The recent Kids Company case is a stark reminder of the responsibility that comes with trusteeship. The problems were about governance, not understanding their impact, not having any reserves, and a CEO who was not held properly to account by the board. The case has even evoked a debate about whether the Charity Commission should now advise people against joining struggling charities as trustees. The defence’s warning that the case will deter others from becoming a trustee may be alarmist, but it’s worth heeding.
So many charities are facing huge pressures right now—from major spikes in demand to loss of fundraising income. Now more than ever, the sector needs good governance.
Governing a charity is a valuable and rewarding vocation that too often is parodied as a worthy pastime, for which applicants are given no training. Trustees need to be prepared for the responsibility and equipped with the knowledge and attitude to do the job well. This is even more important if the charity is struggling.
So, what should a trustee of a struggling charity keep in mind?
1. Focus on the mission
The charity’s mission should be your primary purpose above all other concerns. Protecting income and promoting the brand are a means to an end; they should never trump the mission. Ask yourself: is the charity staying true to purpose? Are its activities still relevant given the context and users’ needs? The pandemic has prompted boards to consider these questions, but you should be thinking about this in normal times as well.
Stay curious and keep learning about the charity’s impact when making decisions. NPC’s State of the Sector research showed that before Covid-19, 95% of respondents agreed that using data and evidence is important for achieving their mission. Data is even more important when a charity is facing challenges, as understanding where you are making an impact lets you prioritise your efforts.
2. Consider risk in relation to your impact
As the Kids Company case shows, the buck stops with the board. But boards are not there to avoid all risks at all costs. Making an impact demands courage to take risks. You might have to try something new, or roll back certain activities. Good boards assess and mitigate risks. They seize opportunities where potential impact outweighs the risks.
Look to your wider purpose beyond the concerns of your charity. Don’t be afraid to consider working with other organisations to achieve more than you can on your own, or whether another organisation might be better placed to deliver something.
Sometimes, the difficult conversation on merging or exit might be in the best interest of your beneficiaries. Mergers can be a powerful tool for achieving impact and there are several different models available. Proactively consider this with your fellow trustees—don’t wait until it’s too late.
3. Be on top of the finances
All trustees, not just the treasurer, should have a good understanding of the charity’s financial position. Be proactive about this. Ask for the relevant financial information you need to make decisions as a trustee, and don’t be afraid to ask ‘stupid questions’. Are reserves sufficient to carry out commitments to service users? Or does the charity need to make redundancies or borrow money?
Be attentive to your level of reserves. A lack of reserves suggests bad financial management and leaves the charity at risk of not being able to deliver committed services or pay costs. Too much in reserves could be a missed opportunity to make more impact; funders may wonder whether you really need their money.
There is no one size fits all approach to spending reserves, boards should carefully consider what is right for their charity. But calculating reserves should not be saved for quarterly reporting. You need to be continually aware of what funds are accessible.
Your reserves policy should not only state how much you will hold, but what it will be used for and how this aligns with the charity’s strategy. It’s okay to change your reserves policy depending on the context. In a crisis, it might be more appropriate to dip below your usual level to meet urgent need.
4. Know the legal duties required of you as a trustee
Keep refreshing yourself on your legal duties as a board and consider what this means in practice. The legal requirements of trustees are set out in the Charity Commission’s guidance The Essential Trustee. They include things like ensuring the charity complies with its governing document and avoiding exposing the charity’s assets. The Charity Governance Code contains guidance around high standards of governance to help you comply with your legal duties as a trustee.
The nature of a charity’s work may make it harder or easier to interpret what those legal duties mean in practice. For example, understanding your immediate public benefit is harder when you are working to longer timescales or trying to achieve change through gradual, slow shifts in behaviour or attitude. The important thing is to make your legal duties relevant to your work.
5. Make the most of your time together
Your decision making must be relevant and efficient. Think about how you can promote this with your fellow trustees to navigate your charity through challenging times. Make the most of your meetings by creating better board papers and put processes in place to turn decisions into actions.
You should know the details and understand issues in depth. Do not rely on reports from senior management alone. Meet with other staff (even if online) and spend time getting to know the issues and successes. When a charity is struggling, the organisational culture is particularly important. As a trustee you can offer support and give opportunities to raise concerns.
Make sure user voice is reflected at board level. People with lived experience bring perspectives and skills that add considerable value to board discussion and decisions. User voice should not be an ‘add on’ when things are going well; it is a crucial ingredient for navigating hard times.
Support in your role
The world is a different place to the one that saw the fall of Kids Company, but many of the principles of good governance still apply. At such a challenging time for many charities, these principles are more important than ever. We hope that the Kids Company case, rather than putting trustees off, will highlight the importance of good governance, the skills required, and the need to support trustees to develop such skills.
NPC are continually learning and sharing best practice on governance and discussing new ideas and policies to improve it across the charity sector. Our guidance ‘Above and beyond trusteeship’ looks at how boards can do the best for those the charity serves. Our recent paper ‘Charity boards in recovery’ looks at effective decision making in a crisis.
If you have questions about being a trustee or want to talk more about governance, please get in touch with me at firstname.lastname@example.org.