Top Tips for Trustees and Board Members of Not for Profit Organisations
The Not for Profit sector is heavily dependent on volunteers with 46% of the population giving time to a charity, school or other Not for Profit organisation. Of these, about one third also hold a governance role as a trustee, governor or director.
As a board member of two such organisations I find the roles both rewarding and at times challenging.
Board members and trustees are responsible for ensuring that the organisation fulfils its charitable objectives and that it is sustainable by ensuring it adopts sound, ethical and legal governance and appropriate financial management. The responsibilities of a director in a charitable organisation are consistent with directors in commercial organisations. Trustees of charities can be personally liable if they cause a financial loss by acting improperly or allow the charity to incur a liability to a third party knowing it cannot be met. Fortunately such cases are rare.
The nature of such organisations does however mean that the risk of financial problems, fraud or other unethical behaviour is high unless strong governance exists. Reported fraud in the charity sector last year was £21m with 25 convictions for fraud by individuals connected to the charity.
To help mitigate the risk of fraud or financial irregularities I have summarised below my five top tips:
Segregation of duties
In any small organisation segregation of duties is difficult but it remains essential. No individual should have sole responsibility for receiving and banking cheques, reconciling the bank, recording purchase invoices and making payments. Whoever is responsible for the finance should also be aware of the risks of cyber or other fraud.
Finance officer on the board
Every board requires an individual who is a qualified accountant or who has a strong knowledge of finance and financial controls. That individual should ensure that there are regular and accurate financial reports to the board.
Ensure that board authorisation is required for non routine and unbudgeted items as well as capital expenditure. The board should approve the salary of the CEO and management team. A board member should also be approving the expenses of the CEO.
Policies and Procedures
Even small charities should have policies covering, for example, ethics, disciplinary matters and health and safety. The board should ensure all paid employees have up to date employment contracts and volunteers should sign a “Code of Responsibility”. Insurances and DBS checks must not be overlooked. Larger charities must also be aware of the risks of money laundering.
Trustees or directors must be willing to speak up if they have concerns or questions about the management of the organisation. In my own experience this can be one of the hardest aspects of being a trustee or director in a voluntary capacity.
Fiona Hotston Moore is a partner at Ensors Chartered Accountants