The charity sector could still pick up important lessons from earlier regulatory cases on governance and the management of risk.
This was one of the themes which Kenneth Pinkerton, Senior Associate, spoke about at The Gathering in February, where Turcan Connell hosted a seminar on the latest developments in charity law and regulation.
One of the first regulatory inquiries carried out by the Office of the Scottish Charity Regulator (OSCR) was into the failure of One Plus: One Parent Families, a charity which became insolvent after it over-extended itself in terms of project work and failed to manage its cash flow. The outcome of OSCR’s inquiry was a set of key lessons for charities on various topics around risk and governance. Those lessons remain vital reading for charity trustees in all kinds of organisations.
There is a plethora of guidance available on charity governance – some published by the regulators north and south of the Border – but lots of additional support from third parties such as Scottish Council for Voluntary Organisation (SCVO) and others with an interest in the sector generally. Trustees should be sourcing, reading and applying this guidance and the key action points arising from them if they want to remain in good shape.
The minuting of meetings can be one important aspect of managing risk and demonstrating good governance (although taking minutes at meetings is not good enough by itself!). Recording decisions, how those decisions were reached, and what the key reasons behind major decisions were can be enormously helpful to charities when looking back later at an event in a charity’s history. A regulatory or tax enquiry, or a complaint from a third party, could mean charity trustees having to revisit what they discussed at a much earlier date. But if the records are lacking, there could be serious difficulties in a charity defending itself properly from allegations of malpractice.
Recent cases also highlight the need for charity trustees to behave in an appropriate manner, within the legal duties imposed upon them, and with regard to the standard of care imposed by statute. Scotia Aid Sierra Leone is an example of a charity targeted recently by OSCR for failing to comply with the law, with two charity trustees disqualified from office. The case sends a clear message to the sector: if you do not behave appropriately, then the Regulator can and will take action in serious cases. Charities should consider how they correct misbehaviour by trustees and should also explore what powers they have to remove recalcitrant trustees who continue to engage is misconduct and who should, for the sake of the charity, be removed from office.
Charity governance is not a subject that will ever entirely go away. There are always new lessons that can be learnt from others. Charities should avail themselves of the resources available across the sector, think about how they record their decisions, and should consider how well they are managing the conduct of their own trustees. These are some of the fundamentals to good charity governance.