Issue 3: Unlocking the value of trustees
Trustees work in the best interests of their charities, and although not involved in the day to day running, there is a lot of value that they can bring through their advocacy, network and influence. Unlocking this potential could help fuel charity growth.
What’s inside this issue:
- How trustees can help to build more resilient charities | Charities Aid Foundation
- How to engage charity trustees in fundraising | Charity Excellence
- Protecting your trustees (& charity leaders) | Access Insurance Services
How trustees can help to build more resilient charities
BY CHARITIES AID FOUNDATION
Something all charities have in common is trustees.
Also known as directors, governors, or board or committee members, trustees are responsible for making sure their charity is doing what it was set up to do. In this sense, trustees have overall control of their charity – meaning their vision for the charity, and the skills they bring to making this vision a reality, can significantly impact the charity’s ability to meet its goals.
It is therefore valuable for charities to understand how trustees can help further their missions, as well as what to look for in new trustees.
With this in mind, Charities Aid Foundation (CAF) and chartered accountancy body ICAEW partnered to publish research on the challenges facing charity trustees. The new report, ‘What’s on the horizon for charity trustees?’, makes recommendations for charity trustees as advisers and leaders of their organisations. While the research offers a variety of useful insights, we have focused here on the ways in which trustees might be able to offer even more to charities than they already realise.
Broader networks make for stronger charities
According to CAF’s Charity Landscape Report, the top challenge cited by charity leaders was that of generating income and achieving financial sustainability (58%). A fifth (21%) of charities said that they planned to use charity reserve funds to cover income shortfalls rather than for capital expenditure. This was twice as many as in 2019 (10%).
Financial resilience is clearly at the top of many charities’ lists of priorities – as well as of concerns.
Diversifying funding and support networks is consequently a focal area for charities. The good news is that trustees can help with this goal. CAF’s and ICAEW’s research into trusteeship found that a key responsibility of many charities’ trustees is to try to connect with donors for the charity and then network and extend these contacts to create a substantial and influential support base. Establishing this support base can be difficult for new charities that cannot trade on their name or reputation. However, making the effort to broaden networks – whether through attending events, engaging digitally, or collaborating on fundraising initiatives – is well worthwhile, as well as an area in which trustees can lead.
Greater diversity can generate new and valuable perspectives
Our research found that fostering greater diversity on trustee boards can bring a host of benefits for charities.
Diversity might refer to a diversity of skills; diversity in terms of personal characteristics, which can include age, gender, ethnicity, and socio-economic background; and diversity of service user board representation, which refers to incorporating the voice of a charity’s beneficiary into the board.
Each of these forms of diversity is important. When trustees embody a more varied range of identities and experiences, this enables their charities to benefit from a greater knowledge and networks.
That said, cultivating diverse and inclusive trustee boards remains a complex issue for many charities. Almost all participants interviewed in our research said that their boards were less diverse than they would like. However, they were also unsure about how to resolve this issue, being sometimes unwilling to compromise on their requirements for particular skills and experience in their trustee candidates.
In response to this uncertainty, CAF and ICAEW have identified the potential for charities and boards to train otherwise suitable candidates, rather than rejecting them for lack of experience.
An example of what such a training initiative might look like is freely available on the ICAEW Volunteers website, which connects not-for-profit organisations with chartered accountants. Information-sharing and skill-sharing through these types of initiatives can be a cost-efficient and effective way for charities to access expertise.
There is always more to learn
For trustees to be effective, it is important that they receive training.
Fortunately, although the third sector lacks a centralised and holistic platform dedicated to training resources and support for trustees, there are many resources available.
For example, the sector-led initiative Trustees’ Week provides an overview of relevant bodies, as does the UK Government. The Charity Commission’s 5-minute guides can also serve as good starting points for charity trustees seeking to develop their knowledge and skills, and signpost to other resources as well.
CAF also offers resources for trustees, and ICAEW offers free Trustee Training Modules as well as a Volunteering Community for skills-based volunteers. There are resources out there if one only knows where to look!
As we continue to emerge from the pandemic, creating a better, stronger, and more connected charity sector is a priority for trustees and charities alike. Fortunately, all charities can grow a little stronger and more resilient, right now, simply by leveraging the presence of trustees within their organisation and considering how these might be able to further their missions even more effectively.
Strengthening trusteeship benefits not only the charities they advise, but also the ability of their organisation to deliver essential services to their communities and promote their valuable causes.
Read CAF’s and ICAEW’s full report on trusteeship here.
How to engage trustees in fundraising
BY IAN MCLINTOCK | CHARITY EXCELLENCE
Charity Commission guidance (CC20) makes clear that fundraising is a board responsibility. It lays out 6 key principles – a very good starting point.
- Planning effectively.
- Supervising your fundraisers.
- Protecting your charity’s reputation, money and other assets.
- Identifying and ensuring compliance with the laws or regulations that apply specifically to your charity’s fundraising.
- Identifying and following any recognised standards that apply to your charity’s fundraising.
- Being open and accountable.
Charity fundraising laws & regulation
Charity Trustees must also comply with the Fundraising Regulator’s code of practice, and HMRC, the ICO and others also issue guidance. It is not trustees’ responsibility to do all this themselves, but it is their responsibility to ensure that it is done, so they will wish to make sure there are adequate systems in place and working.
For charities working internationally, some UK laws are applicable to work overseas, such as anti-bribery and data protection legislation, and there are specific HMRC requirements in respect of transferring charitable funding overseas and tax, as well as international agreements and host country legislation.
Creating a fundraising culture
With demand expected to increase and income not, driving fundraising growth is critical to protecting increasingly vulnerable services. Regrettably, all too often, some people still see this as ‘not my problem’. Even trustees and senior staff who are responsible for making clear that it is and without whom it won’t be. Trustees must recognise that fundraising is a priority and the responsibility of everyone in the charity, and get behind the CEO and fundraisers to create a fundraising culture.
Trustees exercising oversight
Equally, whilst some fundraisers are brilliant, others can be masters of obfuscation – these are usually the ones you really do need to ask the right questions of. For many of us, fundraising is a bit of a black art. Can your fundraising reports be understood by everyone, do they focus on the key issues (both financial and non-financial), report against business plan/budget targets and identify the action being taken, by whom, when this will be achieved by and the impact expected? If not, ask for the clarity you need. Here’s a Charity Excellence resource on how to make your reports more effective and less work.
Here are some compliance questions that the Fundraising Regulator advises you should be asking about fundraising:
- Have you undertaken a risk assessment?
- Do you have:
- A policy that clearly lays out how the charity accepts or refuses and uses donations?
- A publicly available procedure for handling fundraising complaints?
- And, how can the charity learn from the complaints it receives?
- The required agreements in place when working with others?
Trustee support – financial & non-financial
For individuals, there are a range of tax efficient giving opportunities.
- Using Gift Aid, charities can claim back additional income from HMRC (as long as the donor is a UK tax payer) and, if he/she is a higher rate tax payer, they can claim this portion back for themselves.
- There are also tax efficient opportunities around the donation of shares, land, buildings and in wills.
For companies, charitable donations can be used to minimise tax liability. Not only on financial donations, but also equipment, stock, land, property, shares, sponsorship and seconding employees.
You could consider social investment which also offers tax relief.
Trustees may not wish to donate, or may not be able to do so. However, there are a whole range of other ways in which trustees can be actively involved in supporting fundraising.
Access to company giving schemes & fundraising
- For example, supporting in pitching to staff through company magazines for donations, or through payroll giving schemes.
- Senior staff in major companies are sometimes allocated funding that they can donate to a chosen charity.
- Some larger companies have charity trust funds (eg Lloyds and Fidelity) and internal support can be extremely helpful in securing funding.
- Encouraging staff to organise or take part in challenge events to raise not only funds, but also promote the company and build team working and morale.
Non-cash donations – goods & pro bono
Goods – for example, support from food and drink companies to help with the cost of events. Charities also buy a wide range of goods, usually at retail prices, such as food, IT, office furniture and carpets.
Pro Bono services – for example, construction, marketing/PR, sales, HR, H&SW, IT support and training, but also a whole range of others.
Company volunteering & fundraising promotion by trustees
Many companies (eg Waitrose and John Lewis) encourage volunteering and may be able to offer specialist skills you might otherwise have to pay for.
There are a variety of charity recycling schemes for printer and photocopier cartridges and old mobile phones. All you need would be for the company to agree to promote and distribute collection boxes that are collected by the provider.
You can create your own web shop via a range of companies, who can help with leaflets/posters etc. Individuals are able to make purchases from a range of retailers at no additional cost, and sometimes with discounts, and the charity receives commission in return. And there are now a whole range of charity apps.
In a similar vein, E Bay for Charity supports charities. Anyone can give to your charity when they sell on eBay. Sellers can donate between 10% and 100% of each item’s sale price. PayPal Giving Fund will collect the donation from the seller, claim Gift Aid (if eligible) and pass 100% of the money on to you.
Access to trustee networks
Everyone has a personal network and, potentially much more valuable, many of us have professional or business networks with commercial companies, the Media and, possibly, high net worth prospects or trusts/foundations. Having this conversation with trustees or suitable supporters during recruitment/induction, or circulating prospect lists to the board can be very useful.
Even if individuals don’t have suitable contacts, they can still help by attending fundraising events and talking to prospects or, if appropriate, accompanying the CEO/fundraisers to meetings with trusts or prospects.
Trustee advocacy for your cause
Trustees and volunteers can also promote your work to the Media and influencers in your community. Actively encourage them to do so and provide them with support/material they might need.
For some, this may only be getting an article published in the company newsletter or similar, displaying a poster or making leaflets available in the workplace, but it all helps.
Also, encourage them to join your social media networks and to like and re-post/re-tweet your posts to raise your profile and build your followers.
Protecting your trustees (& charity leaders) – an introduction to D&O cover
BY ACCESS INSURANCE SERVICES
We have established the value that trustees bring and some of the responsibilities they have. Protecting your trustees from claims against them or your organisation is an important facet to consider in managing risk within your charity.
The applicable UK law highlights the responsibilities of trustees and senior management and emphasises the fact they can be held personally liable as a result of their own errors or omissions or those of their fellow directors and officers. Legal defence costs for claims against trustees, directors and officers can run well into six figures, leaving an organisation at financial risk. For this reason, D&O (directors & officers) cover has become a key component of most organisations’ insurance programmes.
Claims can be brought for a range of reasons including any of the below committed by trustees or member/s of your senior leadership team:
- actual instances or allegations of wrongful acts
- errors or omissions
- breach of duty
Some organisations which are limited liability entities have been wrongly informed that their directors can’t be held personally liable. This limited liability only applies to debts in the event the organisation goes into administration. There is a range of scenarios that are commonly misidentified as being covered under a D&O policy, but for which no cover exists. These include:
- Allegations or incidents of fraud/theft (covered by crime/fidelity insurance).
- Failure to pay monies owed to a third party under a contract. (Some policies will cover the personal liability of directors to creditors in the event the organisation is declared insolvent and wrongful trading occurred).
- Failure to deliver services to a third party under a contract.
- Poor commercial decisions, for example, overspending on a project.
The two key aspects of D&O cover:
- Cover for the organisation: covers the entity for claims brought against it for the wrongful or negligent act of a senior leader.
- Cover for individuals: covers individual senior leaders for claims brought against them in a personal capacity for the wrongful or negligent act of a senior leader.
Who can bring a claim against you?
Claims against directors and officers are becoming increasingly common. Donors, service users, members, tenants, current or former employees/trustees, regulators, partner organisations, creditors and suppliers can all bring legal actions against individual directors or against the organisation and its directors.
In recent years there has been a major shift as senior leaders have been held more accountable by their fellow employees, service users and government bodies for organisational failings. As a result, stakeholders have begun taking increased legal action against individual leaders within organisations rather than, or in addition to, the organisation as a whole when incidents occur.
Know what you’re being covered for
Due to the size of claim settlements, the number of insurers offering cover to the sector is shrinking and market rates for D&O cover are increasing. Your charity’s size, operations, risk management and claims history will also influence the price of D&O cover for your organisation.
While many organisations focus on the cost of their D&O policy, understanding the scope of the policy is critical. The type of cover and exclusions which can apply as laid out in Access’ full guide here, have a significant impact on the price of your D&O policy.
Invest in risk management
Now more than ever, it’s vital to invest in robust D&O risk management processes and provide documentation of these practices to your insurer upon renewal time. Your risk management documentation should highlight:
- Proper financial practices and cash flow controls
- Seamless contracts with stakeholders
- A continuity plan, cyber-incident response plan and risk assessment
- Robust internal policies to mitigate on-site risks and ensure regulatory compliance