Managing community funds


Ultimately, who gets the credit if things go right, or takes responsibility if things go wrong?

Having good governance, a well consulted CDP and open policies should reduce the likelihood of challenge. Your organisation’s constitution will describe the responsibilities and accountabilities of the offices within your organisation; refer to these when taking decisions on behalf of your organisation and be aware of the responsibilities you have to your organisation and your community.

A ‘can do’ attitude with actions rather than words will keep people interested. Quick wins will help, but
managing a fund will be about the long term as well as short term achievements.


Good governance, like openness, is an essential aspect of accountability. Whereas openness tends to relate to making sure all activities are transparent, particularly to your community, governance can serve to make sure all structures and procedures are legal and properly regulated.

There are a number of important factors to consider.

Firstly, do you need to separate your income generation company from the fund administration group? You get more control if you keep the fund administration “in house”, but the wider community might find it fairer if there is separate fund management.

There are tax considerations with different governance structures. Consider how these might affect your organisation and you may wish to take professional advice on this. Income, no matter how it is derived, is taxable and this includes community benefit revenue.

The producers of this document all have resources to help you choose and set up a suitable company for your fund administration. This includes help with appropriate templates for governing documents such as Articles of Association, advice on company and director requirements, responsibilities and procedures, registering with and reporting to Companies House and other reporting and accounting requirements.

If you choose to apply for charitable status there are additional requirements and regulations from the Office of the Scottish Charity Regulator (OSCR) that will apply to your group and particular responsibilities for Directors.

‘Arm’s length’ committees

The use of ‘arm’s length’ committees as part of the fund management process can provide an alternative method of decision making, offering improved fairness, openness, and accountability. These committees are one step removed from the main fund managing organisation and their purpose is to assist with and provide additional governance to the fund distribution process.

A common, though not the sole structure is the Project Evaluation Group (PEG). A PEG can be made up purely of volunteers from within the community or can be supplemented by paid external experts or local staff. The normal task of this group is to review and evaluate more substantial and complex projects and activities prior to them being assessed and decided upon by the main committee. This can be a useful tool if used to streamline and distribute the work involved in processing and assessing applications and investment proposals. However it cannot be a substitute for good core governance by the fund manager.

There can be an issue of governance in respect of the behaviour and composition of these arms length structures if they are not properly regulated and openly elected/appointed although they have the advantage that they may attract additional volunteers.

Use of third party support

As with PEGs, the use of external opinion and experts can assist a local community to undertake fund management. There may be unusual or complex proposals and applications that can not be assessed locally without bringing in specialist knowledge. Likewise general external advice and support can strengthen Director/Board member skills and expertise, policy and governance processes. There can be merit in using external volunteers from an equivalent fund managing community to provide a second opinion as part of a local appeal process.

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