What have Charity Audit Committees got to do with Depeche Mode?

The short answer is nothing.

But read on, if you want to see a link.?

It arises out of a challenge that was given to me by Stephen Joyce, Finance Director of the Royal Society of Chemistry. Stephen challenged me to:

"Write a LinkedIn article to make a connection between Audit Committees and any Depeche Mode UK Top 20 song title of your choosing"

Stephen and I both share a love of music (particularly the 1980s) especially on vinyl or, even better, if it’s live performances.?

This year has seen me follow my favourite band for a few gigs as part of their Memento Mori World Tour and I therefore decided that now was the time to accept the challenge. I have taken the challenge one stage further: I have chosen 10 Depeche Mode song titles and linked them to best practices and top tips for charity audit committees so here goes my way of making a connection between Depeche Mode song titles and audit committees. Each song is listed with the year in which it was released, its highest UK Chart Position and then a headline as to how it connects to audit committees:

1. New Life (1981, 11)

The ongoing need to consider succession and new audit committee members

Audit committees should be aware of the ongoing need to add new skills and recruit new members at the appropriate times. It can be helpful for a committee to conduct a skills audit to assess how the skills of the committee may be affected by retiring members or new challenges the committee is facing. A successful skills audit will also capture the current skills of the main board and highlight possible gaps where new trustee skills or professional guidance may be required.?

With transparency being important for charities, it is key that any recruitment is in the best interests of the charity and an open process wherever possible. In some cases, it is an explicit requirement in the charity’s rules. Being clear on what is required of new audit committee members can assist in setting expectations on commitment at the start as well as being able to explain the immediate and longer-term objectives and strategy of the charity.?

2. See You (1982, 6)?

You can’t be a very effective committee member if you are not visible

Committee members are typically busy people and providing sufficient notice of meetings contributes to achieving a good attendance record. A well-run audit committee will have a rolling programme of meetings at least twelve months ahead. Consideration also needs to be given to the frequency of committee meetings; it will be dependent on the size and complexity of the charity as well as any reporting requirements to the main board. The best time of day to hold meetings will also need to be carefully considered. This can be a challenge as the preference for charity staff to meet during normal office hours can often contrast with committee members who may themselves be in employment elsewhere.

Start times can be varied from meeting to meeting if a compromise is needed or, alternatively, consider using technology such as Teams or Zoom. Technology can be useful if timely decisions are required or to reduce the costs and time of travel although caution should be exercised as meetings can only be held in this manner if permitted by the charity’s governing document.

3. Get the Balance Right! (1983, 13)?

An audit committee should provide a balance of skills

Consider the following football scenarios:?

• A team with 11 strikers.
• A club that puts its best coaching staff in charge of its second 11.
• A team with eight players rather than 11.
• A coaching staff that does not have any specialists in goalkeeping.
• A club that fails to identify the weaknesses in its team and the players from opposing teams that could be purchased to fill those gaps.?

In each of these situations performance is most likely to be at a lower standard than could otherwise be achieved. Furthermore, in each of the given situations the way in which the scenario was structured or organised was to the detriment of the outcome. Similarly audit committees need to be structured for good governance in order to optimise performance.

An audit committee is not about choosing strikers or goalkeepers but it does need to strive for the best committee members to provide a balance of skills, experience and behaviours. In some popular research Dr R M Belbin developed nine team roles to identify people’s behavioural strengths and weaknesses with the objective of aiding recruitment processes and developing team performance. The theory is equally applicable to an audit committee where each person should be chosen to ensure that the correct balance of skill is achieved.

4. It’s Called a Heart (1985, 18)?

Not forgetting the governing document...the heart of a charity’s modus operandi

The governing document or constitution should detail how and when to organise meetings and how to vote on decisions; these requirements must be followed to avoid invalidating any of them.

Typically the governing document will explain the minimum number of trustees that must attend a committee meeting so that decisions can be properly made (the quorum) and how to deal with conflicts of interest. It is good practice to have a standing item on any formal agenda for declarations of interest to be made or allow for confirmation that there are none. Capturing this in accurate minutes of meetings is vital evidence of a well run audit committee. Minutes should be a record of the key decisions taken and points of discussion without turning into a transcript of the meeting. Preferably the minute-taker should not be a committee member but if this is not possible then steps should be taken to ensure an appropriate involvement in the meeting of the relevant person.?

5. Behind the Wheel (1987, 21)?

The person behind the wheel of an audit committee is the chair

WHAT MAKES AN EFFECTIVE CHAIR?

A good chair should recognise:

• the role may require input at any time, not just at scheduled meetings
• the need to focus on key risks facing the charity when planning committee activities
• the need to keep committee members engaged; and
• the need to set clear expectations for advisers, such as internal and external auditors.

6. Never Let Me Down Again (1987, 22)

Are some audit committee members letting you down?

Assuming that the audit committee has organised its meetings well in advance then the attendance record of individual members is something that should really only need to be considered in exceptional circumstances. However, audit committees (and boards) do struggle with the attendance of certain individuals from time to time. To properly fulfil their responsibilities under the terms of reference, an audit committee member needs to be in attendance more often than not unless medical or other valid reasons are known. For this reason there been a trend for annual reports to include attendance records for individuals.?

7. Everything Counts (1989, 22)

Only a lack of cash will cause a charity to fail financially

Every charity requires funding to survive; ultimately, only a lack of cash will close an organisation. If establishing the charitable purpose is the first priority, then implementing a financial strategy is a close second.

An effective audit committee is aware of the financial risks involved for each significant source of existing income streams but also considers the potential for new ventures and new streams of funding, with diversification and sustainability in mind. Alongside these risks is the mitigation of those associated with loss, inefficiencies and fraud by having robust financial controls and procedures in place. The failure to do so often leads directly to serious financial mismanagement or abuse. The Charity Commission has cited numerous examples where its case workers encounter charities in which the very basics of good practice are ignored: trustees routinely signing blank cheques, single individuals responsible for counting cash donations, staff members signing off one another’s expenses claims. Naivety is often involved when charities fail to put controls in place, and while a certain degree of mutual trust between trustees and staff members is vital to the smooth running of an organisation, it must always be underpinned with effective systems and processes that protect the charity.

Most charities will be undertaking multiple activities and being able to understand the income and costs associated with each is paramount.?

8. Enjoy the Silence (1990, 6)

Dominant figures – can they be silenced?

Good governance identifies the need for effective, collective decision-making by committees. Too often, individuals, or small groups of individuals controlling a charity to the extent that decisions are not made properly by the board as a whole or the relevant committee. When individuals are too overbearing, others often fail to fulfil their duties to consider issues before making decisions, perhaps because they are intimidated or obstructed by the dominant individuals, or because they are simply not included in decision-making in the first place.

Therefore audit committee members should consider whether their charity is affected by dominant individuals, and reflect on their own performance; do they always apply their skills and experience when contributing to decision-making, or are they sometimes tempted to go with the flow and agree with majority feeling? Do they regularly challenge the charity’s executive on proposals, or its performance against targets? Do they switch off when certain issues arise in committee meetings, because they don’t consider it to be their area of expertise or responsibility?

9. Walking In My Shoes (1993, 14)

Matching personal interest with the needs of the charity

An audit committee member should consider the purpose and mission of the charity before joining. It needs to fit - or at least fit with the vision of – the individual’s own beliefs. Blended with the appropriate time commitment given by the individual this should be a good starting point to motivate that person to provide an ongoing contribution.

There are also many other areas to consider at the outset including determining potential conflicts of interest, cultural fit of the individual and the required expertise and experience. The charity should also confirm that it requires the skills and experience of the individual concerned. This may not necessarily be an immediate need but could be as part of a wider succession plan for an existing committee member. Some charities ask people to initially observe a committee beforehand so that both sides can get to know each other.

10. Wagging Tongue (2023, 54)

Timed agendas

Determining the suitable amount of time required to complete each meeting is a sound governance principle. New audit committee members can successfully be introduced to others immediately prior to a meeting (with refreshments or at an alternative social gathering). This has the benefit in getting the new member to integrate and the group to work better as a team during their precious meeting time. The agenda itself should be informative to provide members with the insight they require to be effective decisionmakers. Many charities benefit from employing a consent agenda, which combines routine reports, minutes and other noncontroversial items as one agenda item on the basis that they do not require discussion or independent action. These items are presented to the committee in a single motion allowing any member to request that a specific item be moved to the full agenda for individual attention. The majority of the meeting can then be devoted to strategic thought, decision-making and actions. Organising meetings in this way is beneficial because it streamlines them and allows the focus to be on strategic and leadership issues. In order to operate a consent agenda effectively documentation must be provided in good time prior to any meeting to allow committee members to give sufficient care and attention to the information.

If you enjoyed some of these hints and tips then check out more insights at Charities | RSM UK