For Charities

An excellent article by Stella Smith in the Third Sector newsletter on the failure to get the bridge built through lack of funding despite raising £37m from primarily government sources. Here is a prime example of a Charity raising money for a project and not being able to complete it (or in this case even start it) because of a total dependence on a few limited sources of funding. Whatever the charity's needs, from seeking funding for a capital project to running a drop in centre, you have to plan for the long term. Great; you win a grant for the next three years from the Big Lottery Fund but what happens at the end of the three years? Too often the project dies because the charity has wrongly assumed that there will be another grant and then another.

The use of restricted funds creates a mixed response from charities. Donors like them because they can be specific about what the money is used for whereas charities would prefer to use the money without restriction to give them more flexibility. Both have valid arguments but in fact restricted funds have a very useful place in charity funding.

There are many examples of new charities being set up following a high profile case, the most recent being baby Charlie Gard  where over £1m has been raised and a new charity is being set up to help babies with similar issues to Charlie.

A new Charity Governance Code has just been published. Although it has not been produced by the Charity Commission, they had observer status on the steering group which created the document. The group is a cross-sector collaboration with an independent chair and the idea is that it will review, develop, promote and maintain the code for the charity sector.

Two separate documents have been produced, one for larger charities and one for smaller charities. In each paper, there are essentially seven headings as follows: -

1.Organisational purpose

2.Leadership

3.Integrity

4.Decision-making, risk and control

5 Board effectiveness

6 Diversity and

7 Openness and accountability

The code is meant for both charities and not for profit organisations and sets out what is expected of them. Each document contains some useful links and a glossary of terms.

I highly recommend that each trustee body obtains a copy of the code that is relevant to their organisation and has it as an agenda item on the next trustee board meeting to ensure their charity embodies good practice.

The link to download the document can be found at

https://www.charitygovernancecode.org/en/pdf

It is no surprise that the Insolvency Service are looking to prosecute 8 former Directors of KIDS Company. The circumstance of the Charity's demise have been explored before but the interesting lesson for all charities is that the founder of the Charity and former CEO Camila Batmanghelidjh is also being prosecuted. Ms Batmanghelidjh was not a director at the time of the Charity's collapse but the Insolvency Service will allege that she acted as a de facto director and should therefore also be disqualified from running or controlling another company for a period of time along with the other directors.

There is the point at issue. You do not have to formally be a director of a company to be disqualified if you have essentially been someone whose instructions other directors and employees are accustomed to act. It is for this reason that the roles of trustees and the chief executive of a charity need to be clearly set out so there is no confusion on this point. I await the subsequent court case with interest to see what further lessons can be learned but for now, ALL charities need to look at this aspect of their governance.

The Charity Commission have recently issued some accounting templates for Charitable Companies whose income is less than £500k. There are already templates in place for small unincorporated charities but these new ones contained in Charity Commission Booklet CC17, not only comply with the latest Charity SORP 2015 (FRS102) but have been issued in agreement with Companies House which hopefully will stop them being rejected by Companies House as happens all too often. Those of you who have accounts prepared by accountants without the aid of templates can of course continue to do so.