Charities Need to Protect Themselves – Charity Governance

In the wake of further national charity scandals, we warn charities and their trustees to protect themselves by ensuring they’re on top of their legal obligations, financial management and charity governance.

With Oxfam’s recent scandal already reportedly costing the charity over 7,000 regular donations, and repercussions still being felt from 2015’s closure of Kids Company, charities of all sizes must take steps to strengthen their governance. Trustees, the people who lead a charity and, often working alongside a management board, decide how it is run, have a legal responsibility to ensure that the charity is being run well and in accordance with what it was set out to do.

James Gare, a Not for Profit Partner from our member firm MHA Monahans, explains: “Charities of all sizes are at risk of being tarred with the same brush as a result of the scandals we keep seeing in the media. Oxfam has already seen an impact on their donations and should people start losing faith in charitable giving, this will impact the bottom line of the smaller, local charities that do great work on our doorsteps.

Trustees must oversee the management of their charities and so it is crucial that, no matter their background, they have a firm grasp of all areas of the organisation in order to put the charity in the best possible position for the future. On several occasions I’ve come across groups of trustees who have deferred financial governance to one or two individuals in an organisation, through individual lack of confidence or understanding. In my view, the whole trustee body should be engaging with these issues. Organisations who don’t collectively understand and tackle these risks are putting their whole charity at risk.

Understanding finance is a skill all trustees should have. Something as straightforward as knowing how to read a balance sheet, having an insight into the management accounts and understanding funds can reduce the level of risk a charity faces. Trustees often walk a difficult tightrope when managing funds and reserves and may be inadvertently putting themselves at risk of losing grant opportunities or being in breach of trust by spending funds inappropriately.”

Our expert team works with a range of local and national charities and not-for-profit organisations. The team can advise and handle accounts preparation in accordance with the charity SORP, audit and independent examination, risk management, reserves and taxation including VAT, maximising income through gift aid and charitable trading. We have also produced month to month guides for charity trustees to help them improve governance and to upskill and improve standards.

If you would like to discuss this with us in more detail or if you have any questions, please contact Hannah Farmborough or call on 0207 429 4147 to be put in contact with a member of our Not for Profit team.