Five things your auditor wishes every charity trustee would ask

Trustees’ Week celebrates the contribution trustees make to charities across the UK, and it is also a good moment to reflect on what effective trusteeship looks like in practice.  Trustees do not need to be accountants, lawyers, investment specialists or experts in every aspect of the organisation they govern. Indeed, one of the strengths of a successful trustee board is often the diversity of experience and perspective around the table. 

What trustees do need is curiosity. 

The Charity Commission is clear that responsibility for the governance of a charity ultimately sits with its trustee board. Its guidance covers everything from having the right people and skills on the board to appropriate decision-making, risk management and internal financial controls. 

As auditors working with charities of different sizes and complexities, we see first-hand the difference that constructive challenge can make. Often, the most valuable contribution a trustee can make isn’t knowing the answer but asking the question that encourages everyone around the table to stop, think and challenge an assumption. 

Here are five questions we think every trustee should be asking. 

“How financially resilient are we, really?” 

A healthy bank balance does not necessarily mean that a charity has significant financial headroom. Some of that cash may represent restricted funds, some may already be committed to future activity, and property and other fixed assets may make reserves look substantial without providing the cash to meet next month’s salaries. Trustees should therefore understand the story behind the headline numbers. 

That means asking: What are our genuinely available free reserves? How many months of expenditure do those reserves represent? How concentrated are our income streams? How sensitive is our forecast to changes in income, salaries or other costs? How much unrestricted cash do we expect to have in six or 12 months? What action would we take if the downside scenario actually happened? 

This is also where the reserves policy becomes important. A good reserves policy shouldn’t simply justify the year-end reserves figure. It should explain why the charity needs the level of reserves it holds, how that level has been determined and what trustees would do if reserves moved materially above or below it.

“Are we getting the information we need to make good decisions?” 

One of the easiest measures of a board pack is its length, and one of the hardest is whether it actually tells trustees what they need to know. Twenty pages of financial information can still leave a trustee unable to answer a relatively straightforward question: are we performing better or worse than expected, and why? 

Good management information should allow trustees to see the relationship between: 

strategy → activity → performance → finance → risk → impact. 

For financial information, that might mean reporting actual results against budget, explaining significant variances, looking forward through forecasts and cash flows, and distinguishing between unrestricted and restricted resources. For non-financial information, it could mean measures of service delivery, fundraising performance, beneficiary outcomes, staff turnover or other KPIs specific to the charity’s objectives. 

Trustees should feel able to challenge information they don’t understand. An unexplained variance, an unexpected movement or a KPI that consistently doesn’t quite make sense deserves another question.

Good trustees don’t need to have all the answers 

Trustees remain responsible for the decisions they make, but that does not mean they are expected to have all the necessary specialist expertise themselves. Charity Commission guidance requires trustees to ensure they are sufficiently informed when making decisions and expressly recognises the need to obtain professional advice where appropriate, for example where trustees are uncertain about their legal powers. Taking appropriate professional advice can therefore form part of trustees exercising reasonable care and skill and reaching a properly informed decision. 

This Trustees’ Week, we would encourage trustee boards to make space for curiosity. One of the most valuable things a trustee can bring to the boardroom isn’t always the answer.  Sometimes, it’s the question nobody else has asked. 

At your next board meeting, consider choosing one of these five questions and setting aside ten minutes to discuss it without reference to the usual board papers. The resulting conversation may be more valuable than simply adding another report to the pack.