Challenges facing Charity Trustees

Trustees play a vital role, volunteering their time and working together to make important decisions that really matter in relation to the charity's finances, activities and plans for the future. The challenges facing trustees in today’s environment are unprecedented. However, with the right level of understanding, backed by reinforcing principles of good governance and structures, trustees can ensure that their charities are best placed to ride out the storm.

Recruitment, induction and training

A board needs to be recruited and its members properly introduced to the purpose and activities of the charity and the role of trustees. It is appreciated that many charities are under pressure in a difficult economic environment and that changing the make-up of their boards may not be seen as a priority. But it really is a win-win situation if it means attracting trustees with a wide and diverse skill set onto the board.

The Charity Commission's guidance, Finding New Trustees: What charities need to know (CC30), emphasises the need to advertise widely to attract the candidates with the most to offer and highlights the advantages of a diverse trustee board, including:

• a broader range of trustee skills, knowledge and experience;
• greater assurance that a charity is fair and open in all its dealings, for example in the way it delivers services; and
• increased accountability for a charity's actions, and public confidence in its work.

Ensuring that there are time limits on the number of years/terms that a trustee can serve is crucial in ensuring turnover of trustees to push the charity forward. Identifying gaps in knowledge and understanding is important so that training can be provided to individual trustees or the whole board of trustees, where appropriate.

Managing the board

A strong trustee/management board is essential to help trustees to work successfully in this complex and challenging environment. A well run trustee board might well be the ideal family, operating with a common purpose and without self interest, but inevitably disputes happen. Indeed, disagreements are not necessarily unhealthy; to have a wide range of opinions to inform trustees’ decision-making can be a source of creativity and the natural outcome of bringing together a diverse range of people to pursue that common purpose. However, if disagreements turn into a dispute, preventing decision-making, that can obviously have a negative effect on the charity. Trustees are expected to work in the best interests of the charity and to seek to resolve issues that have the potential to damage the charity’s work.

It is important to ensure that the shy and retiring are able to get their point across and that no one person or clique dominates proceedings. The chairman of trustees has an important role in managing any tensions and needs to attempt to create consensus. Voting should be avoided if possible: a narrow vote might be inherent in politics but amongst trustees can prolong tension.

Understanding roles

“Civil Servants”, Margaret Thatcher famously announced, “are there to advise, Ministers are there to decide”. In larger charities there is inevitably a tension between the board and the senior management team and disputes can arise when the board gets too involved in detail and insufficiently involved in strategy. Equally a board can find itself unhappy if the chief executive or chairman becomes dominant and simply wishes the trustees to rubber stamp his or her suggestions. It is important to recognise that difficult times can affect the relationship between trustees and staff more widely within the organisation as well. Trustees need to take appropriate steps to prevent or keep to a minimum tension and dissatisfaction predominantly by being transparent and fair.

Having a governing document which is fit for purpose

The founders of a charity aim to ensure that a governing document serves the charity well for the foreseeable future, and allows for changing circumstances. However it is likely that, with the passage of time, new needs and unforeseen eventualities will develop and that the governing document may need updating to reflect these changes.

In these circumstances it is the duty of trustees to seek to change the governing document in order to ensure the charity's continuing effectiveness. How they do this depends on the nature of the change, the structure of their charity (company or unincorporated charity), the size and, where the powers provided by statute cannot be used, the terms of their governing document.

Risk Management

Charity trustees should regularly review and assess the risks faced by their charity in all areas of its work and plan for the management of those risks. Risk is an everyday part of charitable activity and managing it effectively is essential if the trustees are to achieve their key objectives and safeguard their charity's funds, assets and reputation.

Identifying and managing the possible and probable risks that a charity may face over its working life is a key part of effective governance for charities of all sizes and complexity.

By managing risk effectively, trustees can help ensure that:

• significant risks are known and monitored, enabling trustees to make informed decisions and take timely action;
• the charity makes the most of opportunities and develops them with the confidence that any risks will be managed;
• forward and strategic planning are improved; and
• the charity's aims are achieved more successfully.

However, trustees should not see their roles simply as managing risk but also as setting ambition. The emphasis should be on risk management not risk avoidance.

Considering the need for collaboration, merger or a takeover

While trustees should consider the opportunities that collaboration and even mergers can bring, it is not a light decision to take and trustees must remember their primary obligations remain to their own charity.

The Commission following its strategic review

The Charity Commission’s resources are under great pressure because of considerable cuts in public expenditure and it has made clear that its priority in coming years will be to focus on core regulatory issues.

The result will be that there is likely to be less ‘hand-holding’ for charities in the coming years, with such charities expected to rely on available resources on the Commission’s website, which are comprehensive and accessible, and other organisations such as NCVO etc. This emphasises further the benefit of having a diverse board of trustees to bring appropriate levels of expertise in all areas of the charities work (as far as possible) with professional advisers ready to assist where required.

Charity and voluntary sector work is at the heart of Stone King’s practice. The firm is recognised as one of the leading practices in the UK. We offer a broad range of advice to individuals, commercial organisations, schools, charities and other not-for-profit institutions including in relation to governance and constitutional reviews, trustee issues, establishing new organisations, funding and commercial agreements and dealing with regulators.