Charity Finance's cover theme this month focuses on why charities fail. It’s not necessarily the most uplifting topic, but it’s an important one for organisations looking to recognise the warning signs before it is too late.
One familiar cause of failure is poor governance. Kids Company has most famously been accused of this, but while that charity was probably an extreme and unrepresentative case, there is a point here about what is expected of trustees.
Recurring problem
We have seen in recent years that when something goes wrong in a charity, it is often the trustees who are held accountable.
A high profile example was of course the scandal over sexual misconduct among Oxfam staff in Haiti. In the Charity Commission’s inquiry report, the regulator acknowledged that “reliance by trustees on delegation to the executive is inevitable and essential”. However, it was still not satisfied that there was sufficient oversight and scrutiny.
Looking further back, the Etherington report on regulation of fundraising made clear that trustees as well as senior managers have to take primary responsibility for this area of the charity’s operations.
In our article this month, the Charity Governance Code’s chair Rosie Chapman acknowledges the difficulties that trustees face. She calls for an improvement in the quality of information that trustees have access to, citing “a lack of mechanisms for the board to assure itself that that the executive is actually doing what the board asked them to”.
Yet for all that we urge trustees to improve, so called “poor governance” continues to rear its head.
As charities have professionalised over recent decades, more and more has been asked of them, and rightly so. But there comes a point where you have to question whether loading more and more responsibility onto trustees is sustainable, particularly for those at larger charities.
However much we try to help and educate trustees with their responsibilities, we keep coming back to the same problem of things going wrong and trustees being held at fault.
A new model?
Training can only reach those who are engaged enough to be reached. So does the model of charity governance need to change?
At present, there are two problems: first, that executive staff can present trustees with their own version of the truth; and second, that it is simply not possible for unpaid trustees to scrutinise the detail of every aspect of a charity’s operations, in large charities at least.
I’m still a believer that trustees should mostly be unpaid. But is there a way that trustees could remain sovereign over the charity’s direction, strategy and values, and have real power in dictating that, but not be expected to have oversight of every aspect of the charity’s operations?
Or alternatively, is it time they obtained help with their oversight duties by hiring individuals to go into the charity and look at its operations on their behalf?
I’m reluctant to claim to have all the answers. Charity governance is a big issue, with a range of solutions having been proposed over the years. But it seems to me that this issue of “poor” governance has persisted for so long now that something needs to be done.
A commission on governance
With this in mind, what better way for Karl Wilding, the incoming chief executive of NCVO, to announce his tenure than by forming a wide-ranging commission to look at whether the charity governance model is fit for purpose?
It could look at what alternative models are available, and the degree to which they are working in other sectors.
Even if such a commission recommends sticking with the status quo, we will have an authoritative document that has looked at all the pros and cons.
And if it doesn’t, we may be able prevent further high-profile charity failures and protect trustees from the consequences.
Gareth Jones is editor of Charity Finance magazine
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