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5 Essential Tips for Charity Board Directors

Alice Murphy, partner, Charity & Not-for-Profit discusses some top tips for charity board directors. This article was first published by the Institute of Directors.

According to the latest Charities Regulator statistics, over 76,000 people currently sit on the board of an Irish charity. Each of these individuals are freely giving their time and expertise, without remuneration, for the benefit of a cause close to their heart. Many IoD Ireland members sit on a charity board in addition to their roles on commercial/ state boards.

Charities are a crucial cog in the wheel of Irish society. The scale of the critical services which are delivered by Irish charities would surprise many of us. Charity directors are governing our schools, our voluntary hospitals, our housing associations, our hospices and much more.

The magnitude and breadth of the services, underscores the importance of having skilled and informed directors in place on the boards which govern these charities.

Some Top Tips for Directors of Charities

The following observations, drawn from my experience in supporting charity boards, as well as my own personal experience sitting on charity boards, may be of interest to readers who sit on a charity board or are considering joining one.

1. Consider Your 'Primary Identity'

It is natural for charities to have an identity aligning with the sector they are operating in. I often hear directors say, “I’m the Governor of a University”, “I’m on the Board of a hospital”, etc. I would encourage all who sit on charity boards to always keep in mind that, regardless of their particular sector, their organisation is a registered charity. This makes each of them Charity Trustees (the term used in Charity law to describe those directing charities). Bringing the organisation’s charitable status to the fore and identifying the organisation as a charity helps with having a charitable and compliance focused mindset.

2. Maintain a Focus on Good Governance

I regard good governance as the lever through which you can ensure your charity’s continued success. In a charitable context, a commitment to best practice governance takes on an added importance, owing to the focus which key stakeholders place on it.

Fortunately, there is now a clear way for charities to demonstrate their commitment to good governance to their funders, beneficiaries and the public at large. This is the Charities Governance Code, to be completed by all charities on an annual basis. I would encourage directors of charities to give time and attention to this document and to use it to build out a compliance framework for their charity. Think about the basics of who is on your board, how long have they been in situ, has a skills audit been carried out, etc. A demonstrable focus on governance at board level should cascade through the charity and foster a culture of compliance.

3. Be Aware of Your Special Responsibility as a Charity Trustee

For those coming from a commercial background, it is important to be aware of the specific responsibilities imposed on directors of charities in respect of the funds of the charity, as the position is more restrictive than you may be used to.

Within reason, commercial boards generally take all commercially appropriate decisions to expend funds, with the aim of profit maximization and commercial success. In a charitable context, a mindset change is required. This arises because the funds of the charity are held for the benefit of the charity’s beneficiaries and must be applied for prescribed charitable purposes. A charity is not free to expend funds however it wishes and charity boards must frame all expenditure decisions through the prism of advancement of their charitable purposes.

4. Be Cognisant That Additional Rules Apply to You

Company directors typically have a good working knowledge of their company law obligations and directors’ duties. Sitting on the board of a charity means that, in addition to company law, the legal regime of the Charities Acts applies. While many of the fundamental principles and duties are reflective of the duties of company law, there are also separate provisions in charity legislation including additional obligations and mandatory filings with the Charities Regulator and these cannot be overlooked.

Charity directors are typically also subject to additional sectoral rules such as the Education Acts (for Education Charities) or mandatory standards from funders (such as the HSE for healthcare charities). Additional sectoral rules can sometimes find themselves in the ha’penny place when they should have central billing. Ignorance of the law will not excuse, and this goes for additional sectoral laws and regulations as well as the “core” company law and charity law principles.

5. Remember You Are in a Dynamic Sector

As a closing thought for charity boards, it is worth remembering that charity regulation is a “young” legal regime, which is still coming of age and hence it is dynamic in nature. The Charities Regulator, which is almost 10 years old, now has a wide array of guidance documents, policies, and templates available to all charities. It is important that charity boards have a system in place to keep up with these as they come on stream.

New legislation is also frequently on the horizon. The most significant forthcoming legal change will be the Charities Amendment Bill (currently awaiting publication). There has been a lot of discussion around what this will mean for Irish charities and publication of the Bill is eagerly awaited. Those charities engaged in fundraising are also eagerly awaiting finalization of the Gambling Regulation Bill 2022 to see how it will deal with charities who conduct lotteries, bingo, and raffles.

Engaging with your community of over 76,000 charity trustees through representative bodies such as the Wheel and Charities Institute Ireland, or by subscribing to available updates, can be a very beneficial way of keeping up to date.

For more information and expert advice, please contact a member of our Charity and Not-for-Profit team.

The content of this article is provided for information purposes only and does not constitute legal or other advice.

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