The high-profile closure of Kids Company has seen the charity and the government come under intense scrutiny regarding funding, governance and financial management. Following its closure on 5 August 2015 there have been some serious allegations concerning the running of the charity.
These allegations are currently subject to investigation and inquiries from a number of governing bodies.
Let’s not get it wrong – the news that Kids Company has closed down is a devastating blow to everyone involved in the charity sector. Charities rely on public support by their very nature, so when cases such as this arise it can damage the sector, not just the individual charity. The media spotlight following the Kids Company case is putting even greater emphasis on ensuring effective financial management and fiscal planning within charities.
Non-financial lessons for trustees following Kids Company closure
In this article, we put finances to the side and focus on the non-financial lessons for trustees following the charity’s closure. The failure of Kids Company is a very serious reminder to trustees that their role within the charity is anything but non-functional; they have the responsibility to safeguard the future of the organisation and ensure it continues to be capable to act for the public benefit.
Trustees cannot stay around long-term
The Guardian recently published an excellent article – good charity trustees are like gold dust, but they have a shelf life – which highlights that “it is also often forgotten that they (trustees) shouldn’t become part of the furniture” within a charity. In any organisation, be it commercial or charitable, when the management board becomes ‘part of the furniture’ it is often difficult to champion change and challenge the status quo. But as the world changes, new strategies, priorities and operations must be looked at. For example, income diversification to include both traditional and non-traditional approaches is paramount.
A trustee board must have diversification of complementary skills
The second point is one that we have spoken about before, in our guide to trustee recruitment (available on our website). A board should have a broad range of skills (such as IT, legal, financial etc), but it should also be diverse in other areas too. To ensure that trustees speak up, challenge actions and raise concerns a charity board with varied skills, perspectives and backgrounds is usually advised. For example, beyond skill diversity boards may look to have a range of genders, sexualities and ages. Research suggests that more than half of trustees believe greater diversity on charity boards will improve effectiveness. It should be clarified, though, that board diversity isn’t about ‘ticking off’ all types of diversity – the board should still relate to the charity’s core activities.
Trustees must speak up and challenge the status quo
Linking with the two previous points, there should be regular, ongoing dialogue between board members and trustees should be encouraged to speak up and raise any concerns they may have. Financial warnings can sometimes go overlooked, as with Kids Company, but it is imperative that there are systems in place that enables trustees to take remedial action at the earliest available opportunity. Determining the role of a trustee is a very serious matter and there should be a balance between charity chief executive autonomy and trustee involvement.
Financial lessons for trustees following Kids Company closure
The financial viability and suitability of charities is undoubtedly a major worry in the sector. A recent report – CVO’s Financial Sustainability Survey Report – predicts that the sector will face a £4.6bn shortfall in annual income by 2018/19, if it is to simply maintain its current spending power. Following the closure, we looked at the financial lessons for trustees following Kids Company closure.
- What is the biggest lesson trustees will learn from the Kids Company closure?
- What advice would you give to trustees when there is so much speculation going on?
- What degree of transparency should there be in how funds are spent?
- Are there always financial warnings?
- What final advice would you give to trustees?
Seek professional advice
In light of the events of Kids Company it is essential to emphasise the importance of seeking professional advice if you have concerns. Whether legal or financial, it’s out there and it’s there to help – don’t be afraid to use it. For more information please contact your local office specialist.
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