Good Governance: a Code for the Voluntary and Community sector

'Good Governance: a Code for the Voluntary and Community sector' has been published, setting out best practice for governing a voluntary organisation. It builds on the original version from 2005, and should be clearer with less jargon. The Code Steering Group is now working on a version for small, unstaffed organisations, due spring 2011, plus a new supporting website.

The summary and full version may be found here for downloading.

Managing money

Apologies if I am teaching 'granny to suck eggs' but it is important to ask how boards manage their organisation's money. The term manage implies an active approach rather than monitoring which is reviewing what has gone on. My experience is that many organisations monitor their finances rather than manage them. Managing actively does not mean not spending money but it does mean understanding what money is being spent, when and on what and similarly with income - what is coming in, when and from where.

It is not so important in times of low interest rates but one of the things to manage is how much money is needed in the current account and how much can stay in an interest-bearing account. To do this you need to know when bills come in - many of us spread bills through the use of direct debits - this often gets us a better deal and helps us to spread spend - it also means that it is paid automatically from our banks. Which means that it is vital that bank accounts are reconciled with cash-books - at least quarterly or as often as bank statements are received.

Patterns of expenditure are useful to observe - the use of Excel or other spreadsheet software helps to plot spend over a year and then to compare year on year. You can then start to make links - for example if you rent out your building, do your utility costs go up the more you rent out the building. Can you therefore work out the additional cost of utilities for renting out the building and build that into lettings' charges? How vulnerable is your organisation to stock market fluctuations and do you need to build some contingency into your reserves for this? Are there times of the year when giving to the collection is less - do you need to find additional income at this time of year e.g. by having a stall at a car-boot sale or running a raffle?

Understanding your finances will help you to feel more secure - reporting this in simple terms to community members will provide transparency and help people to feel involved. It may also provoke some to offer to help out with fund-raising or money management - for example finding a better deal for your utilities or insurances. The more people are involved with finances the more likely they are to feel a responsibility for them which makes the treasurer's job a lot easier.

Catching up before my holiday

Nearly a month of trying to get my computer sorted - it wouldn't start, got fixed, wouldn't start, got fixed and then everything was different - discovered my on-line back-up wasn't working and so have had a happy few weeks reacquainting myself with my beloved computer, buying a laptop that works and trying to sort out the back-up. Not quite done that yet.

So where was I? Ah yes reserves policies. Here's one I did earlier - it's for an organisation which gets income from renting its building to businesses, has that building to maintain and is in the throes of major improvements hence needing to build up a capital reserve.

XXX Organisation
Reserves Policy

Introduction

XXX Organisation reserves policy is to maintain sufficient level of reserves to enable operating activities to be maintained, taking account of potential risks and contingencies that may arise from time to time. These risks may include

• Rent arrears;
• Tenants leaving and units left vacant being unable to rent them; or
• Needing to leave units untenanted to ensure building works may be carried out safely and efficiently.

Additional contingencies

In addition, amounts are set aside to meet financial risks associated with potential contingencies and uncertainties relating to XXX Organisation’s operating activities. These include:

• The funding of unforeseen major projects that have not been provided for in the normal financial planning process in particular building works to ensure health and safety; and
• The provision for an orderly winding-down of operations in the event of a significant adverse event that is outside the control of XXX Organisation.

The reserve fund

Currently all XXX Organisation’s reserves are unrestricted and are therefore free reserves. The unrestricted reserves of XXX Organisation are designated and allocated to meet the above risks and contingencies and is set at £18,000 to be kept in a high interest account.

Capital fund

XXX Organisation is aiming to build up a capital fund to finance building works. It intends to keep back about £20,000 per annum from its income to add to this until a maximum of £250,000 is reached. This fund will be invested in a high income account.
Review of Policy

The policy is reviewed annually by XXX Organisation’s Trustees.

Signed: Dated:


You may of course make it much longer and more comprehensive but I think that it is about what works for your organisation. Most of our Meeting Houses and Chapels have very straightforward finances with similar amounts of money coming in each year from live-giving, legacy income, investment income, income generation and grants; and similar annual outgoings to fund ministers/lay leaders/worship leaders, running the congregation, building maintenance and building improvements.

And if it's a matter of having a more comprehensive policy but taking many months to decide on it or having something quite simple to be going on with, then I would suggest having something simple at first. The other thing about short and simple is that people will read it and have a chance of understanding it. As with any policy it needs to be understood and taken on as the policy by all trustees/management committee members.

Once you have a reserves policy you then need to look at your books to see if you have that amount and if not work out how to build up the appropriate reserve. Conversely if you have too much money in reserve you need to be talking about how to spend the money. As said in the previous post, money held by charities is meant to be spent on their charitable purposes.

Treasurers and reserves

Just a brief posting today, methinks.

Treasurers - who'd be one? Especially in organisations without admin or finance staff like our local faith communities. I had the role for three years and got myself into all sorts of knots - the end of the financial year was an interesting time as it kind of went like this ... £1,500 too much, then £200 too little, then £80 too much and then something like £4.21 too little - eventually I would get the discrepancy between bank figures and cashbook to zero but it hurt to get there. Now I am a woman who loves figures but I don't love accountancy and book-keeping.

Treasurers are often accused of being mean because many don't appear to like spending money. However the buck stops with them if there were ever an audit of how money had been spent. Treasurers should have an overview in their heads as to how the organisation is doing. What is being spent, what is coming in, what is on the horizon (both expenditure and incoming) and what the community would dearly love to do?

The Charity Commission is quite clear that money in should equal money out. We are after all charities and money should be used for our charitable purposes - having money sitting in a bank is not a charitable purpose. But charities can carry reserves and capital funds. Reserves are to keep the charity going should income reduce (as with a stock market downturn) or should expenditure increase (if the water charging policy is implemented) and for planned maintenance and as a buffer for say emergency repairs. A charity may also save money for a large project say retiling a roof or making the building accessible.

However if you carry any kind of extra money other than to cover usual expenses then you must have a reserves policy. This must say how much you have or intend to have and for what purposes. It is a useful exercise to write a reserves policy as it enshrines to some extent your community's thinking about risk, your knowledge of future financial issues and your aspirations for the future. I will post an example of a reserves policy within the week.

Now I must away to drive to Yorkshire and trust it isn't raining there as it is here.

Trustees - officer roles

The Charity Commission only dictates that charities have a chair and a treasurer. Company law used to require an incorporated charity to have a Company Secretary but that changed in 2008. You may of course have a secretary and a vice chair and any other number of named officers - vice or deputy -treasurer, minute secretary, membership secretary, lettings secretary and welfare secretary and suchlike.

Whether these people are formally appointed (either elected or selected) as trustees or not it does not really matter - if you act like a trustee i.e. you are involved in the strategic decision making (not just the discussions) then you will be treated as a trustee by the Charity Commission. You can't have the power without the responsibility - whatever your governing document says!

The chair and the treasurer are both key roles. The treasurer's is easier to describe. In organisations with a finance director then the role is often called the honorary treasurer and this person monitors the finance director's work and therefore the financial stability of the organisation ensuring that all procedures are followed and that no only is the organisation viable now but will be for some years to come. NCVO say that these are the overall roles of a treasurer

• Maintain an overview of the organisation's affairs
• Ensuring its financial viability
• Ensuring that proper financial records and procedures are maintained.

Clearly in smaller organisations - probably most of our communities, treasurers do much more hands on work with the money often collecting money, banking it, preparing budgets and accounts, and being the main contact for the bank.

I believe that the chair's role is pivotal to the success of any charity. However I have known charities with good staff and a poor chair who have done well. Whatever your view it is best to get this agreed between all the trustees. NCVO says this of the chair's role.

The chair is a trustee with a specific role on the board. The chair is elected or appointed to this role as set out in the charity’s governing document.

The role of the chair is to chair meetings of the trustee board.

In addition, some chairs take on a number of additional roles. The chair can only take on these additional roles if they have been authorised to do so. This authorisation might be set out in the governing document or related procedure, or agreed by the other trustees in a role description or some other document.

Additional roles of the chair sometimes include:

• Supporting and supervising the head of staff or chief executive and acting as a channel of communication between board and staff
• Acting as a figurehead for the charity (for example, representing it at functions, meetings or in the press).
• Leading on the development of the board and ensuring its decisions are implemented.
• Taking urgent action (but not decision making unless authorised) between board meetings when it isn’t possible or practical to hold a meeting.

The roles above are not exclusively roles of the chair. For example, in some charities the development of the board might be led by another trustee; in others, the charity’s press spokesperson might be a member of staff.

In my experience it is through the chair that the board communicates with the chief officer/staff. If supervision is provided to staff then it is usual for the chair to both supervise the chief officer and to give line-management support. If there are staff then the relationship between the senior staff and the chair can make (or break) an organisation.

Here is a good discussion document from the Scottish CVO about the relationship between the chair and the chief officer.

When the relationship is between minister and trustees (who are also the ministered to) there are different considerations which I admit I understand from a personal point of view i.e. how we do it in Newcastle-under-Lyme but I am not sure that this can be systematised. So I will have a long hard think about this.

The Nonprofit Social Media Decision Guide

This guide which covers things like Twitter,Facebook and blogging can be downloaded for free from here. You will need to sign up with your name and contatct email address.

Resources

I am setting up a Google site to hold resources about governance and signposting to good resources. I hope to have this done in a week. I have started but have been busy so only got half way there.