Some months ago, my accountant told me that there were too many charities, and it is too easy to set one up. He’d obviously had a difficult morning trying to make the sums add up at one of the charities where he was a Trustee, and there was insufficient financial control.

His comments had slipped my mind until Kids Company collapsed and it was reported that there were more than 60,000 children’s charities in the UK, all competing with each other.

This reminded me that, as a councillor, one of my cabinet responsibilities was to handle grants for charities and it was apparent that much of the work in one particular sector was duplicated by several, yet each had its own management hierarchy and offices. They needed to rationalise if the taxpayer was to get value for money so I authorised a year’s (reduced) funding with the proviso that they got together and restructured.  A year later, they had done just that, appointing a single CEO, and – joy of joys –developing a proper business plan.

It hadn’t been easy for any of them, leading to some job losses, and fractured relationships, but the reward was significant improvements in targeted effectiveness, and they had become a role model for other charities to adopt similar reviews.

To be successful, charities have to be businesslike. Their funds come from small and large donations, with many supported by government and local authorities; they must be open and transparent and be held to account. They have to be financially responsible, with independently audited accounts.

Kids Company had such wide recognition because of its charismatic founder, but it seems that oversight was allegedly lacking. The equally high profile trustees appeared ignorant of their own roles as the equivalent of a board of directors to monitor sustainability; having no reserves, and evidently no business plan, yet free to employ large numbers of people on generous salaries and open new ventures beyond their London base was frankly incompetent. A hand to mouth existence, relying on last minute bids for multi-million pound grants, isn’t in anyone’s interests, least of all those whom a charity is supposed to serve (as well as those small businesses whose bills will never now be paid, and those whose livelihoods have been destroyed).

Councillors are regularly invited to be Trustees, but it is a serious responsibility, with potential repercussions should there be any breach of contract. Having taken legal advice, myself, I always refused such invitations, although I was happy to serve as an Advisor on a number of charitable and other community boards.

In her first paragraph, the solicitor advising me stated, ‘before accepting an appointment you must enquire about the organisation’s indemnity insurance cover for trustees, and also ask to see information regarding governance of the organisation. In addition, whether the organisation retains legal/financial advisers and/or whether a lawyer/accountant is appointed to the board.’

She went on to point out, ‘a statutory Duty of Care is imposed by Section 1(1) of the Trustee Act 2000. It provides that a trustee must act with such care and skill as is reasonable, bearing in mind any special knowledge or experience he/she has.’

She highlighted the fact that trustees can be exposed to the risk of personal liability in particular circumstances, ‘where the assets of an organisation are insufficient to meet a claim…’

I was referred to and Companies House for further guidance, and I suggest that anyone else tempted to take on the burden of becoming a trustee do the same!

Seeing Kids Company unravel is a lesson to us all, and we won’t have heard the last of it.

But it isn’t alone. Instead of setting up charities in the heat of the moment, people should be encouraged to explore the potential of supporting an existing organisation with the same aims and objectives. All too often, charities struggle because they lack clear direction, and the sense to recognise that they would be stronger as part of a larger group, with professional management.

The key to success is trustees who know what they are doing.

All councillors should receive appropriate training to ensure that they are up to the supervisory challenges, and be made aware of potential personal risks. Being a trustee is about more than agreeing excessive pay packages for staff and hosting an occasional fundraising drinks party.

6 comments for: Judy Terry: Do councillors take their role as charity trustees seriously?

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