In a landscape where frontline services have been hard hit by central and local government cuts, small charities play a crucial role in filling the gaps and helping to glue the fabric of our communities together. A new report from PolicyBee suggests they need support and guidance in managing their risks more effectively, if we are to continue to rely on the essential work they do.
Specific examples of poorly-managed risks include a lack of dual signatories on cheques; unidentified or poorly handled conflicts of interest; and lack of induction training for trustees on their legal responsibilities. All carry a threat of seriously affecting a charity’s ability to function effectively, its reputation and, if things go badly, its very existence.
PolicyBee’s Dominique Fell-Clark, who is also founder of The Women & Girls Fund Suffolk, funding female-focused small charities in association with the Suffolk Community Foundation, commented: “At a time when the charities sector as a whole is under increasing scrutiny, and small charities are already struggling due to a lack of funding and resources, managing risk needs to be more under the spotlight.
“With the important Christmas fundraising period upon us, small charities may receive more rigorous questioning from potential donors in order to ensure their donations are being handled efficiently, and that the charity as a whole is being managed effectively. As the research highlights, many small charities are currently poorly equipped to identify risk and deploy the measures required to protect both the individuals within their organisation and the organisation itself.”
Major barriers – funding & resources
Sixty-four per cent of respondents from small charities cited a lack of time, followed by a lack of funds (52%) as the major barriers to putting risk management measures in place. Lack of expertise was also highlighted by 39%. Similar hurdles were cited as the reason for not having received risk and governance training.
Risk management register
Only eight per cent of small charities have a risk management register in place*** and while a risk management statement is only a statutory requirement when annual income is above £1 million in England & Wales (£500k in Scotland and Northern Ireland), the Charity Commission encourages all charities to adopt a statement, as a matter of good practice:
‘Trustees of smaller charities with gross income below the statutory audit threshold (who should still be concerned about the risks their charity faces) are encouraged to make a risk management statement as a matter of good practice.’
The ‘right’ advice not getting through
While risk and governance advice is readily available from a number of sources that support charities, the research shows that many small charities are not familiar with the organisations that provide it. Sixty per cent are not very familiar with seven of the main regulatory bodies and umbrella organisations that support charities in the UK.
Dr Olumide Adisa, Principal Investigator Suffolk Institute for Social & Economic Research, University of Suffolk said: “Despite the fact that the risks faced by charities depend on the size, funding, and services offered, the case of small charities deserves special consideration because these organisations are often performing essential frontline services in their local communities on shoestring budgets and many smaller charities are more likely to view risk management measures as a drain on resources.
“Understanding how small charities identify, assess and mitigate risks can make a real difference to their longevity and sustainability as it highlights the extent to which different types of risk are dealt with in these organisations and the barriers that remain.
Dominique Fell-Clark concluded: “The combined social capital and impact of smaller charities is immense and that’s why we we are urging this group to give serious thought to what their risks are and how they can manage them better. Not forgetting that if things go wrong at the smaller end of the scale, it can become very personal.”
PolicyBee has today launched its online Charity & Community Help Hub, to point small charities directly to useful information that can help them. It filters the wealth of charity support advice available and delivers a one-stop-shop platform of essential third-party resources.
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