenditure to over 98% in the just one financial year? That’s some impressive turnaround management or interesting accounting.

Gina Miller, Founder and Chair of the True and Fair Foundation (and of Brexit fame) has suggested there be a minimum (percentage of) spend on charitable activities. Thankfully the Charity Commission has rebutted this, with a statement reflecting the diversity of charities and consideration of their life-stage being taken into account – reminiscent of the response the Commission and others gave the True and Fair Foundation’s report ‘A Hornet’s Nest’ early last year.

Maybe it’s time to revisit Dan Pallota’s TED Talk: The way we think about charity is dead wrong?

 

Charities are specialist

Charities are specialist and need managing accordingly to be legal and effective. My reflection on working with small charities is that people tend to join a Board because they are motivated by the cause. They are not typically from a charity management background, and then find themselves up to their eyeballs in CC guidance, or conversely, not! Passion for – and knowledge – of the cause is extremely important but how effective is it if the infrastructure isn’t there to deliver it? As Wendy Watson, Founder of NHBCH stated:

“Mistakes were made. I’m not a businesswoman, I’m somebody passionate that wants to keep the helpline going and find a way to raise some money to do that.”

The usual brief I receive is, “we need some help developing our fundraising strategy”. It’s true, but the precursor to that is clarifying organisational purpose, honing down their priorities from doing everything in their causal area to a few strategic areas where they can genuinely make a difference. This strategic direction should come from the Board and highlights the need for a sound understanding of charity governance.

The main issues for NHBCH seem to be around managing conflict of interest (CC29) and financial management (Charity finances: trustee essentials (CC25). It’s not illegal for family members to be on the Board or work for the organisation, but conflict of interest – including perceived conflict of interest – must be managed. The governing documents detail how conflicts of interest are managed, and how and when meetings are conducted (i.e. decision making). Adhering to the governing document therefore ensures trustees operate legally. Given the jump in NHBCH’s charitable expenditure in the last financial year, Charity reporting and accounting: the essentials, March 2015 (CC15c) might also have been a useful resource.

 

Help is at hand

Trustees in large charities often have the support of a paid-for governance function ensuring things operate smoothly: trustee inductions, Board papers are in on-time and circulated, minutes are taken and approved, queries are resolved within working hours. These organisations are therefore well placed to capitalise on the non-charity sector experience that these trustees bring. But for smaller organisations and those with less experience of charity management, this in-house support is missing.

Charity Commission guidance is publicly available and in becoming a charity trustee you are agreeing to comply with it. It’s pleasing to see the new Charity Governance Code progressing themes every trustee should be mindful of. (NCVO’s blog on the Charity Governance Code covers everything you need to know about the Code.) But for those organisations reflecting on their governance as a result of lack of funding or that they think they may need to close, how pressing are these themes? They need a fix, and strengthening governance at point of crisis feels a little too late.

So here’s a quick summary of what you could do if you’re new to a Board.

1. Charity Commission Guidance. An excellent place to start for new trustees of those needing a refresher, is The essential trustee: what you need to know (CC3).
2. KnowHowNonProfit. Free info! Check out the Governance section.
3. Small Charities Coalition. Free trustee matching, finding and networks. And seminars taking place across the country, including this one on Governance in Chester in October.
4. NCVO membership. It’s worth the membership fee. Access tools such as the Governance Wheel (easy to use and gives a snapshot of governance strengths and weaknesses), the Trustee Bank (free trustee recruitment site) and get discounts on training and consultancy. I’d recommend Charity Trustees: Induction and Refresher Training – next one in October in London.

Do you know of other useful resources are out there for new charities and trustees? If so, please share!