Is Your Charity Making the Most Effective Use of its Assets?

Posted On June 15, 2017 By mhauk

Charity trustees have well known duties of stewardship, which means ensuring that resources are used for charitable purposes and are not put at risk unnecessarily. There is also, of course, a duty to use them effectively. Three areas to consider are:

  • Investment
  • Banking
  • Property

Remember the case of the Bank of England investing in the payday lender Wonga? Charities might be encouraged to consider an ethical investment policy, so investments don’t compromise the aims of their charity. Consider perhaps programme related investment where charities invest in activities that achieve their objectives and are willing to sacrifice some income. These additional choices are now in statute so that any charity can use them unless their governing document has explicit restrictions.

Banking services should be kept under review and trustees should be aware of the level of charges and benefits available in the market. Setting up bank accounts for a new entity can be a frustrating experience.

It is worth checking with your accountant to see if they can recommend a suitable bank.

Property can be retained as part of an investment and, as such, it is subject to the same considerations as investment funds. Target rates of return and the costs of management need to be explicit. However, charities often have mixed motives with property, seeing the assets as both an investment and as part of charitable activity. This echoes the programme related activity issues identified above.

We have created Keeping Your Charity on the Right Track, a 12 month programme to help you improve your organisational governance in a stepped and measured way. Each month’s article covers an area of charity governance for review. The article for month six further considers trustees’ duties in relation to its assets, and includes a checklist:

  • Set up a regular review of investment activity.
  • Consider if ethical investing or social investment might bring more effective use of charity resources.
  • Review costs of banking and balance them against the benefits.
  • Review how property is used; consider moving if it is not fit for purpose.
  • Link these reviews to the risk profile set for the charity’s investments.

If you have any questions or if you would like to speak to us about managing your charity’s assets, please contact Hannah Farmborough or call on 0207 429 4147 to be put in contact with a member of our Not for Profit team.

This article originally appeared on the blog of our member firm, Larking Gowen.