The sector must get better at reaching trustees "who may not fully understand their roles" the National Council for Voluntary Organisations has said, after the Charity Commission warned a charity which paid a trustee and spent most of its income on fundraising.
The National Hereditary Breast Cancer Helpline was issued with the first official warning by the Charity Commission last month after the charity failed to address concerns about its finances.
Wendy Watson, the charity's founder, paid herself £31,000 for running the charity while she was chair, a payment which had not been properly authorised and which she says was an error.
The charity had also been criticised for spending large amounts on staff, charity shop and sales costs, which meant that the charity was only spending a fraction of its income on running its helpline.
While the charity shops brought in 90 per cent of the charity’s income, according to its accounts for the year ending 31 March 2016 store costs and fundraising accounted for £409,227 of its total income of £924,827.
Staff costs were also £397,168 and cost of sales accounted for £123,580, the accounts show.
The charity’s 2015 accounts show that only £27,403 was spent on charitable activities, despite a total income that year of £974,555.
Speaking to Sky News yesterday, Watson said she wanted to make the charity more sustainable so she could retire and hire staff to run the helpline, which she had been running voluntarily by herself.
She said: "Mistakes were made. I'm not a businesswoman, I'm somebody passionate that wants to keep the helpline going and find a way to raise some money to do that.
"The charity needed to make the shops more profitable, which is what we've been doing. That will enable me to train others to work on the helpline so that I can retire."
A report released by the Charity Commission last month says that the charity had been "exposed to undue risk through a lack of appropriate financial controls and its financial model was unsustainable".
The report also criticises the unauthorised payments made to Watson and the charity’s receipt of interest-free loans from a trustee "for which no formal agreement or repayment schedule was in place".
The report says: "Specifically, although the former chair had resigned as a trustee, she continued to run the charity’s operations without any formal role and continued to receive payments.
"They were continuing to allow the former chair to make key decisions about the operation of the charity, despite having resigned as a trustee."
The charity’s failure to properly address the issues raised by the regulator led to the commission issuing an official warning under the Charities Act 2011 – the first time it has used these new powers.
The warning calls on the charity to review the loan arrangements it has in place, properly record board-level decisions and improve its financial controls.
Aidan Warner, external relations manager at NCVO, said: "It’s obvious that Mrs Watson is very well intentioned but this case is the perfect reminder that good intentions are not enough to run a successful charity.
"There’s a major question as to how the trustees ever arrived at the strategy of rapidly opening a large chain of shops in order to try and support a small, low-cost helpline.
"It’s alarming that Mrs Watson didn’t properly understand her role as a trustee, and that matters didn’t improve even after the commission’s involvement.
"We have lots of guidance available on trusteeship which is very well used. But I think all of us in the sector should think about what more we can do to reach those trustees who may not fully understand their roles."