Finance News: Advice line - Pesh Framjee on finance and governance

Q. We have recently had a situation in which the trustees said they would have responded to an important issue if they had been aware of it.

In practice, they were informed about the matter in the regular information provided by management. Is there a way of dealing with this?

My experience is that it is useful to stipulate clearly what, when and how management should report important issues to the trustees. Failure to do this can lead to recrimination and misunderstandings.

It is often difficult in the two-tier governance and management structure of a charity to know when to report to the trustees and how much to report.

It is also difficult for the trustees to evaluate when they should be taking a more proactive role. As a generality, this is left to the judgement of the chief executive or the senior management group.

This approach works when it is business as usual but can lead to problems when there are difficult judgements to be made. With the benefit of hindsight, it is often possible to see that matters might have been raised at trustees' meetings but not given the necessary emphasis, particularly if they are part of a busy agenda.

My advice is to agree reporting criteria and operating guidelines that clarify when and how matters need to be reported to and actioned by the trustees. They are reported as a 'reportable item' rather than in passing or as part of general information.

The information presented should also have formats and prompts for 'follow-up action', 'matter resolved satisfactorily' and 'further report expected'.

The aim is to ensure the CEO has some guidelines and fallback to help make the judgement call on difficult issues.

Pesh Framjee is head of the non profit unit at Deloitte and special adviser to the CFDG. No liability arises to the author, his firm or Third Sector. Send your questions to pesh.framjee@haynet.com.

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