Effective Charity Trustees: Duties, Governance, and Financial Essentials

1. Being a Charity Trustee Thursday 3 May 2012

2. Agenda • Welcome and Introduction Lesley Stephenson • The Financial Times Non-Executive Directors’ Club • The Effective Charity Board Philip KirkpatrickBates Wells & Braitwaite & OnBoard • Charity Finance Essentials Richard Wilson • Partner, Ernst & Young LLP • A Personal Experience of a Trustee Denis Burn • Experienced Charity Trustee, currently Chairman, Bristol University

3. The Effective Charity Board Philip Kirkpatrick, Bates Wells & Braitwaite & OnBoard

4. The effective charity board • The Voluntary Sector Code of Governance • Trustees’ duties • What an effective trustee asks • What a really good trustee asks • What a really good trustee knows • The really good trustee’s approach • The chair’s role • Board composition

5. Voluntary Sector Code of Governance – principles A good board will provide good leadership by: • Understanding their role • Ensuring delivery of organisational purpose • Being effective as individuals and a team • Exercising control • Behaving with integrity • Being open and accountable

6. Trustees’ duty – a simplified statement To govern the charity so as to help it achieve its purposes and, in doing so, to act: • reasonably • prudently; and • selflessly

7. Noting that a charity exists: • Not for beneficiaries • Not for staff • Not for trustees • Not simply to continue existing • But for purposes

8. What are my charity’s purposes? • Not the mission statement • Not the activities it undertakes • Not to be “a company for carrying out an undertaking of great advantage, but nobody to know what it is.” • The purposes are in the objects clause of the constitution

9. Questions an effective trustee asks • What does my charity do? • How does it do that? • Is there constitutional power? • Who has what authority? • Has authority been properly delegated? • Is there adequate funding? • What information do I need? • Am I getting it?

10. Questions a really good trustee asks • Why does my charity do X? • How effective is X? • How expensive is X? • How best can we deploy our resources? • Would it be better to do Y?

11. The really good trustee’s approach • Being on the board is fulfilling and fun • If there are staff, the board’s job is to consider the big picture • Staff should be: • allowed to do their jobs without interference • held to account appropriately • If the reason is not obvious, the reason should be sought • Expert advice should be taken but questioned • The mind is like a parachute • Common sense is the essential personal quality

12. The really good trustee’s approach • “If you do what you’ve always done you’ll get what you’ve always got” • Trustees are allowed to innovate • Trustees are allowed to take risks • The unthinkable is thought but the do-able is done

13. The chair’s role The chair’s role is vital: to set the tone and provide leadership to ensure that all engage and have opportunity to ensure that discussion remain strategic, relevant and useful to review individual trustee performance To protect and manage the CEO

14. Board composition • Selecting for skills and experience is not so hard • Selecting for personal qualities (eg. common sense) is hard • Importance of range and complementarity of skills and experience • It’s hard to make democracy work effectively • Consider introducing a nominations panel • Trustees are never representatives • Large boards tend to be less effective

15. Contact details Philip Kirkpatrick Bates Wells & Braithwaite London LLP p.kirkpatrick@bwbllp.com Tel: 020 7551 7777 www.bwbllp.com

16. Charity Finance Essentials Richard Wilson, Partner, Ernst & Young LLP

17. Be aware of Applicable Legislation Understand the Regulatory Framework Managing money effectively Investing the funds Managing Risk Financial Controls Understand the Reserves Understanding Fundraising Laws Effective Staff and Volunteer Policies Insurance Going Concern Trustee Expenses Land

18. Applicable Legislation All Charities that are Companies – Companies Act 2006 Charities in England & Wales – Charities Act 2011 Charities in Scotland – Charities and Trustee Investment (Scotland) Act 2005 Charities in Northern Ireland – Charities Act (Northern Ireland) 2008 and Charities Act (Northern Ireland) 1964

19. Regulatory Framework England & Wales – The Charity Commission Scotland – Office of the Scottish Charity Regulator Northern Ireland – The Charity Commission for Northern Ireland

20. Managing money effectively Know which funds have restrictions on their use Grants, legacies, etc. Prepare annual accounts and trustees annual report in accordance with SORP Accounting and reporting of Charities – Statement of Recommended Practice 2005 Trustee Report Statement of Financial Activities UK GAAP - not IFRS

21. Investing the funds Must be clear on basis of investment. Is it best financial return, furthering the charity’s aims or doing some of both? Must comply with the relevant powers for standard investments. May be restrictions or additions in the charity’s governing document. Exercise such care and skill as is reasonable when using power of investment. Must consider the suitability of any investment and obtain the appropriate advice. Must ensure that the investment furthers the charities aims and there is a way to end the investment.

22. Managing Risk Make a risk management statement in the trustees annual report if the charity is above the audit threshold (income greater than £500,000)

23. Financial Controls No legislated requirements but charities expected to follow best practice All trustees have a duty to protect the charity’s assets and resources and to make sure they are only used to further the aims of the charity

24. Understand the Reserves Comply with the annual reporting requirements and set out the charity’s reserves policy. This requirement is to show the level of reserves the charity holds and why it needs to retain them at that level.

25. Understand Fundraising Some areas of fundraising are subject to specific regulation Ensure you understand what regulations beyond charity regulations apply such as taxation, data protection, etc Ensure there is proper control over funds raised and that they are used for the purposes raised Ensure general funds are managed distinctly from special funds Ensure delegated fundraising is appropriately contracted

26. Effective Staff and Volunteer Policies Be aware of legal obligations and ensure effective staff and volunteer policies have been established

27. Insurance Ensure where insurance is compulsory it is taken out Be aware of Trustee powers under the Trustee Act to insure any property owned by the charity against loss or damage

28. Going Concern Must inform the Charity Commission if the charity winds up or ceases to operate

29. Trustee Expenses Disclose any payments made to trustees in the charity’s accounts

30. Buying and Selling Land Know and comply with the powers the charity has to buy land Comply with statutory duty of care as set out in the Trustee Act when investing and disposing of land Obtain prior authority when disposing to a connected person

31. Contact details Richard Wilson Partner, Ernst & Young LLP www.ey.com/uk T: 0207 951 2000

32. A Personal Experience of a Trustee Denis Burn, experienced Charity Trustee, currently Chairman, Bristol University

33. Q & A Session

34. Networking Drinks Reception