09 April 2020 by Kerry Round
Good governance practices will benefit a charity by bringing an understanding of the risks and opportunities that they face, both now and in the future.
The chances are, if you’re reading an article on charity governance in Governance and Compliance, then you already know and understand how fundamental good governance is to a charity regardless of its size.
What I will do is provide a clear guide as to the issues facing charities in the UK in 2020, where you can get help and guidance, and it would be remiss of me not to highlight some business continuity issues in the current climate of COVID-19. Many charities, in particular the smaller ones, will be particularly hard hit and could even face the possibility of not being able to carry on if affected.
Good governance should be embedded throughout a charity to ensure that robust decisions are made, based on sound and meaningful information, to deliver the charity’s objectives. It builds upon the foundation of regulation and legislation by adding strong and robust accountability, transparency and ethical behaviour. Transparency will protect both the board of trustees and the senior management.
Governance is more than just ticking boxes. It is about attitudes and culture. It is about whether a charity puts its values into practice. It is about how trustees make decisions and how well they understand what is going on.
Good governance includes the following:
• the long-term direction of the charity, including its objectives or purposes
• implementing policies and activities to achieve objectives
• complying with legal requirements
• accountability to those with an interest or ‘stake’ in the charity.
David Holdsworth, Registrar of Charities for England and Wales and Deputy Chief Executive of the Charity Commission, says: “Good governance in charities is not an optional extra, or a bureaucratic detail. Good governance is what underpins the delivery of a charity’s purposes to the high standards expected by the public”.
• Trustees failing to act with reasonable care and skill
• Breakdown in collective decision making by trustees - usually due to dominance
• Poor communication and lack of training in key areas such as governance
• Existing teams being overworked and under-resourced (or otherwise inadequately supported)
• Safeguarding concerns and the implications of adverse and unplanned actions and behaviours that put others at risk
• Reputational management issues
• Executive pay
• New strategic intent from the Charity Commission, which continues to focus on and raise the bar on public trust.
Charities are continuing to be asked to apply the Charity Governance Code (the Code) where applicable as it can be used as a practical tool to help charities and their trustees develop high standards of governance. The Code has its own website which can give you a lot of guidance and can be found at charitygovernancecode.org.
It is not a legal or regulatory requirement, instead it sets the principles and recommended practice for good governance and is deliberately aspirational as some elements of the Code will be a stretch for many charities to achieve. It is a tool for continuous improvement towards the highest standards.Something which perhaps all organisations should strive to achieve, charity, corporate or otherwise.
I’ve spoken a lot about s172 Companies Act 2006 and whilst this is strictly for ‘directors,’ perhaps trustees can also take a lot from this and apply the principle to their decision-making. S172 states: “A director of a company must act in the way he considers, in good faith, would be most likely to promote the success of the company for the benefit of its members as a whole, and in doing so have regard (amongst other matters) to the likely consequences of any decision in the long term, the interests of the company’s employees, the need to foster the company’s business relationships with suppliers, customers and others …”. So, for a board of trustees of a charity to know who all of its stakeholders are and to consider this wider group of stakeholders when making decisions regarding the charity will, by its very nature, be a benefit to the charitable purpose and to the charity as a whole.
Diversity has been gaining traction in the charity sector for quite some time. Leaders should be representative of the communities they operate in and the people they support and the charity sector is no different. For many, inclusion and social justice are at the heart of what the charity sector is all about and indeed the Code states at Principal 5 that: “The board works as an effective team, using the appropriate balance of skills, experience, backgrounds and knowledge to make informed decisions”.
Trustees should be evaluating both their own performance and their composition, as well as asking the difficult questions as to whether they are demonstrating diversity of thought and background to represent those they are trying to support. Indeed, for larger charities the Code recommends an external review every third year.
The Charity Ethical Principles is a new document which is intended to supplement the Code. It states that: “All charities should proactively champion ethical behaviour and reflect and apply their charitable values in any activity they undertake, in addition to meeting their legal and regulatory requirements”. The principles are:
• beneficiaries first
• right to be safe.
Last but by no means least there is the Charity Commission’s guidance – available at gov.uk/guidance/charity-commission-guidance – which is a government site that seeks to answer many of the questions that charities and social enterprises might have.
So good governance should be a priority for all trustees. Charities that operate with their purpose at the core of all they do, and underpin this with robust governance and the highest standards of conduct, will serve their beneficiaries better. Conversely, where we find weak governance, we are more likely to find a charity that is failing to meet its charitable potential.
There is a wealth of guidance out there for any charitable organisation that is looking for it. My concern actually, as most of the governance direction out there is simply ‘recommendation’ and not ‘law or regulation’, means that it can sometimes be difficult for under-resourced charities to know where to start and what to prioritise.
To my mind, if you’re involved in the charity sector it means you have made a decision with your heart and your head to give your all for a good cause.
For the majority of charities there is never an intention to fail at governance and so the clearer the guidance and the easier it is for these charities to get help, the better for society as a whole. And, I give thanks to all those who are part of this charitable world.
In an ideal world, the charity will already have a Risk Assessment Register and a Business Continuity plan, but in practice and with limited resource and budget, these documents might have fallen by the wayside and now isn’t the time for recriminations. If you have not already done so, I would advise trustees and executives to conduct a risk assessment of the immediate situation, consider matters such as: