Send the link below via email or IMCopy
Present to your audienceStart remote presentation
- Invited audience members will follow you as you navigate and present
- People invited to a presentation do not need a Prezi account
- This link expires 10 minutes after you close the presentation
- A maximum of 30 users can follow your presentation
- Learn more about this feature in our knowledge base article
Transcript of Charities governance
What are Charities?
Beneficial to the Community
Relief of poverty is generally directed at people who are poor, in need, aged, or suffering genuine hardship which may include;
caring for aged, infirm
caring children, orphans,
caring for the blind, veterans, disabled
can include the provision of accommodation for elderly people, patients, relatives, emergency shelters and helping needy people (refugees).
Education includes the provision of some form of education and ensuring learning is passed on to others.
Education has included early childhood centres, schools and universities, scholarships and prizes for academic achievement, the founding of schools, technical colleges, universities, providing or improving sporting facilities for school students, the provision of museums and libraries, developing the character of young people.
Religious purposes has included any benefit for religion, ensuring religious faith has passed on to others.
Those purposes have included religious services, voluntary and missionary work, maintaining churches, including cemeteries or burial grounds.
The purpose of matters beneficial to the community originally followed the purposes set out in the statute of Elizabeth I (Charitable Uses Acts 1601) but has been widened over the years to now include the following purposes:
•Promoting public health such as education, counselling, rehabilitation services.
•Providing public works and services such as building roads, maintaining water supplies, cremation and burial services.
•Providing public amenities, recreational facilities, public halls, libraries, museums, statues, fountains, playing fields.
•Protecting the environment (such as re-vegetation of forestation, conservation)
•Protecting human life including emergency rescue services.
•Preventing cruelty and protecting the welfare of animals including animal welfare, shelters and sanctuaries.
•Facilitating social rehabilitation including integrating people back into the community.
A Charitable Trust is incorporated under the Charitable Trusts Act 1957 and to the extent that powers are not provided in the Trust Deed, the provisions of the Trustee Act 1956 apply.
To be registered under the Charitable Trusts Act 1957 and also under the Charities Act 2005, a Trust Deed must be established for a charitable purpose.
In terms of legal responsibility, it is arguably more difficult in a Charitable Trust (unless the beneficiaries can be clearly identified) for the beneficiaries to be able to bring any action against the trustees.
An Incorporated Society is an incorporated body under the provisions of the Incorporated Societies Act 1908.
For registration purposes an Incorporated Society must have 15 members.
The members of the society are not liable for the obligations of the society except where expressly provided for in the Act and has a legal status separate from its members.
In an Incorporated Society every member can bring an action against another member where they believe their ownership rights to assets have been affected by the decisions of the other members (executive committee).
What do boards do anyway?
A Company is a legal entity in its own right, having the rights and obligations of a natural person, it sues and is sued in its own right.
In the absence of fraud, the coporate veil will not be lifted and members and liabilites are limited to the assets of the company.
Most companies in New Zealand have a profit-making motive this is not a pre-requisite to registering under the Companies Act 1993, it can also be used as a non-profit vehicle.
The usual company law implications and requirements are not altered by the use of the company structure for non-profit making purposes except so far as the constitution promotes public not private purposes.
For the Company to be charitable, it must include charitable purposes within its consititution.
Governance from the Latin word: gubernare
which means 'to steer, rule'
A charitable board is responsible for:
Setting the strategic direction and priorities
Setting annual budget and key financial transactions
Setting practices and policies
Characterising and managing risk to an organsation
Ensuring the charity is being managed
Challenging and testing management thinking
The board is collectively responsible when it all goes wrong and individually even if you are not at the particular meeting.
In a small charity members of the board are often volunteers who also manage the charity, how does this work with the overlapping roles?
Board members may be appointed for their interest in the charity or its charitable purposes, not their skills and are almost always unpaid volunteers.
Some charitable boards can be large and unwieldy because of the desire to accommodate specific representation of the main stakeholders and most enthusastic volunteers.
Board members who are unclear about the objectives of the charity may have no clearly defined strategic direction. It is often assumed that everyone knows what the purpose of the charity is.
They may have political or similar imperatives which influence the operation and purpose.
They may be closer to the recipients of their services than a commercial entity.
There may be philosophical ‘unhappiness’. This may include Board members who want to manage the charity rather than govern it.
There may be two points of view - “we are trying to run the organisation like a business which we are not” and the other being that “we need to be more business like”.
Fiduciary comes from the Latin term 'fiducia' which means' to trust. Members of the board owe a fiduciary duty to the beneficiaries and the donees of the charitable organisation.
1. Board members must exercise a standard of care of which a 'ordinary' person might expect to make on their own behalf. Board members are not required to exercise a skill greater than that which may be expected from a person with their particular knowlege or expertise.
2. Board members must at all times act in good faith, diligently and prudently.
3. Board members must avoid using their position for their own personal advantage avoiding conflicts of interest.
Other Duties of Board Members
1. Acquaint themselves with the terms of the trust deed/rules/constitution
The rules will provide answers to many of the problems which a board member will face when making decisions or taking actions. The rules will set out how the charity will hold meetings, what powers the board has i.e. to spend, distribute or loan money, what financial and auditing requirements the charity has.
2. To abide by the terms of the Trust Deed/Rules/ Constitution
Board members must act only within the purposes and powers as set out by the rules. Once a charitable entity is established any funds held by it can only be used for the purposes they were donated for. The rules will provide which rules' can be changed and the process the board must take to change them.
3. To act in the best interests of the beneficiaries
In a charity it can be difficult to identify who the beneficiaries are. Members of the board must act in good faith and with diligence and prudence in the execution of the purposes of the charity.
A charity should develop a set of policies for the administration of assets, to identify and manage the risks of loss, waste, theft and fraud.
A recent Charities Commission seminar on fraud noted that often fraud occurs where charities least expect it to occur.
Designing and implementing internal tools to manage against fraud allows charities to be transparent. It prevents board members and staff being called into question because systems are in place to limit the ability for fraud to occur. i.e. how many charities are you aware of that have single signatories for cheques and electronic banking?
What internal tools?
Simple tips to prevent fraud
1. Review internet banking security, banks now allow dual signing authority on accounts
2. Dont sign blank cheques or provide eftpos cards without limits
3. Review who is in charge of finances, do background checks
4. Provide role descriptions, so that each member of management is aware of what their responsibilities are
5. Put caps on expenditure withboard approval required over a certain amount
6. Know if the management and staff have problems i.e. drinking and gambling problems
7. Avoid large amounts of cash handling
8. Regularly checking accounts, bank statements
9. Confirm tax payments
8. Carry out due diligence, budgetary performance etc
Most people will volunteer to be on boards of charities because of the vision and goal of that charity, and are appointed not neccessarily for the skills they bring.
The board should have a policy of educating and communicating with board members to ensure they are aware of their legal and ethical responsibilities and of the programs run by the charity.
Charity rules will provide that an agenda and background materials are provided in advance of the board meeting. To have effective discussions within the board, these should be provided far enough in advance so that all board members have the opportunity to review.
Whistle Blower policies
It is useful to have a whistleblower policy in place so that individuals can come forward with information on illegal practices, without fear of retaliation or breach of confidence.
Review policies for protecting assets, i.e property, financial and human resource s to protect against damage or loss, to protect the charity's integrity and reputation.
Review need for general liability cover for directors, officers and staff.
Establishing policies for protecting the charity's records over time, including minutes and resolutions, which are required to demonstrate legal compliance. By ensuring these documents are adequately held will protect against allegations of wrongdoing in future.
Effective Board Members Are...
Objective: capable of thinking independently, and not controlled internally or externally by other members or interests
Strategic: capable of looking at the big picture, balancing short and long term interests
Intelligent engagement: capable of dealing with other board members and manager(s)
Courage: able to ask the tough question(s)
Team Member: board is collectively responsible
Appointing Board Members
When appoinitng new board members, a board should review what it needs to be effective;
Composition: would the board benefit from a range of perspectives?
Competence: what specific and generic skills are missing from the board?
Conduct: will the board member be full engaged, have time, and provide robust debate on issues
Before appointing board members the board will need to check what rules are in place in the governing document for appointments.
Are the rules for appointment suitable to ensure the right people are appointed?
Common rules for appointment deal with the following:
1. Specifying the minimum/maximum number of board members.
2. Providing a mechanism by which board members are elected
3.Providing a mechanism to ensure that the board as a collective group have the experience, organisational and financial skills to advance the charity's purpose.
A board should have enough members to allow for full deliberation and diversity of thinking on governance and other organisational matters. Except for small organisations, a board should have at least five members.
Getting the most out of board meetings- Board Agenda
1. Board alone ( informal time)
2. Interest Register / conflicts of interest
3. Action items from the last meeting
4. Decision papers/ strategic issues
5. CEO and Financial operational reports
6. Minutes of last meeting
7. Off agenda items
Questions You Need to Ask
1. What issues do we have (explicit and implied)
2. Do we have all the information ( time to review)
3. How can we benchmark?
4. Does the information stack up?
5. End of meeting, is the charity going to be better off?
Conflicts of interest
Preceptions: Charities must remain transparent in all their dealings
Board members need to actively manage conflicts
- have the conflict noted in minutes
-abstain from being part of discussion and voting
- withdraw if required
65% of fraud is internal - know your staff and their lifestyle
Management commitment and accountability
Monitoring and enforcing
Internal Controls – signing authority, control of receipt book,
petty cash, expense reimbursement, separation of duties; stock control
Risk Registers and Assessing fraud risk
Regular financial reporting
Process audits and external audit
Communication and awareness - training
System prompts and restrictions
Supplier and customer vetting
Separation of duties
It is important, especially in small charities where board members adminster the charity personally, to ensure that no single individual has the sole responsibility for a single transaction, from authorisation to completion and review.
Mason v Lewis – s301 claim against directors when company went under as result of executive fraud
Directors liable to creditors:
failed to take active interest
didn’t ensure kept adequate accounts
failed to monitor
relied on verbal assurances and accepted inadequate accounts.