ICSA Ireland

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18 December 2017

Charity Code of Governance

I was delighted to be part of the panel discussion ‘Charity Leadership – From Good to Great’ at the recent Charities Institute Ireland’s annual conference and noted the parallel governance journey of UK and Irish charities. With the Governance Code for the Community, Voluntary and Charity Sector currently under review and in consultation, I take the opportunity to share with Irish charity trustees England and Wales’ elaboration of its Charity Governance Code launched in July.

Criticism of the 2010 version of the charity code was that it continued to be focussed on the mechanics of good governance: polices, processes, procedures and didn’t reflect the current importance placed upon the dynamics of good governance: people, personality, behaviours, relationships, culture and values. This has changed.

The new code has seven principles, which rest upon a foundation principle. As before, it is believed that these principles are universal to all types of charities. The principles are:

Foundation principle – which expects trustees to be committed to the cause, recognise meeting public benefit is an ongoing requirement, understand role and legal responsibilities, and commit to implementing good governance.

Principle 1 Organisational purpose - the board is clear about the charity’s aims and ensures that these are being delivered effectively and sustainably.

Principle 2 Leadership - every charity is led by an effective board that provides strategic leadership in line with the charity’s aims and values.

Principle 3 Integrity - the board acts with integrity, adopting values and creating a culture which helps achieve the organisation’s charitable purposes. The board is aware of the importance of the public’s confidence and trust in charities, and trustees undertake their duties accordingly.

Principle 4 Decision making, risk and control - the board makes sure that its decision-making processes are informed, rigorous and timely and that effective delegation, control and risk-assessment and management systems are set up and monitored.

Principle 5 Board effectiveness - the board works as an effective team, using the appropriate balance of skills, experience, backgrounds and knowledge to make informed decisions.

Principle 6 Diversity - the board’s approach to diversity supports its effectiveness, leadership and decision making.

Principle 7 Open and accountable - the board leads the organisation in being transparent and accountable. The charity is open in its work, unless there is good reason for it not to be.

In addition to these principles, there is supporting rationale, outcomes and recommended practice (separated between charities with an annual income over £1m and those below). One fundamental difference in this code is the adoption of ‘apply or explain’. As the code is voluntary, it better reflects the reality that we can only encourage charities to adopt the code and explain how their governance arrangements are effective.

There still remain areas that require further clarification or guidance, e.g. an example of reporting the application of the code in the trustee annual report, although we do not promote any type of ‘boilerplate’ statements; guidance on diversity reports; and more emphasis on the long-term interests of beneficiaries. Various organisations are producing guidance and toolkits to help charities implement the code; some will be free. Where relevant, many will be signposted on the code’s website.

Producing the code is only the start of the hard work, the steering group are now looking at how to put the code on a more sustainable footing. Further funding is required to help promote take up of the code and develop baseline research to measure impact. Furthermore, developments in the UK Corporate Governance Code will be monitored with a view to any impact it will have on the current code. This could mean the code is revised in the next two years. The steering group is also reviewing its composition – like all committees we need to ensure we have the right skills, competencies and knowledge to drive the code forward.

Louise Thomson FCIS
Head of Policy (Not for Profit)
ICSA: The Governance Institute.

The code can be found at: https://www.charitygovernancecode.org/en

Further good practice guidance can be found at: https://www.icsa.org.uk/knowledge/charity-resources