A periodic review of a charity's activities, governance and finance can help its trustees and staff examine issues in a wider context, improve effectiveness and ensure that the charity is complying with legal requirements.
It is similarly useful preparation for a review visit by the Charity Commission.
Input from an external source can be beneficial because external contributors are able to offer objective and unbiased views.
There are a number of policies and procedures to think about when performing a review. When looking at governance, for example, charities should think about three key areas: its activities, its governing document and the organisational structure. Are the activities in line with the stated objects?
Is the governing document up to date? Is the organisational structure effective?
A health check should also touch upon trustee recruitment and training.
With Sorp 2005 in mind, charities should consider whether trustees are properly appointed and if they have the correct number of trustees. They should also think about the skills on the trustee board and identify any deficiencies. Equally, trustee meetings need to be considered. Trustees should meet regularly and charities need to look at minuting for the purpose of keeping accurate records.
There are also major issues around conflicts of interest, risk management and the protection of vulnerable people and children. Is the charity's policy on conflicts of interest up to date and consistently applied? As the charity's situation changes, has the management of new or increased risks been provided for? Charities also need to look out for any legal requirements regarding the protection of vulnerable people.
Reviewers should check that every employee has a contract and that procedures for training, appraising and disciplining staff are in place. Legal developments in employment should also be looked at, as should delegation. How do employees report back and what are the lines of communication? Is delegation to sub-committees permitted, and are terms of reference in place?
Charities should take another look at Gift Aid declarations and procedures to reclaim tax. They should also consider whether changes to financial controls and investment powers are needed, including delegation to investment managers.