Blick Rothenberg

Governance and recent charity collapses

30.11.2016

It is over a year since Kid’s Company collapsed in ignominious circumstances. In the time that has followed, there has been other charity failures. One example being 4Children which collapsed in August.

Much has been written about the failings at Kid’s Company on the part of the trustees and the government. What can trustees and senior management at charities learn to prevent their organisation ending up in a similar position?

 

In many ways there aren’t any new lessons to learn – simply a reminder to trustees about the need for good governance and financial management. After all, the legal responsibilities of trustees are not new – they are long established in law and explained by the Charity Commission in its guidance notes.

 

Strong and balanced boards

Possibly the key failing at Kids Company came from the top, with a dominant founder who had too much power and say over how the charity was run. Trustees should remember that collectively they are responsible for everything done in the charity’s name. The board should collectively prevent it being dominated by one individual. In addition, although trustees have the responsibility for oversight, a number of responsibilities are delegated to the Chief Executive so they should not overstep the boundaries.

 

Trustees should have confidence in allowing management to manage the charity from day to day but are responsible for the strategic direction of the organisation.

 

They are there to hold management to account and challenge management decisions rather than simply rubber stamp them. The relationship should be open and constructive allowing different views and opinions to be expressed.

 

Conversely charities can suffer from a too powerful chief executive where every decision has to pass through them. This can constrict the board’s and charity’s ability to act. Ideally, the full senior management team should attend board meetings so that a breadth of experience can be present.

 

Ideally, the chief executive should have the opportunity to meet and discuss matters informally with the chair and other officers of the charity so that matters can be debated but then brought back to the full board.

 

Commitment

It is important that there is the right mix of skills on the board, trustees who have operational knowledge of the charity’s work as well as those with an understanding of legal and finance issues.
 

It is not enough to just turn up quarterly for board meetings. Trustees should never underestimate the commitment that is required to fully understand how the charity and its board works.
 

Delegation

Effective delegation is also important to the effectiveness of boards.

 

What is more important is culture and behaviour. Roles and responsibilities should be understood and discussed regularly. But with any delegation, there should be a mechanism to report back so that decision making still takes place at board level.

 

Oversight

Trustees should not lose sight of the fact that they are responsible for oversight and ensure that there are clear channels of communication.

 

There is no panacea but boards should continue to ask questions not only about the charity but also about their own roles and responsibilities. Boards should have their own development plan to ensure they ask relevant and challenging questions.

 

For more information, please contact Mark Hart at: mark.hart@blickrothenberg.com