Find entries by tag

Posted by Sarah Brown on 17 May '18

The buck stops with trustees - 3 ways to avoid disaster

As a Sheffield and South Yorkshire charity announces its sudden closure what trustees can do to avoid the unexpected in their own charities

Yesterday I got a phone call from BBC Radio Sheffield asking me to comment on the shock closure of Homestart South Yorkshire. They rang because they know I have written blogs about charities and know the sector.

The charity has just announced it is closing in 2 weeks impacting 500 vulnerable families, 20 staff who are facing redundancy and 200 volunteers. The chief exec who has only been in place for 10 weeks says they were overstretched with a move to new premises and there is no single cause.

The first question the drive time show host asked me was “Who is to blame?”. Unfortunately, my reply had to be that legally it is the trustees, the buck stops with them. They are responsible even though they rely on staff for information and advice.

In my experience here are three ways to avoid a similar disaster and unexpected closure and which as trustees you can focus on at each meeting.

1 Have a robust risk register

Create and monitor your risk register and how you can mitigate the risks. Every area of activity and the charity operation should be considered for the register and I tend to use a simple red, amber and green coding to identify critical issues that need addressing. For example, taking the Homestart example the move should have identified some risks such as potentially higher costs so that some ways of coping could be identified. Identifying the risks is critical prior to making decisions. The Charity Commission provides a risk register template you can access it here.

2 Have clear values

It is critical that any charity has values that are both ranked in order of priority and clearly translated into how everyone acts. The reason it is important to rank them is that there will be occasions when there are conflicting priorities and everyone needs to know what is most important. Linked to your risk register, this may mean that you need to also clarify how people act to achieve these values, and this may need to change depending on the risks. Imagine, for example, that your top value is to be able to support the people you serve on an on-going basis with a quality service. You take on a new building to help achieve this but it costs a lot to run. Late one Friday evening the phone rings and the only person there is a receptionist. A major company needs a meeting room for Monday because of a crisis and they will pay whatever it takes to get it. But your room is being used by service users on Monday. What does the receptionist do? Take the booking and get income for the charity or maintain the service for the users? If the priority is on-going viability then the money may win if you are financially challenged but don’t leave the receptionist to guess.

You need to have certainty that you as trustees know what will happen and everyone is clear so that you can be sure the charity is following your strategy and fulfilling its mission. You can use our tool to rank your values and a good test is to get each trustee and also staff to do it separately to see what you each put. Contact us for a copy.

We also have a tool to help translate the values into behaviours and systems across the organisation and to help you monitor how this is working at each meeting.

3 Keep on top of the numbers

The problem about only looking at the accounts from the past which are often quite out of date is that it is like trying to drive a car by looking in the rear-view mirror. You need a budget and forecasts about how you are doing against that budget and a cashflow forecast to identify if you will actually be able to pay the bills physically. Again, this links to the risk register because unfortunately not all funders or contracts pay promptly and you need to decide how you manage this in your cash flow forecast. You might decide as part of your risk management that you will put in your cash flow forecast late payment from some sources as this reflects experience or what you fear.

If you monitor these three fundamentals you should avoid nasty surprises and be judged by the charity commission to be fulfilling your responsibilities as a trustee.

I would recommend also looking to implement our Responsible Organisation Charter© which includes all the elements a charity should be considering for long term success.

We can provide support to trustees wanting to ensure they are fulfilling their responsibilities (see more here)

If you have found this interesting you may want to read these:

The five top risks for a charity becoming a social enterprise

The truth about charities betraying our trust

New opportunities – the first charity raises money from a share issue