Lessons from recent Charity Commission inquiries

Just before Christmas, the Charity Commission published its inquiry into the Quba Trust, through which it found misconduct and mismanagement in the administration of the charity.  The Commission proactively carried out a monitoring inspection of the charity due to its international operations in a high-risk area. Charities which operate internationally can be more vulnerable to abuse or harm as a result of where and how they operate.  Lessons for the wider sector include:

• Risk assessment and policies – All charities should have appropriately tailored internal policy documents which address the specific risks associated with the kind of activities that are undertaken. A failure to implement internal policies (and follow them) can put assets, beneficiaries, and a charity’s reputation at risk.

• Financial governance – Trustees must ensure that their charity has adequate financial controls in place. It is important that the financial activities of charities are properly recorded, and their financial governance is transparent. The Commission has produced guidance to assist trustees in implementing robust internal financial controls that are appropriate to their charity. Internal Financial Controls for Charities (CC8) is available on the Commission’s website. Under CC8, there is also a self-checklist (Word doc) for trustees which has been produced to enable trustees to evaluate their charity’s performance against the legal requirements and good practice recommendations set out in the guidance.

• Due diligence and monitoring – Due diligence is an important part of trustees’ duties. It is essential in order to be assured of the provenance of charitable funds and confident that trustees know the people and organisations the charity works with, allowing them to identify and manage associated risks. It is vital that trustees have robust due diligence processes and ensure that these are consistently implemented. Monitoring is a vital step in ensuring that a charity’s funds or property reach their proper destination and are used how the charity intended. The type and depth of monitoring may vary depending on the type of project, the location and the sums of money involved. It is vital that trustees have robust monitoring processes in place, including documentation (reports, receipts and invoices) in addition to photographs and video.