Posted: 04 / 10 / 2024

Article by: Emma Houghton, Head of Not-For-Profit
Image: Renan Katayama, CC BY-SA 2.0 https://creativecommons.org/licenses/by-sa/2.0, via Wikimedia Commons

Charity governance received unprecedented levels of mainstream interest this week as supermodel and self-styled philanthropist Naomi Campbell was banned by the Charity Commission from being a charity trustee for 5 years. Following an inquiry into Fashion for Relief, of which Campbell is a trustee, the Commission found significant evidence of financial mismanagement and trustee misconduct.

Suffice to say that on several fronts Fashion for Relief fell short of Charity Commission guidance; which is only guidance if you have a relatively relaxed approach to the law. Key findings from the inquiry concluded that the charity:

  • Failed to pass on more than a minimal amount of funds raised to charitable partners and beneficiaries.
  • Misused charity funds to supplement lavish trustee lifestyles.
  • Paid £290k in consultancy fees to trustees.
  • Made almost no attempt to implement a good governance structure or adequate financial controls.

Consequently, the inquiry, which can be found here, concluded by highlighting three key concerns for the wider sector.

  1. Decisions around using charity funds and assets should be driven by what best serves the charity’s objectives, as stated in its governing document. Trustees are legally responsible for ensuring that adequate financial and administrative controls are in place to maximise the positive impact on its identified beneficiaries. Unsurprisingly, this does not usually extend to expensive hotels, non-related travel, or personal effects.
  2. Trustees must be completely objective when making decisions for the charity. Trustee neutrality is compromised when there is some personal or other interest in the outcome of a decision. This includes working with another organisation in which they have an interest, contracting family or friends, and receiving a financial or non-financial benefit for providing a service to the charity.
  3. Trustees must assume collective responsibility for the charity. Implementing a robust governance structure and adequate financial controls is the responsibility of all Trustees and they are ‘jointly and severally liable for the decisions they make.’ This means that should there be a breach of the guidance, simply deferring to the decisions of other trustees would not be defensible in the eyes of the Commission.

Of course, these imperatives all require some degree of discretion. It’s not always clear what’s in the best interest of a charity, which expenses are reasonable, or when something constitutes a personal benefit. That’s why we encourage our charity and not-for-profit clients to drop us an email or pick up the phone for an informal discussion when faced with challenges like these. Our experience and expertise are always on hand to ensure they can make fully informed decisions in the best interest of their objectives and beneficiaries.

To find out more, drop me an email email at [email protected].