Lack of agility and board-level capacity stretch can be serious risks for charities. With much to contend with on the operational and regulatory front, even a minor crisis can significantly overwhelm a board that is slow to make decisions and has not taken steps to reduce the impact of risk events on trustee capacity.
Common Issues
You might find the following in your governance framework:
- Inappropriate delegations, such as unnecessary involvement of trustees in internal dispute resolution;
- Hard to achieve and inflexible delegation arrangements, such as mandatory three-trustee panels in multi-stage processes;
- Unnecessarily high quorums that cannot be met at short notice;
- Excessive minimum membership requirements for committees with delegated functions;
- Vaguely worded delegations – especially common (and risky) are unclear ‘chair’s actions’ clauses.
- Unwarranted bans on delegations to individuals.
We regularly help charities review their governance arrangements, to ensure they are fit for purpose and removing potential pitfalls.
Beware of overstepping delegated authority
While it can be tempting to simply get on with things in the most practical way, it’s important to get delegations right. Acting outside of delegated powers (known as “ultra vires”) can have serious consequences:
- For Trustees
If trustees make decisions beyond their authority, they may be personally liable, meaning they could have to cover any financial losses themselves. This is not typically covered by trustee liability insurance. Trustees should ensure that their decisions or actions are within their authority. Those making delegation decisions must take due care.
- For Charities
While charitable organisations have more protection than commercial entities, unauthorised actions can still result in financial loss, reputational damage, or legal challenges. Furthermore, a decision taken without proper authority might be overturned.
Best practices for delegation
It’s crucial to record all delegated authorities clearly. This ensures everyone knows what decisions can be made, by whom, and within what limits. Some charities, like Academy Trusts, must maintain a delegation schedule, and the Charity Governance Code recommends documenting delegations in detail.
Agreeing a set of basic standard terms which apply automatically to all new sub-committees and working groups avoids the need to go off-topic during important board discussions and also reduces the risk of creating ill-defined delegation arrangements.