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