The ICAEW has called for a change in the law to allow the Charity Commission to refuse a charity registration when a similar charity already exists.
The recommendation forms part of ICAEW’s study, on behalf of the Charity Commission, into charities’ use of strategy. Some 26 charities of varying income sizes were interviewed.
It found that charities with strategies appear more able to deal with fluctuating economic conditions, but few charities considered merger in their strategies.
The majority of larger charities interviewed (88 per cent) with income over £1m had strategies, compared with only 44 per cent of charities with income below £1m. Those with no strategy in place said they were prioritising survival.
The roles and responsibilities of trustees were also reviewed with “unsatisfactory results”. Some trustees lacked a sound appreciation of their roles and responsibilities while others were not respected by management.
Also, it said trustee boards lacked both financial and general experience, particularly in developing strategies, and a number of charities appeared to suffer from a conflict between the CEO and trustees.
Further, charities often had a strong sense of identity and the review panel recognised that this made mergers difficult.
There was also a discussion around the number of new charities that were being registered each year and whether an increasing greater number of smaller charities, each with their own overhead costs, represented value for money.
ICAEW recommended that the Charity Commission should be more stringent in its registration process and that legislation should be developed to allow it to refuse registration where it believes the new charity is very similar to an existing charity.
It also recommended that the Charity Commission provide guidance on strategy processes and links to risk and impact, encourage charities to use scenario planning techniques in their strategy planning, and clarify guidance on conflict with subsidiary and friends’ boards.
Other recommendations included for the Charity Commission to emphasise the need for trustees to hone their soft skills in dealing with others within their charity, and to undertake research to further explore the causes of shortcomings in the performance of board effectiveness regarding governance and strategy.
Nick Brooks, chair of the ICAEW charity and voluntary sector group and head of not-for-profit at Kingston Smith, said: “Most disappointing in the review was the continued theme of poor governance - boards not understanding their role; not understanding their charities and not reacting positively with management.
“The lack of financial acumen amongst boards is a continuing concern.”
Sam Younger, chief executive of the Charity Commission, added: “Sadly, the findings point to the governance weaknesses present in many charities, often linked to poor understanding among trustees of their role and responsibilities and a lack of financial skills within charity boards.”
