Charity mismangement

PlutoinCapricorn

Honest, it occurs to me that posting on an open forum in detail for all to see was not the best, most ethical way to ask for advice: perhaps a more general summary of the problem followed by the private message facility might have been better.

Errata, I have been involved only with large and medium professional NGOs, so have never seen anything like this before.

Honest, I agree that you are out of your depth and that things have gone too far for an internal solution. I am confused about one point: at first I assumed that you were talking about an external accountant but now think that you mean an employee. I am not sure of the curent figures, but if your income is below a certain level you can prepare accounts for submission yourself, in the middle band you are required to retain an independent examiner and above that you must use external auditors. You say that the charity is well known, I now think that you must be talking about what I would call a small charity which does not use external accountants? Here is something that I have found:

"The charity sector is highly regulated and there are copious guidelines relating to charities. These are nothing new and have been around for a very long time. The enquirer only has to refer to the Charity Commission to get the necessary advice and support. Accounting principles do not vary and have not done so almost since time began. There are specific disclosure principles relating to charities. Again these are Charity Commission requirements. All charities over a certain income require an audit."

Debt_Free_Chick

honest7 wrote: »

I just want to thank everyone for their advice at this difficult time. The meeting is in a few days, and the accountant will be there. I do however need to know the extent of the problem at hand first before I go to the funders. Hopefully I will get more information from the accountant, and we can then proceed from there. But in all honesty this is not looking good for the organisation and I am more than prepared to contact the funders if nothing gets resolved.

This is not a matter for you to sort out, single-handedly - it's for the Management Committee, collectively. They are responsible for every aspect of the management/operation of the charity. Even where they appoint delegates, they are still responsible. In this case, they seem to have delegated financial operations to the Vol Worker, but then failed to have any reporting/monitoring of the financial running of the charity.

Reporting/monitoring is very easy to implement as are some basic financial controls.

Is there no Secretary either?

For now, however, DO NOT take this on yourself. Your job at the meeting has to be to get the MC to take responsibilty for this and for them to collectively i.e. by a vote, agree what to do.

I hope the auditor is on board and can reinforce this too.

My suggestion is two decisions to be made - one in relation to future operation and the implementation of reporting and financial controls; and the other is an investigation to establish if there have been any financial irregularities over the past, say, two years. Keep the two things separate and whatever you do, ensure the reporting for the future is implemented immediately.

Here's a quick suggestion of how things should operate for the future:-

Change the bank mandate for all accounts. Only members of the MC to be signatories with any two signatures required for ALL transactions

Appoint a Treasurer - it can be a member of the MC, or you can employ someone. In the short term, ask the accountant if a member of his firm can do the job.

Have the bank statements sent to the Treasurer

Every payment from the account to be approved at an MC meeting (do you hold these monthly? If not, start now). Original invoices to be submitted to the meeting, so payment can be approved. Approval ONLY on production of an invoice. Cheques can be signed by two members of the MC at that meeting, if payment is approved.

Financial report to be provided to each monthly meeting listing all payments made in and out of the account. Payments should be cross referenced to the approval (think about numbering the approvals e.g. 09/01, 09/02 etc with 09 being this year, changing to 10 next year).

Financial report to include a bank reconciliation

Annually, Treasurer to draw up a budget for the year's expenditure. Budget should include the names of the suppliers of the various goods/services. MC to approve the budget, including the suppliers. Any payments in the future should be cross referenced to the budget so that the MC can see that the payment and the supplier was anticipated in the budget.

Monthly, treasurer to report on actual expenditure vs budget, including the out-turn for the rest of the year (i.e. how much is left in the budget for each type of expense)


Finally, what's happened might not be wilful, deliberate fraud - more a case of being a bit too liberal use of the Charity's funds. Keep an open mind until the investigation is complete. The investigation should be done by a firm of accountants - not the one currently used.

HTH

fengirl_2

Debt free chick is right, except that the management committee here are all Deaf people whose first language is not English (BSL has its limitations) and whose life experiences are usually quite limited. Ways of doing things which we in the sector take for granted do not just filter down to people with communication difficulties - everything needs to be spelt out and is not always understood frst time.
I see this type of situation a lot and it horrifies me but doesnt surprise me. You can give as much advice and training to vol orgs as you have breath for, but if orgs choose to ignore you or not to engage with you, then the trustees bear the brunt.

Debt_Free_Chick

fengirl wrote: »

Debt free chick is right, except that the management committee here are all Deaf people whose first language is not English (BSL has its limitations) and whose life experiences are usually quite limited. Ways of doing things which we in the sector take for granted do not just filter down to people with communication difficulties - everything needs to be spelt out and is not always understood frst time.
I see this type of situation a lot and it horrifies me but doesnt surprise me. You can give as much advice and training to vol orgs as you have breath for, but if orgs choose to ignore you or not to engage with you, then the trustees bear the brunt.

Ah - fair point. My experience is like yours - very many small charities are run on a "too-charitable" basis with no real management.

It's not just about "good management" though and perhaps this is an angle the OP can use .... In order for the charity to do as much charitable work as it can, it has to be run like a business i.e. to extract as much money as possible to devote to its charitable causes. In the same way as a business with sloppy management is more likely to make a loss, a charity with sloppy management is more likely to waste money at the expense of the good causes it's trying to benefit.

I wonder if all the employment policies are in place too. If the Charity is employing staff, there's a whole host of employment issues to consider too :eek:

The communication challenges in this case need to be addressed first though. For the future, meetings should be properly convened with an Agenda and supporting papers issued in advance (preferably, one week in advance of the meeting date). Putting stuff in writing like this is good practice, but presumably would help with the communication issues?

One does wonder if the composition of the MC is "right" but I know only too well how difficult it is to enlist volunteer members - our local playground charity has operated with no MC for years and is being run by the Parish Council (trustee)!

Good luck to the OP - I'm sure some improvement can be made.

Savvy_Sue

Two useful sources of information which I wholeheartedly commend to anyone with responsibilities in the sector are

• Independent Examiners - monthly or more frequent newsletter, readable and always a mix of 'Be warned!' and general information. There's a Register Here button on the first page.
• Legal Update from Sandy Adirondack - as and when bulletins flagging up changes to the law relating to voluntary organisations. Click on the Legal Update links to register.

The OP would certainly get a lot out of these, but other members of the MC might also find them useful.

Errata

honest7 wrote: »

I just want to thank everyone for their advice at this difficult time. The meeting is in a few days, and the accountant will be there. I do however need to know the extent of the problem at hand first before I go to the funders. Hopefully I will get more information from the accountant, and we can then proceed from there. But in all honesty this is not looking good for the organisation and I am more than prepared to contact the funders if nothing gets resolved.

Your tenacity and optimism do you great credit, but I suspect the full extent of the problems can only be discovered by a forensic accountant and an organisation with a full understanding of the voluntary sector / contracts / funding / etc etc.
To be blunt, you now have knowledge of wrongdoing by staff, volunteers and trustees and you now have a responsibility as a trustee to immediately report this to the funding organisation(s). Any delay in doing so could be misconstrued by ill-wishers as collusion.
You can't put a plaster on a headache.

mountainofdebt

Honest7

With regards to training it might be that the funding for the project worker allows for training courses to be paid for.