Collective Decisions, Collective Responsibility and Individual Responsibility (Resource developed by Simon Croft)

The ‘Good Neighbours’ Community Group Scenario ‘Good Neighbours’ is a small, local charity with a board of seven trustees including the original founder. They have around thirty volunteers and no staff. The organisation provides help to local elderly or housebound people – taking them shopping, to the dentist or the hairdresser and similar activities. To date, they have run almost entirely on donations from individuals including one or two small legacies, and they currently have about £600 in the bank. They have just received a £1000 grant to help them recruit, train and support more volunteers so they can help more people; to publicise their work to reach new clients; and to produce a simple newsletter. The grant does not include any provision for IT. However, at the last board meeting, the trustees started to discuss whether they should buy a computer – to help them manage membership lists and volunteers records and to produce the newsletter and publicity. The founder and one other trustee are very keen; the others are less sure this is the right thing to do and want to think costs and implications through more fully before a decision is made. At the following meeting in a month’s time, the founder arrives at the meeting with a brand new £500 laptop. He saw there was a special offer at a local shop that expired before the meeting and so bought it on his personal credit card there and then. He expects the board to reimburse him from the charity’s funds immediately before he starts getting interest charges on his credit card. Discuss this scenario. PART 1 1. What do you think of the founder’s actions? Do they show an understanding of collective decision making and collective responsibility? 2. What do you think the founder should have done when he saw the laptop offer? 3. What is the board’s duty to the charity and the charity’s funds? (If you’re not sure, see Principle 1, Point 2) 4. Do you think the founder should be taking part in the decision about what to do next since he now has a personal interest in the outcome of the decision? (If you’re not sure, see Principle 5, Point 3 - Conflicts of interest) 5. If the board collectively decides that buying the laptop was not in the best interests of the charity at this time, what should they do? 6. If the board agreed to reimburse the founder even though they don’t think the charity needs the laptop, what would that mean as regards collective responsibility and hence for their own personal liability?

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PART 2a The board decides that the brand new laptop isn’t needed by ‘Good Neighbours’. Fortunately, the laptop is a standard package, hasn’t been opened and the founder is able to return it subject to a small handling fee (which he pays himself) and isn’t seriously out of pocket. However, relations on the board are strained as a result. Both the founder and the other trustee who was keen on buying the laptop start talking to volunteers and clients saying that they tried to bring the board up to date with new IT but their positive steps were (wrongly in their opinion) undone. They say it’s not their fault if volunteer management and booking arrangements start falling apart. 1. What do you think of the actions of the founder and other trustee? Do they show an understanding of collective decision making and collective responsibility? 2. What harm do you think their actions might do to the charity? (See Principle 5 Point 1 – Protecting the organisation’s reputation) 3. What responsibility do the other trustees have in this situation? What action(s) do you think they should take?

PART 2b The board decides that the brand new laptop is needed by ‘Good Neighbours’. However, since they only have £600 in the bank and half of that is already committed to other expenses, the Treasurer says they should reimburse the founder from the £1000 grant. No-one questions this and it is minuted as a decision. 12 months later, the board submits their end-of-grant report to the funder showing what the money was spent on, and receives a letter saying they need to repay the £500 spent on the laptop as that was not what the grant was given for. 1. Who do you think is responsible? 2. Who could be liable? 3. What went wrong?

FINALLY:

1. How would you prevent something similar happening in future?

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Key Points - The ‘Good Neighbours’ Community Group Scenario PART 1 The founder did not have the authority to buy the laptop on his own. He ignored the principle of collective decision making and expected the rest of the board to take collective responsibility for his individual decision by agreeing the expense retrospectively. He has effectively put his own personal money at risk by acting without the authority of the board. If the founder really thought that the laptop offer was too good to miss, he could have called an extra committee meeting and sought the collective decision of the board – and would then have been bound by it. The board has a duty to act in the best interests of the charity and its beneficiaries. It has a duty to spend the charity’s funds legally and wisely (prudently). The trustees should therefore try to make the same decision that they would have made if the founder had not yet bought the laptop. They must not let the personal situation of the founder cloud their judgement, even though he may be a friend as well as a fellow trustee. This may mean discussing not only whether a laptop is needed, but also whether the cost of the laptop and other costs (such as insurance, software, support, internet, printer, consumables etc) are affordable, justifiable and the best value that can be achieved. It would be sensible to hear the founder’s views as to why he felt a laptop was so essential, but then the rest of the board should make the decision about what to do next without him. The board might decide that the laptop is not necessary. If so, they must not reimburse the founder. If the board does reimburse the founder, they all become collectively responsible for that decision. If they make the payment knowing that the decision wasn’t in the best interests of the charity, then technically any one, several, or all of them could be held liable to repay the money to the charity’s funds. PART 2a The founder and the other trustee are not upholding the principles of collective decision making and collective responsibility. Even though the decision has not gone the way they personally would have preferred, they still have a duty to uphold it, and must certainly not undermine it. This kind of action can do a lot of damage to the reputation of the charity and can be harmful in other ways too. For example, clients could be worried or lose confidence; board relationships are likely to deteriorate, potentially compromising future effective decision-making and making the board an unpleasant place to work; existing

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volunteers or trustees may feel pressure to ‘take sides’ and might resign as a result of the bad atmosphere; new volunteers or trustees could be put off joining. The board has a collective responsibility to address this quickly. Ideally, the Chair should take a lead, but if, for example, the founder was the Chair, then it would be up to the other trustees to raise the subject, remind everyone of the collective decision making and collective responsibility principles, and find a constructive way forward in the best interests of the organisation and its beneficiaries. PART 2b Under the principle of collective decision making and collective responsibility, all the trustees are responsible. The Treasurer might have proposed the idea, but the rest of the board accepted it as a decision. This collective responsibility translates into individual liability. All of the trustees are potentially liable to repay the £500 that was mis-spent. If the grant funders chose to try to recover the funds, they could pursue any one, several or all of the trustees. The trustees didn’t question the Treasurer’s suggestion or check the grant – they just assumed the Treasurer was correct. Checking and exploring key information and decisions is important – anyone can make a mistake and it is by asking a few (often simple) questions that such errors can be picked up. It doesn’t mean that someone isn’t trusted – it just enables everyone on the board to take an informed part in the collective decisions for which they will be responsible. FINALLY Making sure this doesn’t happen again is mainly down to a combination of making sure everyone on the board knows their role and responsibilities, and a few simple controls and procedures. Training, including good induction, is really important. Make sure all trustees: • Are clear on the principles of collective decision making and collective responsibility and how they link to individual responsibility. • Know they can and should ask questions if anything isn’t clear. • Know the basics of their general responsibilities as set out in ‘Good Governance: A Code for the Voluntary and Community Sector – Version for smaller organisations’ so they know what kind of questions to ask. You may wish to put some basic controls and procedures in place so that everyone is clear on what they can and can’t do.

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