• What's on the horizon for charity trustees?

The past two years have proven turbulent, including for the charity sector. External factors – such as the COVID-19 pandemic, Brexit, inflation, and the rising cost of living – have impacted charities’ operating environments.

Trustees from local, national, and international charities across a range of cause areas were interviewed to help inform the report. The findings of the research highlight six key themes:

1. Financial resilience: Even charities that have secure incomes worry about protecting these or the possibility of losing them
2. Collaboration: The nature and involvement of a charity’s trustees can significantly impact the collaboration and culture within the organisation
3. Diversity: Almost all trustees interviewed said that their boards were less diverse than they would like. However, they were also unsure about how to change this.
4. Support and training: Trustees would welcome additional support, guidance, and training to bridge gaps in knowledge and experience
5. Digital: Digital covers a wide range of charity functions and is interpreted differently by trustees depending on their expertise and the relevance of various elements of technology to their charities
6. Sustainability: While not the primary objective for most charities, climate change and sustainability considerations are increasing in relevance and importance

Michael Izza, ICAEW's CEO, Alison Taylor, CEO of CAF Bank and Charity Services, and Daniel Chan, Chair of ICAEW’s Charity Committee and a Director at PwC, discussed three of the key themes – Financial Resilience, Board Diversity and Sustainability – as part of the launch webinar held on 4 March 2022, where over 400 of you joined us. For those of you who were not able to be there, this article highlights some of the views expressed by the panellists and signposts useful resources on these three topics. You can also access the webinar recording here.

Unsurprisingly, financial resilience was a key focus, not only for the research participants but also for the webinar audience. Our audience poll showed that this was a pressing concern because of the combined impact of declining funding and increasing costs: 40% of the webinar audience were most worried about a decline in donations and grant funding and nearly a third of the audience was most concerned about increasing costs.

While the charity sector has shown remarkable resilience during the pandemic, all panellists agreed that experiences varied greatly within the sector and that many charities needed to use their reserves and government support just to survive. The sudden transition to remote working and digital service delivery was costly for many charities and trustees should not underestimate the ongoing costs of switching their operations increasingly from analogue to digital. Not only is it important to constantly update technology but staff with a digital skillset can demand a premium in this buoyant labour market.

Cultivating diverse and inclusive trustee boards is a complex issue for many charities. While almost all participants interviewed for the research said that their boards were less diverse than they would like, they were also unsure about how to make progress.

The panellists encouraged trustees to be conscious of diversity and to recognise the advantages of diversity at board level. Most importantly, charities need to have the right people on the board to make the best decisions for the charity and its service users. This requires a culture where people with different perspectives can share their views openly and have a robust discussion. As a result, a diverse board will add depth to the discussion and acts as an enabler for the charity rather than a barrier. Moreover, there is a risk associated with recruiting trustees solely based on their skills and knowledge. Charity boards cannot defer decisions to the relevant subject matter expert on their board as responsibility rests with the whole board.

The panel encouraged charities to go beyond their existing network when looking for new trustees and advised boards to look at candidates that may not have the full skillset yet, but whose ability, attitude and talent make them well qualified to join a charity board. Charities may also need to reflect on practical factors, such as the timing of board meetings, to make them more accessible for those with full-time jobs or caring responsibilities.

The research found that sustainability was not considered a high-priority issue for charities that have other charitable aims, but interviewees agreed that climate change and sustainability considerations were increasing in relevance and importance.

While a decade ago small organisations were unsure where to start their sustainability work, this is no longer the case as there are now many resources and case studies available to help all organisations make their contribution. Charities also need to consider the reputational risk of not reflecting sustainability considerations in their decision-making as funders increasingly expect this from charities.

Many of the largest charities are already required to comply with Streamlined Energy and Carbon Reporting requirements, and expectations around broader sustainability reporting are increasing every year. The panel also encouraged charities to reflect on the social element of sustainability, an area that is inherent to charities’ work, and to be braver and more explicit about this as it positively differentiates charities from other organisations.

Financial Resilience, Board Diversity, and Sustainability are all important to the long-term relevance of charities. There was overwhelming consensus among the panel that trustees need to continuously reflect on these three goals and the other topics raised by the report.

While many charities may need to rebuild their financial resilience and consider if their reserves policy is still appropriate, this focus should not come at the expense of the charity’s other priorities and long-term goals. Charities can, and should, embrace the increased demand for their services, and trustees need to challenge themselves to contribute to board discussions in areas beyond their specialist skill. Finally, charity leaders mustn’t neglect the mental health challenges that the pandemic has caused, but should support their staff, service users and supporters to rebuild social capital. In combination, these guiding stars will help trustees navigate their charities through challenging times.

The report What’s on the horizon for charity trustees? and the webinar recording are available here.

1. Financial resilience

Many audience questions at the webinar were about Charity Reserves and core funding from philanthropic trusts and foundations.

• Reserves: We are planning a webinar on Reserve policies in 2022, so please look out for email invites in the coming months. Our 2020 webinar on Charity Reserves, and webinars on delivering financial sustainability for charities are available in our library of webinar recordings. The Charity Commission’s publication Charities and Reserves (CC19) provides guidance on what charity reserves are and how to develop and report on a charity's reserves policy.
• Grant funding trends: The report on Foundation Giving Trends 2021 shows the key facts and figures on grants by the Top 300 grant-making foundations in the UK. GrantNav from 360 Giving allows users to access data on funding provided in recent years and can help identify foundations offering core grants
• Income diversification: CAF has a think-piece on how charities can develop a wide range of innovative strategies for generating income. Strategies identified include building corporate partnerships; investing in digital platforms; and running a business that supports one’s charity. For further information on income diversification, charities can also refer to this article on factors charities ought to consider before diversifying their income streams, written by CAF Lead Advisory Manager Dawa Dem.
• CAF resources: CAF’s Charity Adaptability Hub offers a library of resources to help charities future-proof their operations and adapt to a post-pandemic world. The Hub includes a section dedicated to financial resilience, with information on strategy and planning, governance and leadership, and loan finance, among other topics. Charities can also learn about planning and managing their investments through CAF’s investment knowledge centre and charity investment resources, which offer information about how charities can invest in order to make the most of their funds.

2. Board Diversity

Audience questions in this area were focused on how subject matter experts such as accountants can share responsibility for decisions with other trustees, and how to recruit more diverse trustees.

• Making decisions jointly: ICAEW’s 2021 webinar How to ensure your charity board is financially competent is available in ICAEW’s library of webinar recordings and explains how to share the responsibility for financial decisions with the whole board. The Charity Commission 5-minute guide on decision-making and CC27 It's your decision: charity trustees and decision making provide general guidance on board decisions.
• Trustee training: ICAEW’s trustee training modules are free for all. If you would like to invite younger people or service users onto your board who may not have prior board experience, ICAEW training will provide an overview of charity trustees’ legal and financial responsibilities and their strategic and operational considerations
• Trustee recruitment: Reach Volunteering’s Trustee Recruitment Cycle provides guidance, tools and tips to help you recruit trustees and diversify your board. ICAEW Volunteers is a dedicated website that connects charities with finance professionals looking for volunteer roles. The service is free for all not-for-profit organisations and volunteers to use.
• EDI considerations for charity boards: The sixth principle of the Charity Governance code covers best practice governance processes for Equality, Diversity and Inclusion
• CAF resources: CAF’s Charity Trustees and Governance page offers a library of resources to help both new and established trustees drive greater impact for their charities
• Further information on charity governance: CAF’s Charity Landscape Report 2022 highlighted the need for charities to invest in resilience measures such as good governance and leadership, digital transformation, and staff development. A key finding of the report was that charities should reach out to new digital networks, social movements, and mutual aid groups to find opportunities to work together – a finding that speaks to the value of diverse trustee boards and networks. The report offers useful reference material for those interested in trustee recruitment.

3. Sustainability

Audience questions in this area focused on reporting guidance for charities.

• SORP and Charity Commission guidance: The SORP information sheet 5 offers guidance for large charities on Streamlined Energy and Carbon Reporting requirements. The Charity Commission published a report on sustainability practices undertaken by charities in 2008, Going green: charities and environmental responsibility (RS17). This encourages all charities to think about environmental sustainability.
• ICAEW resources: ICAEW’s sustainability resources provide guidance on the role of accountants in combatting climate change and aligning with the wider UN Sustainable Development Goals (SDGs). At ICAEW’s January Charity Conference, audiences heard from charity CEO Nathan Baker about how the Institute of Occupational Medicine aligned its strategy with the SDGs. You can read about this here.