Trustees of a charity have a duty to apply the charity's income to the achievement of its objects unless it has a specific policy with regard to (a) its reserves; (b) a large project which it is saving money for; or (c) there is planned expenditure in the following financial year. If these do not exist the Charity Commission expects a charity to spend all its unrestricted funding every year.
It is for a charity to determine how it plans to spend its income and how it intends to raise income and/or reduce expenditure. So what do we mean by 'a charity'? In terms of who is entitled to make decisions without these being delegated then we have the board of trustees and the charity's members. This model of governance is similar to commercial companies where there are directors (trustees) and share-holders (members). The governing document should clearly describe the rights and responsibilities of each group. The GA constitution does not ... more for a later post.
It is for trustees and members to determine what the decision making process for spending money is. If this does not exist then the trustees need to produce a decision-making policy and procedure. Trustees cannot complain that this does not exist - it's their job to produce it and then to adhere to it. Without such policies it has to be a matter of custom and practice. How in the past have we as a body decided on our budgeting? In the past this has been done through a series of processes including the following people/groups - the Executive Committee, Commissions and Panels, the Chief Officer and staff, and ultimately the membership usually via the Annual Meetings.
So what spending should members of a membership charity have influence over? All of it! As an analogy, any member of the British public can express concern about what the Government is spending - it would be a little odd if someone in the government then said but you only have say over what you paid in taxes. Similarly with charities, trustees are working for all their members and it is usual for all members to be able to vote on the future budget and spend of that charity not just on the money that they helped to raise.
So what guides a charity on how to spend its money? Essentially three things
- Their object; combined with either
- Their business plan; and/or
If new money is raised then it should be spent on these three items above.
We cannot have a board of trustees working outside of their own framework of governance and raising money which they say the membership has no influence in spending. If the trustees think that they can do this, and then do do this, then they should not be surprised or upset if the GA's membership is less than grateful.