2nd QUARTER 2014
Charities and not-for-profits use a
variety of payment methods for their
purchases, including cheques.
Although cheque use is diminishing
in the face of electronic payments,
many charities still rely on cheques to
make payments without having to
access the Internet or carry cash.
Losses due to cheque fraud continue
to dwindle, dropping 22 per cent from
£35.1 million in 2012 to £27.5 million
in 2013, according to Financial Fraud
Action UK (FFA). The FFA credits
improved fraud detection methods,
such as the digital analysis of
cheques, with causing the significant
decrease.
To continue this trend of shrinking
cheque fraud losses, the Charity
Commission is urging charities to
follow these basic controls:
Ensure cheque books are kept in
a secure place.
All organisations require good
governance to prevent dissolution.
Charities and not-for-profits, with
their tight budgets and limited
resources, are especially in need of
judicious governance that prioritises
the needs of the organisation.
Sensing this need for guidance, the
Developing Governance Group in
Northern Ireland developed a code
consisting of seven key principles of
good governance for the voluntary
and community sector.
Adhering to these seven principles
can help your organisation flourish
under stable, effective governance:
Leadership – Every
organisation needs good
leadership. Make sure yours is
led by a committee which
guarantees the delivery of its
objectives, charts its strategic
course, and reflect its values.
(Continued on next page)
This Simple Guidance Could Help Your Organisation Avoid Cheque Fraud
Good Governance Principles
DID YOU KNOW?
The charity sector in England and Wales has
a total annual income of more than £50
billion, and 90 per cent of these charities
issue cheques on a regular basis, according
to the Charity Commission. The opportunity
for cheque fraud is extensive—learn how to
protect your organisation.
Risk management tips brought to you by the insurance professionals at Glowsure Insurance Brokers
Review bank mandates and
authority limits.
Prohibit the signing of blank
cheques.
Record payment details in cash
books, including the cheque
number, payee and nature of the
payment.
Obtain documentation to validate
the payment, including invoices
and confirmation that the goods
or services have been received.
The FFA recommends always
drawing a line through unused space
on the payee and amount lines to
prevent fraudulent cheque
alterations.
Learn Your Duties and Liabilities as a Charity Trustee
(Continued from previous page)
Responsibilities and obligations
– The members of your
management committee are legally
responsible for their decisions and
should be collectively accountable
for the welfare of your organisation.
Effectiveness – By assuming
responsibilities, your management
committee should organise itself to
effectively fulfil its obligations.
Performing, reviewing and
renewing – Periodically reviewing
the organisation’s effectiveness is
critical to ensure legal compliance
and long-term survival.
Delegation – An organisation will
quickly crumble without clearly
delineated responsibilities. Your
management board needs to
assign responsibilities to anyone
performing duties for your
organisation and monitor their
performance.
Integrity – When running a charity,
integrity is key to achieving its
mission. All management decisions
should be made with integrity and
in the best interests of the
organisation.
Openness – Transparency is
necessary to show nothing is being
mismanaged.
Good Governance Principles Working as a charity trustee, a person who manages the administration of a
charity, can be an intensely rewarding experience, providing opportunities
for skill development, networking and helping the community. As a trustee,
you are ultimately responsible for the affairs of the charity and for achieving
its goals. Although most trustees are volunteers, the position is not without
risk. Even when acting with good faith, you could be held personally liable
for your business decisions.
Anyone, including senior management, directors, board members and
committee members can be considered a trustee and subject to duties
under charity laws. Just because your title or job description does not
contain the word ‘trustee’ does not mean you are not considered one.
Before becoming a trustee, learn all you can about the charity and your job
expectations. This includes reading the governing document (the main
constitutional document governing the key aspects of the charity), annual
reports, policies, accounts and knowing the charity’s legal structure. Once
you become a trustee, you are responsible for duties including:
Duty of care – You must use reasonable care and skill in your charity
work, including using any special knowledge or personal experience.
Duty of prudence – You must ensure that the charity’s finances are
used appropriately, prudently, lawfully and in accordance with the
charity’s objectives.
Duty to comply – You must guarantee that the charity complies with
the relevant laws.
In addition to fulfilling your trustee duties, you may also be held personally
liable for any debts or losses the charity incurs, depending on the charity’s
legal structure and governing document. If you incur debt or liabilities
totalling more than the charity’s assets, you may be responsible for
covering the difference, even if the liabilities were properly incurred. You
can help lower your personal liability by accomplishing the following:
Establish effective induction procedures for new trustees.
Seek professional advice when needed.
Implement effective internal management and financial controls.
Ensure that the charity has the resources to meet its requirements
under any contract it signs.
Rely on Glowsure Insurance Brokers for more guidance on securing your
charity’s success.
The content of this Pro-File is of general interest and is not intended to apply to specific circumstances. It does not purport to be a comprehensive analysis of all matters relevant to its subject matter. The content should not, therefore, be regarded as constituting legal advice and not be relied upon as such. In relation to any particular problem which they may have, readers are advised to seek specific advice. Further, the law may have changed since first publication and the reader is cautioned accordingly. © 2014 Zywave, Inc. All rights reserved.
Risk management tips brought to you by the insurance specialists at Glowsure Insurance Brokers