23 February 2016 by Henry Ker
We recently saw the release of two reports from the Public Administration and Constitutional Affairs Committee (PACAC) into charity fundraising and the collapse of Kids Company (see page 15 for further commentary from Simon Osborne). Among damning comments was the claim that there is ‘a failure of trustees to understand that their primary role is governance’. We have also seen even more charity scandals emerging, the latest being Age UK’s promotion of E.On energy deals.
As charity governance remains firmly in the public eye, we asked the Governance and Compliance/Core community about the issue. The first question was the oft-debated topic of whether trustees should receive payment for their work. There was a strong majority with 63% answering ‘yes’, 19% answering ‘no’ and 17% who are unsure.
The third sector is inherently reliant on volunteers to lend their skills and expertise – although as the point gets reinforced that trustees are responsible for their charities, there is a feeling that this responsibility deserves to be recognised financially. Some argue remuneration would also attract a higher calibre of candidates to these roles.
We asked how, following these recent scandals, charities can restore trust in the sector. The primary response was to ‘increase transparency’, with just over half (56%) mentioning this (or a variant on the theme such as ‘openness’, ‘disclosure’ or ‘scrutiny’). There was however a particularly strong call for transparency around financial information – whether fundraising or expenditure. As one respondent said: ‘By being more transparent about how funding has been raised and where they have spent the money’, another commented ‘clearly state what percentage of funds do not go directly to the charity recipients. Breakdowns of how non-charitable expenses are incurred’, and another ‘Charities need to demonstrate more accountancy and transparency around how they use their funding’.
There were also calls for ‘better governance’. A range of explanations were given here, with a focus on the role of the trustee and their role in holding management to account. One respondent explained that ‘trustees need to be independent and have the ability to challenge management’, and another said ‘they have to show that they have independent trustees who scrutinise management and hold them to account’.
Other respondents focused on the training and skill levels of trustees. For example, one commented ‘Encourage … more training for independent trustees’, with another explaining that ‘charities could be encouraged to publicise in more detail what is being done with regards to training of new trustees and ongoing training, particularly with regards to financial matters, board evaluation, succession planning and “refreshing” the board’. One respondent argued for a minimum requirement of qualification in certain areas: ‘It should be essential to have an appropriately qualified professional trustee to ensure legal/accounting obligations are met’.
It is worth mentioning that despite all the recent scandals, it is a minority of organisations in the charity sector that are poorly governed. One commented: ‘There are so many charities and only a few scandals. Same with companies, not all are bad but only the bad ones hit the headlines! They should keep up the good work and reinforce trustee duties training’.
If you are a company secretary or governance professional at a leading UK business, and you would like to take part in or comment on future surveys, email email@example.com
Conducted in association with The Core Partnership