The news streams having recently filled with stories about the closure of the Kids Company on 5 August 2015 and the statutory inquiry that’s been launched by the Charity Commission over its financial collapse, which raises some interesting issues for anyone who devotes even a small part of their time to the management of a charity.
This three part article intends to consider two of those issues in greater detail and how these might affect you:-
1) Does a charity need to maintain cash reserves?
2) If things do go wrong, what’s the personal liability of those involved?
In practical terms, there’s lots of different ways that a charity can be set up. To try and keep things simple, part 2 of this article will look at cash reserves and part 3 will focus on personal liabilities. For those wanting to skip straight ahead, part 2 can be accessed by clicking here and part 3 by clicking here.
For those who can brave reading on, it’s first worthwhile summarising the main legal responsibilities of a trustee.
Charity trustees are the people who are responsible for the overall control and management of a charity, by whatever name or title they act under (e.g. trustee boards, directors, governors). Trustees must be at least 16 years old to be a trustee of an incorporated charity (i.e. a company or a charitable incorporated organisation) and be at least 18 years old to be a trustee of any other charity. Also, you can only act as a trustee if you haven’t been disqualified from acting as a trustee.
If you’re a trustee, then it’s important that you understand what your responsibilities are. In brief, charitable trustees are responsible for:-
1) ensuring the charity carries out it purposes for the public benefit;
2) complying with the relevant laws and the charity’s own governing document (e.g. a trust deed or articles of association);
3) acting in the charity’s best interests;
4) managing the charity’s resources responsibly;
5) acting with reasonable care and skill; and
6) ensuring the charity remains accountable for its statutory accounting and reporting requirements.
A more detailed breakdown of trustee responsibilities has been published in guidance from the Charity Commission, which is available by clicking here (please note this guide is 40 pages long and 1.42MB).
So, does a charity need to keep reserves? Please click here for part 2!