Frozen handcuffs?
Events, dear boy, events’ are the unknowns that can most easily steer a government off course (or on, depending which way you look at it).
One would have hoped that the independence of the third sector would offer some degree of protection from vagaries of fortune outlined in Harold Macmillan’s after-dinner ruminations. It would appear not.
At the time of writing, Iceland’s authorities appeared close to agreeing a repayment package for UK savers – protected on grounds that private individuals are not ‘informed investors’, but the billions of pounds invested by councils, charities, universities and other public bodies are still in limbo. One subscriber to this magazine observed that if he, an ordinary saver, had worked out the Icelandic economy wasn’t in the best of shape back in March and got his cash out, why was this not possible for larger ‘more informed’ bodies? There is no doubt that the problem does raise serious governance issues. The Charity Commission reminds us in its notes on how to claim under the FSCS (see News review, The long slow thaw ): ‘When exercising any power of investment, trustees must follow standard investment criteria on the suitability and diversification of investments. They must also review investments from time to time, and take proper advice when investing or reviewing those investments.’ So what measures need to be put in place to make sure this really happens?
Rodney Buse, chair of Charity Trustee Networks (see his viewpoint article), told me: ‘I have advocated that finance directors in the sector act as independent members of audit and risk committees of other charities. I think in the current climate many should ask whether their audit and risk procedures are adequate and to look at these committees’ composition and terms of reference.’ He’s got a point, because the alternative is the end of the ‘light touch’ regulation the sector has enjoyed so far. Not paying attention to available credit warning information isn’t really an excuse, even for small organisations, and there is much to be said for each charity for setting up routine investment-specific alerts for governing boards and executives (if not already in place) so that the same thing does not happen again.
We can only hope that the crisis talks held on 10 October will result in some positive news for the sector. Something decisive needs to be done – recent headlines would have hardly reassured nervous donors. The UK’s £37bn bail-out for the banks has shifted the balance between government and markets overnight – banks and their shareholders pay a price for government support. It is by no means certain that an emergency government payout to the sector would not incur something comparable. Events indeed.
Author: Clarissa Dann
Clarissa Dann was the editor of Caritas as well as an HR and management online service,he People Bulletin until July 2011.
She is now the editor of the specialist trade finance magazine, Trade and Forfaiting Review which can be viewed at www.tfreview.com but does write on charity finance and investment from time to time.
Clarissa has a background in legal and professional publishing, as well as business journalism and holds an MBA from
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