Running a charity can be very time consuming and complying with the law and charity regulations can sometimes seem very daunting. To help, we have put together our top tips for trustees running a charity.
Only Carry out Charitable Purposes for Public Benefit
Once started, you must ensure that your charity continues to do what it is set up for and nothing else. Make sure you understand your charity’s purposes and plan what your charity will do and how it will do it. You should be able to explain how all of your charity’s activities further or support its purposes and understand how that meets the public benefit test.
You should regularly review what your charity does and how it achieves its purposes to make sure it remains effective and relevant to its beneficiaries. Having a business plan that is regularly updated will help you to focus on your charity’s goals and how they will be achieved. A good charity business plan will help trustees to:
i) Clarify what their charity does and how it does it
ii) Set out goals and how they will be achieved
iii) Spot potential problems and set out how they will be resolved
iv) Measure progress
Do What Your Governing Document Says
Your charity’s governing document should clearly set out what your charity does and how it is run. That includes who will run it, what powers you have to further its purposes, rules for meetings and how changes can be made.
You should regularly review your charity’s governing document to make sure it remains up to date and is fit for purpose.
Make Sure You are All Eligible to be Trustees
Have the Right Policies in Place
A good way to make sure you always act in your charity’s best interest is to have appropriate policies and procedures in place. Policies and procedures are in addition to your governing document and should complement what your charity does. Having clear policies that are relevant to your charity will help your charity’s trustees to make decisions more consistently and to act within their powers and the law.
The Charity Commission for England and Wales expects all charities to have a reserves policy. As a minimum, we recommend that you also put in place a conflicts of interest policy.
Charity reserves are funds that can be spent at any time on the charity’s purposes, but which the trustees decide to keep aside. They exclude funds that have certain restrictions on them and normally exclude tangible fixed assets such as land, buildings and others assets held to be used by the charity.
A reserves policy is one of the most essential policies a charity should have. It tells people why a charity is holding a particular amount of reserves. Having a reserves policy is an important part of managing a charity’s finances. There are also rules around what trustees must say in their annual report about their reserves policy. A good reserves policy will show potential donors and funders that the charity’s money is being well managed.
There are hundreds of policies that you could have for your charity and, depending on what your charity does, some you must have by law. For example, you must have a health and safety policy if your charity employs five or more staff. If you are uncertain what policies you must have by law, you should take legal advice from a qualified solicitor.
As well as a reserves policy, a conflicts of interest policy and those policies you must have by law, you might also want to consider putting in place the following key policies for your charity:
|Grant making||Child protection|
|Authorisation of expenditure||Safeguarding vulnerable adults|
|Acceptance of hospitality||Storage of electronic data|
|Acceptance of donations|
This list is not exhaustive and there are many other types of policies that may be relevant for your charity.
- money & investments
- land and buildings
- other assets such as vehicles, office equipment etc
- staff and volunteers
- goodwill and reputation
Make sure that your charity’s resources are only used to further its purposes. Make informed decisions about investments and borrowing and take appropriate advice if needed. Do not over commit your charity and manage the risks to its assets, beneficiaries and reputation.
Managing its finances properly is essential to achieving your charity’s aims and making sure that money is used properly. It is important to have effective systems in place for managing your charity’s resources such as sound internal financial controls. This will help to reduce the risk of accidental errors and deliberate fraud or theft.
Having sound financial controls in place will not only reduce the risk of mistakes or wrongdoing, it will also help you to manage your charity’s money more effectively. The Charity Commission recommends that a review should be conducted at least annually of the effectiveness of your charity’s internal financial controls.
As someone responsible for managing a charity you have what is called a ‘duty of care’. This means you must use reasonable care and skill to manage your charity, taking advice where necessary. You are not expected to know everything or be an expert in charity matters, but you should give enough time and thought to running your charity. Trustees can delegate tasks to staff or professional agencies provided they maintain overall control of the charity.