Charity Trustees

The Charities Act says that a ‘charity’ is an institution which is established for charitable purposes only (see part 2 of the Charity Commission Guide) and is subject to the control of the High Court’s charity law jurisdiction (see part 5 of the guide)  www.gov.uk/government/organisations/charity-commission

The Charity Commission publication The hallmarks of an effective charity (CC10) is intended to be complementary to the Good governance code.

www.gov.uk/government/organisations/charity-commission/about/publication-scheme

What are Charity Trustees?

A trustee role is a non-executive one. Part may be operational – but only when specifically agreed.

This is the definition from the Charity Commission.

Trustees have overall control of a charity and are responsible for making sure it’s doing what it was set up to do. They may be known by other titles, such as: directors, board members, governors, committee members.  Whatever they are called, trustees are the people who lead the charity and decide how it is run. Being a trustee means making decisions that will impact on people’s lives. Depending on what the charity does, you will be making a difference to your local community or to society as a whole. Trustees use their skills and experience to support their charities, helping them achieve their aims. Trustees also often learn new skills during their time on the board.

What does a charity Trustee need to know and what does a Charity Trustee need to do?

www.gov.uk/government/publications/the-essential-trustee-what-you-need-to-know-cc3

Described under the following subheads:-

• About this guidance.
• Trustees’ duties at a glance.
• Who can be a Trustee and how trustees are appointed.
• Ensure your Charity is carrying out its purpose for the public benefit (look carefully at what “public benefit”
• Comply with your charity’s best interests.
• Manage your charity’s resources responsibility.
• Act with reasonable care and skill.
• Ensure that your charity is accountable.
• Reduce the risk of liability.
• Your Charity’s legal structure.
• Charity Officers – the Chair and the Treasurer (the de facto Finance Director.)
• Technical terms used in this Guidance.

The Charity Trustee – what’s involved?

www.gov.uk/guidance/charity-trustee-whats-involved

The kinds of skills which boards are looking for are broad.  However, in thinking about your skills, knowledge and experience, you should also consider what else you have to offer. For example, your experience of managing through influence rather than control (as you will have read in earlier.  chapters, the sector is all about consultation), or your analytical skills or your ability to ask insightful questions in order to get to the heart of an issue, are all valuable contributions which you could make. Probably the most important skill of all is being able to offer sound judgement.  But you do need a solid understanding of what you are supposed to offer an also what the purpose of the Charity is.  Many take the view that in the “commercial” world the primary requirement of an NED is numeracy. In a Charity this is important but so is purpose and empathy and the sort of drive that comes from conviction and commitment.

• About Charity Trustees
• Before you start
• Make sure you are eligible
• Trustees’ 6 main duties
• Making decisions as a Trustee Chair and Treasurer trustee roles
• When trustees can be personally liable
• Find out more about being a Trustee

The NCVO has developed a set of ethical principles for the Charity Sector.  These principles provide an overarching framework for voluntary organisations to guide decision-making, good judgement and conduct. Endorsement of the principles is voluntary, but all charities are encouraged to reflect on the principles in their work and decision-making. www.ncvo.org.uk/policy-and-research/ethics

Good Governance within a Charity – nothing you would not expect but, as a Trustee, you need to keep in mind that you are charged with helping the Charity to achieve understood levels of good governance.  www.charitygovernancecode.org/en/pdf

When deciding to accept a Charity Trustee appointment, you should carry out your own due diligence.  This means that you need to be aware of everything that might affect the picture and the image of which you are presented with and its accuracy. Is it what it seems?  Is it what is described to you?  What sort and size of risk would you be taking on?

and

Importantly, in forming this judgement, you will develop a perception of what the Charity should be – what are the strengths that can be nurtured and built on and what are the weaknesses that need addressing. Trying to discover all this at the very beginning of your involvement rather than be confronted with a stream of revelations after your appointment should appeal as attractive and as sensible to you!

In practical terms, you take a view.  You make a judgement about what you accept – but being aware of the risk of what you disregard.  In any case, once settled into your new Trustee appointment, you will be continuously working towards good Governance.

Review this list and assess what you need to do:

• The first thing is to make sure that the charity has a good induction process in place. In an ideal world every charity will have a well organised and comprehensive process although the reality can often be quite the opposite. (see link)
• Study the charity’s annual report and accounts. One of the first things to look at is the last set of audited accounts. These are available on the Charity Commission website: charitycommission.gov.uk . The Charity Commission will also show you the income and expenditure over previous years and the charity’s compliance history in terms of filing their accounts. The report and accounts are a treasure trove of information and often the report at the beginning will be illustrative of recent issues, including financial performance and plans for the future. One key thing to look for is that the accounts are unqualified and that words to the effect of ‘In our opinion the financial statements give a true and fair view of the charity’s state of affairs …’ are stated by the auditors.
• Review the latest set of management accounts
• Obtain and study the charity’s memorandum and articles of association
• Understand the role of the Chairman and make your own assessment of how best to work with him/her
• Understand the role of the Treasurer ( the de facto Finance Director) and make your own assessment of how best to work with him/her.
• Find out as much as you can about the other Board members and the Chief Executive, and meet them
• Make sure that you are clear about the vision and strategic aims and values
• Check there is a plan to achieve the aims. Is the Charity minded to achieve these?
• Enquire about the skills of executive team and their capability to be successful
• Do your own google research. Talk to people. Are there any big issues facing the charity?

Note that although business skills and disciplines are becoming increasingly more important, the Charity needs to protect and enhance its charitable mission. Reconciling these two imperatives is vital.

Here is a random collation of statistics that may be helpful –  from various sources but mainly extracted from  the Charity Commission and www.civilsociety.co.uk

• With over 165k Charities covering a huge range of interests in the UK, there is a continuous ebb and flow of activity. This includes about 134,000 charities with incomes under £100,000, with only 35,000 employees and 116,000 volunteers between them.  There are roughly 700,000 trustees in England and Wales.  This implies that the average trustee sits on 1.35 boards; around 1.27 per cent of the population is currently a trustee and, amongst retired men, this rises to 5.5 per cent.
• Around a sixth of the population of trustees steps down from their role each year. Those stepping up and stepping down appear to be roughly in balance, indicating that there is no obvious shortage of candidates for trusteeship.
• The median length of service for a trustee is around five years, with trustee tenure longest in the smaller organisations. In the largest charities, median tenure is between three and four years.
• 80 per cent of charities have no other staff or volunteers. These charities are overwhelmingly community-based: village halls, PTAs, church centres, choirs, scout and guide groups, sports clubs, women’s institutes and the like. Some appear to be either charities set up to distribute a small legacy, or those run by individuals raising money in memoriam.
• The average trustee contributes 4.88 hours per week, although the median is much lower – between one and four hours. This means that if you take a median hourly wage, trusteeship is worth at least £3.5bn a year. Although this does not measure the amount of time trustees contribute to delivering services. Additionally, given that the average trustee is considerably wealthier than the median, the likelihood is that the services they provide are worth far more, on a per diem basis.
• About 70 per cent of trustees were recruited through informal networks, and only 5 per cent answered a public advert.
• More than 2,000 charities pay their trustees, according to an analysis of Charity Commission annual returns. This represents 1.6 per cent of all charities. (Note:- payment is for work additional to that of Trustee work which is not remunerated.)
• Paying trustees becomes much more commonplace as charities get bigger. Research has found that 7.4 per cent of charities with annual incomes over £5m paid their trustees. Some research points to the largest 100 charities reporting that 16 paid at least one trustee, although some were paid for duties other than trusteeship, and some were executive trustees sitting on unitary boards.
• Relatively few boards assess their effectiveness. Only 12 per cent of trustees have a formal induction, only a third have a job description, and very few indeed have appraisals. Only 9 per cent of trustees think training is very important.
• It is thought that there are some serious skills gaps. Only 24 per cent of trustees believe their boards have sufficient skills to avoid fraud, for example, and there are also issues with legal, fundraising and digital. Only 40 per cent say they have sufficient skills in governance, which is a worry, since this is arguably the board’s primary function.  Providers of services to trustees are less impressed with the skills of boards than boards are themselves.

There is a prevailing view that trustees mostly love doing the job. It says that 90 per cent of trustees say it’s rewarding, and 94 per cent say it is important or very important to them. There is no particular shortage of trustees, and no evidence that trusteeship too onerous – a welcome finding in the wake of warnings to this effect.

Over the past 20 years the Charity Sector has grown hugely, driven by government pressure to accept contracts, local government seeking to offload elements of its work for cost reasons, growing public awareness of needs and, often, of inadequate responses and the public’s appetite for support in varying ways.

Charities, in general, have had to work hard to keep up with not only these needs but also the expectations placed upon them in governance, business and organisational terms.

It is hard to staff up to the standards now being demanded when you can’t remunerate and often pay market recruitment rates – and sometimes not make sound recruitment assessments.  But things are changing and will continue to change.

Historically, recruiting trustees was done informally and internally – with scant regard for the business-type criteria.  This meant that many Boards continued to lack effectiveness.  However, this was not generally the case with larger Charities which were able to pay near market recruitment rates and attract impressive profiles.

What is happening now is that the ability to pay near market recruitment rates together with a realisation that this is vital is gradually moving down the size scale.  Somehow image and perceptions have also change and this has helped immeasurably.

Over the past 20 years the Charity Sector has grown hugely, driven by government pressure to accept contracts, local government seeking to offload elements of its work for cost reasons, growing public awareness of needs and, often, of inadequate responses and the public’s appetite for support in varying ways.

Charities, in general, have had to work hard to keep up with not only these needs but also the expectations placed upon them in governance, business and organisational terms.

It is hard to staff up to the standards now being demanded when you can’t remunerate and often pay market recruitment rates – and sometimes not make sound recruitment assessments.  But things are changing and will continue to change.

Historically, recruiting trustees was done informally and internally – with scant regard for the business-type criteria.  This meant that many Boards continued to lack effectiveness.  However, this was not generally the case with larger Charities which were able to pay near market recruitment rates and attract impressive profiles.

What is happening now is that the ability to pay near market recruitment rates together with a realisation that this is vital is gradually moving down the size scale.  Somehow image and perceptions have also changed and this has helped immeasurably.

Remuneration – Yours!

Charity Trusteeships are not remunerated – but expenses are reimbursed according to the internal rules of the Charity. By arrangement, Trustees with particular skills can be engaged by their Charities for project work or similar generally where authorised by the Charity Commission.

We would like to develop this Section into a more comprehensive critique and guide about the current status of Diversity in the Charity Sector.

One would expect Diversity to be at its fullest best in the Charity Sector – but some research points to this not being the case in some instances. They say that Boards are not fully representative of their communities.

Sometimes overlooked is how you manage your own financial and accounting matters. See separate Technical Topic Section on Accounting and Tax.

Keep an eye on what is reported in the media – both national and trade press (see below), new books, what is happening on the relevant trade bodies (see below) and course and conferences that take place.

• The NCVO – the National Council of Voluntary Organisations, probably the nearest thing that the Charity Sector has as a Trade Body. ncvo.org.uk
• The DSC – The Directory of Social Change.  The DSC has a vision of an independent voluntary Sector at the heart of Social Change The DSC exists to help these organisations and the people who support them in achieving their goals. (Quoted from their website.) dsc.org.uk
• ACEVO – The Association of Chief Executives in Voluntary organisations. –    . For 30 years, ACEVO has provided support, development and an inspiring, collective campaigning voice for our members across the UK. ACEVO’s network of over 1,150 individuals includes the leaders of small, community-based groups, ambitious medium-sized organisations, and well known, well-loved national and international not-for-profits. (Quoted from their website.)  (Not now restricted to CEOs.)     acevo.org.uk
• The Third Sector – describe themselves as ) the UK’s leading publication for everyone who needs to know what’s going on in the voluntary and not-for-profit sector. Many of their 55,000 readers are chief executives, trustees and senior managers in charities and voluntary organisations. Others are parliamentarians, lawyers, finance professionals and private sector executives concerned with corporate responsibility. www.thirdsector.co.uk/about-third-sector
• The Centre for Charity Effectiveness – is part of CASS Business School and offers a range of CPD and academic products – including five MSc programmes
• www.cass.city.ac.uk/faculties-and-research/centres/cce/our-people. Note that there are a number of academic institutions who have Charity based offerings.

(mostly available from Amazon)

• Good Trustee Guide – by Anne Moynihan (Editor) and published by the NCVO. ncvo.org.uk   Look at their other publications. NCVO has developed a set of ethical principles for the Charity Sector.  These principles provide an overarching framework for voluntary organisations to guide decision-making, good judgement and conduct. Endorsement of the principles is voluntary, but all charities are encouraged to reflect on the principles in their work and decision-making. www.ncvo.org.uk/policy-and-research/ethics
• The Charity Trustees Handbook – by Mike Eastwood and Jacqueline Williams – published by the DSC – The Directory of Social change – dsc.org.uk  – Look at their other publications.
• Boards that Work – A Guide for Charity Trustees by David Fishel and published by ICSA. Look at their other publications.
• Charity Administration Handbook – written and published by BDO.
• Charity Accounts. A Practitioner’s Guide to the Charity SORP The Charities SORP – the Statement of Recommended Practice which sets out how charities should prepare their annual accounts and report on their finances. The SORP is an interpretation of the underlying financial reporting standards and generally accepted accounting practice (FRS 102)

(NOTE from Editor – Suggestions welcomed for new inclusions.)

See also:-

• Reading List – (See contacts listed in its Section.)
• Where to find Opportunities – (See Recruitment contacts listed in its Section.)
• Professional Development – (See contacts listed in its Section.)

Other contacts

• The National Pro Bono Centre – – for advice and support – .www.nationalprobonocentre.org.uk/
• Reach Volunteering – providing Volunteering opportunities. reachvolunteering.org.uk/
• The Honorary Treasurers Forumwas created to help Honorary Treasurers in the important work they carry out by providing a place where they can come together as a community.    honorarytreasurers.org.uk
• The Institute of Chartered Accountants in England and Wales’ Forum for  Charity Volunteers – icaewvolunteers.com

(NOTE from Editor: More contacts need to be collected for this section.)