Risky business: Key tips for charities to manage risks

The Charity Commission (the Commission) recently produced its first annual report on the risks facing the charity sector and what it anticipates for the future (Report). 

The report intends to help trustees assess risks and plan ahead to help build a sustainable future for their charity. 

Whilst there were no big surprises from the Report, Samantha Pritchard, partner, and Jessie Melroy, solicitor, both in our charities team, consider some key reminders for trustees. 

Protecting your finances

As expected, the Commission's report flags that financial pressures are a key risk in the sector in particular because of increased costs, increased demand and decreased donations.  This has been a key risk for many charities for a considerable period.

What can trustees do? 

The trustees have a legal duty to safeguard the assets of the charity, including the finances.  This is particularly the case when finances are tight.  Ensuring you have the right financial controls in place in your charity can provide early warning signs to trustees and can ensure that trustees keep a watchful eye on budgets and expenditure.

Trustees can also consider whether their charitable purposes can be delivered with greater financial efficiency, for example, through collaboration or joint ventures or by looking to merge to create economies of scale. 

Acting for the public benefit

The Commission also reported a 23% increase in the abuse of charities for (non-charitable) private benefit. It is easy to see how this may arise, for example, if someone is facing their own financial pressures at home and is tempted to take from the charity’s funds.  It can also arise from unscrupulous individuals targeting a charity for personal gain. 

What can trustees do?

The trustees can ensure that they understand the rules that apply to their charity with regard to private benefit and trustee benefit, and can make sure they have appropriate fraud prevention policies and procedures to protect their charity.   

If you have new trustees on your board or you think you might benefit from a refresh, attending trustee training and staying up to date with the Commission’s guidance will help guide you in your role. Additionally, there is a wide range of support available to Trustees through our training modules for charities.

Need advice?

If you need support in relation to charity governance, please contact Samantha Pritchard on [email protected] or 0191 211 7905.