In the fourth part of our series on contract management pitfalls, we look at the risks arising out of varying the terms of construction contracts.
The Air Ambulance Service runs two local air ambulances services, serving a total of five counties - Warwickshire, Northamptonshire, Derbyshire, Leicestershire and Rutland - and the Children’s Air Ambulance. It is a substantial charity with annual income of around £11 million and a dramatic web-site headed ‘Mission Critical + Saving Lives’.
Complaints were made to the Charity Commission after the charity ran a fundraising event that lost £111,000 and made a loan of £27,000 to its deputy chief executive. The Commission found that there had been serious governance failings, concluding that:
- ‘the processes in place for managing the fundraising event were significantly inadequate’,
- while the decision to make the loan may have been in the charity’s best interest but the trustees were ‘unable to demonstrate that [they] made the decision properly and collectively’,
- ‘the trustees did not exercise sufficient control over the CEO’,
- the trustees were ‘over-reliant on the CEO and their chair’ whose relationship ‘was such that they did not sufficiently involve the trustee board as a whole’, and
- the trustees did not appear to be fully aware of their duty to act collectively.
The charity trustees agreed an action plan to address the concerns raised and have ‘made good progress’ in doing so. However, the Commission’s findings are serious and it is likely that the trustees had to devote a significant amount of time to responding to the Commission and managing the reputational impact of the investigation and consequent publicity.
The report is a useful reminder that charity trustees are ultimately responsible for the actions of their charity. The Commission emphasises that charity trustees must
‘make themselves aware of and monitor any significant endeavour the charity enters into, ensuring that proper risk assessments and due diligence are carried out at the outset and kept under review’.
The report also highlights:
- the limits of the Commission’s helpline - the charity had called the helpline to discuss the loan but the Commission was not swayed by that, responding: ‘our helpline provides generic advice; if a charity is seeking our formal view … [it] should write to us, setting out the specific circumstances and specifying exactly what power it considers it can rely on’;
- the importance of trustee training - ensuring through trustee induction training and regular refreshers that all board members are aware of their duties and able to assert themselves where necessary to ensure decisions are made properly and collectively;
- the need for caution around ‘chair’s action’ - If the chair is authorised by the board to take action in an emergency, the decision should be reviewed and, if appropriate, ratified by all of the charity trustees as soon as possible afterwards;
- the need for clear and robust systems – the charity in this case agreed to a wholesale review of policies and procedures; and
- the importance of specialist advice – in its concluding comments the Commission emphasises that:
‘It is a legitimate call on a charity’s resources to seek professional advice when it is needed, including when entering into significant fundraising ventures.
Charities need to be aware when and where they need to obtain proper advice in relation to charity law specifically (as opposed to experts in any other areas of law) – either from the commission, or from a charity law specialist’.
For the full report click here.
For more information
Contact Shivaji Shiva.
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