It is accepted that in line with good governance, charities and third sector organisations should regularly review the effectiveness of their governance arrangements.
As part of such a review, and starting at the top, that should involve a review of the make-up of the board of "charity trustees" to ensure that it is fit for purpose and able to monitor the assets of the charity or third sector organisation in line with its purpose, vision and values.
Who are the charity trustees?
"Charity trustees" are defined in the Charities and Trustee Investment (Scotland) Act 2005 ("the 2005 Act") as "those persons having the general control and management of the administration of a charity". They are also ultimately responsible in law for the charity.
"Charity trustees" can be called different things - for charitable companies limited by guarantee they are generally called "directors", for charitable trusts "trustees", and for Scottish Charitable Incorporated Organisations ("SCIO"s) "charity trustees". They may also be "governors" in an educational charity, or a member of a committee of management in other charities or third sector organisations.
What does the "right mix of skills" mean?
The concept of the right mix of skills is by no means new. In 2007, the Scottish Charity Regulator ("OSCR") published its first report under section 33 of the 2005 Act. The charity concerned was One Plus: One Parent Families which, with a turnover of £11 million, in 2005, claimed to be the largest lone parent organisation in Europe. On 22 January 2007, the charity went into liquidation.
As one of the Charity Trustee Lessons to be Learned OSCR stated that:-
"Charity trustees must ensure they have, collectively, the right mix of skills and experience for the type and scale of the charity for which they are ultimately responsible."
The Scottish Governance Code for the Third Sector is a statement of best practice intended for governing bodies of third sector organisations in Scotland. Under the principle of "Effectiveness" it states that:-
"As the board, we should work together as a team, with an appropriate range and balance of skills, and experience, to continually improve the governance of our organisation. This will be done by regularly reviewing [the] performance and mix of skills on the board."
How do you identify the right mix of skills?
To identify whether your Board has the right mix of skills, it is necessary to identify what that "right mix of skills" looks like in practice. This should involve consideration of the charitable objectives of the charity and the activities it undertakes to achieve them. For example, a large sports and leisure charity might identify that it needs governance, legal, sports arts and culture, advertising and marketing, public relations, human resources, accounting and finance, fundraising and charity/not for profit skills.
A small grant-giving charity whose charitable objectives are broadly the prevention or relief or poverty in a particular area might identify that it needs local individuals who understand the needs of the area, someone with investment experience to monitor and oversee the investment managers of the portfolio and also an individual with an accounting and finance background to support with the finances of the charity.
There are many scales matrix available to help charities carry out this exercise. It will be different for every charity and it may well change from time to time. It is always useful to think ahead and consider the right mix of skills in light with the charity's strategic plan. For example, a charity which plans a capital build might wish to seek the skills of a project manager. Once the project is completed it may well decide that that particular skill is no longer required.
Are the provisions in the constitution for trustees still fit for purpose?
When carrying out a review of the mix of skills of the board of trustees, it is worthwhile reviewing the provisions for the board of trustees in the constitution to check whether they are still fit for purpose. There may for example be trustees appointed by other organisations which have become disconnected with the charity over time. Are there ex officio appointments which are no longer relevant? It may be worthwhile asking those organisations whether they are content to give up any trustee positions.
Once the review is complete it requires to be implemented. That may involve changes to the constitution and if so, we would be happy to advise on any changes to ensure that they are made legally and do not result in any unintended consequences. The process for changing a constitution can be challenging and again, we are on hand to guide your charity through that process.