Is there a monster under your bed? Trustees, fundraising and finances

I can remember a long time ago, working with a charity (that shall remain nameless) where the CEO had absolute control of all information that went to the trustees.

Any report that went to them was vetted (and often changed) first. If a staff member was asked to present to trustees, their presentation would be seen by the CEO first. And I gather that this is not uncommon.

In this case, when asked, ‘how do you know?’, the trustees could only answer ‘because the CEO says so’. Is this good enough? Clearly not – as the recent scandals have shown.

I am a trustee for a charity, but I’m also a designated governor for a new free school. The charity sector has had bad press recently for its financial management, but as both a fairly new type of organisation and a political hot potato, free schools seemed to have popped up in press articles on a weekly basis for as long as I can remember.

For this reason, those setting up free schools are subjected to an increasing amount of scrutiny and training. And spend a lot of time thinking about how to answer the seemingly simple question – but how will we know?

It’s a question that is actually as relevant for all charities, not just schools. Making sure that trustees have not just been told what is happening, but know what is happening.

Practical tips charities can borrow from schools

Some of the things from the school governor world could be pulled over to help.

1. Multiple sources of information, coming directly to trustees. It isn’t good enough to have everything via the CEO.
2. A representative board, with members from different stakeholder groups. If you think of a school governing body, there will always be parent and staff governors, and many will also have community representatives. The school I’m involved with will also have a governor representing the student council. Trustee boards are often skills or contacts-and-influence based, so will struggle to be in touch enough with the organisation, its staff and its beneficiaries to know things are being done properly.
3. Regular visits to the organisation, looking for specific things – so governors often take part in learning walks with the Head Teacher, looking for how lessons are being differentiated to meet children’s needs, for example.

Individual responsibility

The other issue that is slightly more difficult, which formed the content of my workshop at NCVO’s Trustee Conference last year, is that trustees need to be individually confident that the charity is being well run and meeting its objects.

Which, for finances at least, means that every trustee should have had sight of the basic finances, presented in a way they can understand. Be that spreadsheets, graphs or interpretative dance. It’s the understanding and engagement that’s crucial.

How many boards look over complicated budgets and income forecasts without truly understanding what they are looking at? How many trust that if the treasurer says it’s all fine, then it must be? How many treasurers really question the auditors or accountants?

Just as in the school sector, where governors come from all walks of life, so should trustees – and will need a combination of training and sensible, clearly presented information to do their job.

If only an accountant can understand the financial report – and then apply the figures to the ‘real’ operations of the organisation and its strategy, then the report isn’t good enough.

A case study

During my workshop at the Trustee Conference we heard from a top secret case study. Someone who had become a trustee of a new organisation just at the point a financial scandal was unfolding.

He told the conference a little of what had taken place. In essence, there were two big stumbling blocks that in the end caused a catastrophic failure that brought the organisation down amidst a hail of press fury.

The first was not properly assessing the skills and abilities of those tasked with the organisation’s finances – both the member of staff in charge of finances and the auditors had been with the organisation a long time and the trustees had not done enough to establish whether or not they were up to the evolving job. It turns out they were not.

The second was not asking for enough information that would allow the board to be sure of the accuracy of the reports they were being given by the CEO. Some fairly basic questions about budgeting, for example, soon made it clear that there were few adequate financial controls in place.

Top tip: if the budget appears to have little substance behind it (or in this case, exist at all), then there is a fair chance that there’s an underlying problem.

How do you present financial information to the board?

I presented one tool to delegates that is often used by boards to work out some pertinent questions to ask about the assumptions underlying a charity’s financial projections. But there are others.

If you have a good example of financial reporting to the board, please do let me know – either as a comment below or confidentially to rosaline.jenkins@ncvo.org.uk. If anyone sends me their accounts presented by dance or similar creative fun there will definitely be a prize.

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The author, Ros Jenkins, leads on NCVO’s sustainable funding consultancy, training and resources. She is currently:

• developing training for trustees on fundraising and finances
• co-ordinating and co-delivering NCVO’s Certificate of Financial Sustainability, aimed at CEOs or senior staff responsible for developing funding strategies for their organisations,
• delivering two workshops at NCVO’s Funding Conference, on 29 February, including ‘Getting the board on board: winning support and investment from your trustees’. If you are interested in the Sustainable Funding approach and would like to refresh your skills and broaden your knowledge, this is the chance to do it. It’s a particularly great way to dip your toe in new income streams.