Trustees Week: Ensuring Charity Funds Serve Their Purpose

It's Trustees Week (4th - 8th November)! As we celebrate trustees and their invaluable contributions to the charity sector, we also want to emphasise the importance of ensuring that charity funds are used responsibly and in line with the charity's mission and purposes. 

Recent news highlights a case where Naomi Campbell and two others were banned from being charity trustees after investigations revealed poor governance and misuse of charity funds. One individual has even been banned for 9 years. While the media has focused on Campbell’s involvement, the real lesson here is the vital importance of trustees understanding and fulfilling their legal responsibilities.  

Trustees play a crucial role in guiding charities, but with this responsibility comes the duty to use charity resources solely to further the organisation or group’s purpose. Mismanagement or misapplication of funds, whether intentional or accidental, can have severe consequences, not just for the individuals involved but for the charity’s reputation and the communities it serves.  Consider the impact that mismanagement can have on a charities reputation. For instance, think about whether the recent actions by Captain Sir Tom Moore’s family have influenced how you feel about the charity associated with his name. 

Avoiding misuse and protecting your charity 

Step 1: Understand your responsibility 

Regardless of structure, Trustees are responsible for a charity and its assets.  Some structures afford Trustees against liabilities where they have been properly accrued, but for unincorporated charities, the Trustees are individually and severally liable (Not sure what type of structure you have, want to change structures, or find out more about Trustee roles and responsibilities, attend a Trustee Training session). Even if you delegate financial management to a team member, or contractor (like a bookkeeper), you need to have checks in place to make sure you understand what they are doing, and can oversee it.   

During Trustees Week this November, it’s the perfect time to remind all trustees and charities about the importance of sound governance and finances. Trustees should ensure that every decision they make directly supports the charity’s mission. This is not only a legal requirement but also key to maintaining public trust.  It’s good for Trustees to discuss how an action is, or isn’t, in the interests of the charity, and how it specifically links to their purposes,  if you are unsure, why not use the Charity Commission’s decision making guidance as a discussion point. 

Step 2: Put it in writing 

All Trustees are equally responsible for their charity’s finances, so you need to make sure you have clear financial oversight.  Regular audits (internal or external), and transparent reporting are essential tools in protecting your charity from falling into similar pitfalls.  Make sure you outline your approach in a policy and have a clear procedure for how to carry out spot checks.  It is important that each Trustee should be involved in carrying these out and not just the Treasurer, or another key individual.  You can find oiut more about what good financial oversight looks link buy using the Charity Commisson’s guidance on internal financial measures.  Remember, we also make model policies available to our silver members!

Step 3: Know when to report 

Trustees need to ensure that there are appropriate internal procedures in place in their charity to encourage staff and volunteers to report known or suspected financial crime or abuse, and so they can do this in confidence and in the knowledge that they will be taken seriously. Information on how to report concerns should be provided along with a clear explanation about how reports of concerns will be investigated. Adequate training should be provided to staff and volunteers to ensure they are familiar with the charity’s reporting procedures and financial controls and know what actions to take if they suspect criminal financial abuse. The Charity Commission has an in depth strategy on dealing with fraud, financial crime and financial abuse of the charity sector which you can find here. 

In the worst case scenario, you might identify a serious incident that needs to be reported.  A serious incident is an adverse event, whether actual or alleged, which results in or risks significant damages, wether this be to the charities finances, propterty, or reputation. The Charity commission has a table to help you know when you need to report a serious incident, and again, our silver members can request a Template Series Incident Reporting Policy.    

We are here to help! 

If you or your charity need some support or guidance with anything addressed in the article above, please do get in contact with us.