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Refining Charity Governance

09 December 2019 by Cecile Gillard

Refining Charity Governance

A consultation process is seeking views on the Charity Governance Code and a suggested ‘light refresh’ of the current version

The Code, first introduced over 14 years ago, is overseen and developed by a Steering Committee of representatives from charity sector capacity and support bodies – the Chartered Institute of Governance, NCVO, Association of Chairs, Small Charities Coalition, ACEVO (Association of Chief Executives of Voluntary Organisations) and Wales Council for Voluntary Action. The Charity Commission endorses the code and strongly encourages charities to use it.

The Steering Group recognises that good governance evolves and so do the expectations of the wide variety of charity sector stakeholders. It is important that the Code should remain relevant, with regular reviews and updating. However, this needs to be balanced against the potential disruption change can cause to those who use the Code and the time and resources it can require for an organisation to adapt and adjust its own practices and procedures. The proposed refresh will therefore focus on revising the existing good practices and adding additional suggested practices. A more substantial review will be left until 2023.

The consultation document asks respondents to provide information about the nature and financial size of their organisation and explain how it uses the current Code. Areas where possible change is explored are:

  • whether the integrity principle should say more about charities’ ethical principles and the right to feel safe and, if so, what the additional material might address
  • whether the diversity principle should be renamed, possibly as “Diversity and Inclusion” or “Equality, Diversity and Inclusion”. Those supporting this suggestion are invited to give details of what further material could support good practice in pursuit of this principle.

There is an invitation to identify other helpful guidance and websites that could be signposted for charities seeking to implement the Code. The Chartered Governance Institute’s excellent range of charity practice notes, model documents and research reports would be an obvious example. Looking ahead, the consultation asks for an indication of issues on the horizon that ought to be considered in the longer term.

Responses to the consultation can be submitted until 28 February 2020.

Code of Practice for Governance and Management of Charities and Funding Bodies (BSI)

The British Standards Institution is expected to publish its Code of Practice for the Governance and Management of Charities and Funding Bodies in February 2020. BSI’s best practice assurance standards are used worldwide, especially in the business sector. So, it may come as a surprise to some that the Institution is applying its distinctive abilities to the public interest realm of charities and funding bodies.

However, bear in mind that its mission is to ‘help organisations make excellence a habit’ and note that the BSI has chosen to operate its own governance framework in accordance with the principles of the UK Corporate Governance Code. Within its governance structure, there is a board with a majority of non-executive directors and formal Audit, Remuneration and Nominations, Standards Policy and Strategy and Social Responsibility Committees support that board. BSI has also adopted its own BSI Code of Business Ethics, which sets ethical values and integrity standards the Institution requires are followed in all aspects of how it does business.

This structure and approach resonates well with underlying good practice and ethical standards relevant to the contexts of charities and funding bodies.

The Code will address good practice in areas of management, governance and the transparency and analysis of financial metrics, as well as impact reporting. It will also suggest the use of a ‘Philanthropic Performance Statement’. It will not deal with fundraising methodology and protocols, the day to day management of funds or the application of funds.

The Code has been prepared for general application to charities, ‘non-profits’ and non-governmental-organisations, as well as funding bodies, operating in any location in the world. Boards and governance specialists supporting charities in the UK’s three distinct charity law and regulatory jurisdictions will want to consider carefully how it can be used alongside legal and reporting requirements and regulatory expectations in those jurisdictions.

They will also want to balance the Code’s standards with their organisations existing commitments to:

  • The Charity Governance Code (or the Scottish Governance Code for the Third Sector)
  • Any sub-sector specific governance standards code relevant to their field of activity, such as the National Housing Federation Code of Governance
  • The Charity Ethical Principles
  • The Code of Fundraising Practice
  • Membership of the Fundraising Regulator’s fundraising standards assurance scheme (which remains optional for charities – though considerable moral pressure to opt in particularly falls on charities that fundraise from the general public)

The Future of the Corporation - British Academy

The British Academy’s major research and public engagement programme ‘The Future of the Corporation’ is examining the purpose of business and its role in society. The research findings from 32 leading academics across the world provided the basis for reflections on how businesses should adapt and respond to the challenges and opportunities and proposed a new framework for the corporation based on the principles of well-defined purposes, a commitment to trustworthiness and an enabling culture. A more detailed set of proposals has now been developed on four themes:

  • law
  • ownership and governance
  • measurement
  • finance

Following the launch of these, during 2020 a programme of engagement with business, government, policy, civil society and academic stakeholders will explore the issues and relevant questions involved. Charity governance specialists will want to contribute to the events, roundtables and additional research activities that are planned.

Other Factors

The recently issued new Code of Fundraising Practice has incorporated the previously separate rulebooks on particular fundraising activities, such as street and door to door fundraising, into the main Code.

Other changes include new provisions intended to encourage better practices and enhanced transparency in third party fundraising relationships and digital fundraising, including the increased use of crowdfunding and online giving platforms. Whilst acknowledging the ‘reach’ and fundraising potential of online activity, the Fundraising Regulator rightly points out: “It is important that fundraising platforms and fundraisers are clear about where the money is going so that donors have all the facts they need to make an informed decision. Platforms often charge fees for processing donations to cover their costs. The platform should be transparent about fees and tell you what they are before you donate”.

The Charity Digital Code, whilst mainly focused on enhancing skills, building users’ confidence and increasing the effectiveness of digital communications within the charity sector, does also address issues of ethics and good practice.

In its section on risk and ethics, the Charity Digital Code sets out the principle that: “Charities need to determine and manage any risks involved in digital. Charities will also need to consider how some digital issues fit with organisational values and ethics. The latter is a broad area that may include anything from partnerships to the use of data by social networks to content”. It recommends that: “Charity leaders should manage this by ensuring that they have sufficient skills and knowledge to make informed decisions about any ethical issues”.

The Importance of a Healthy Culture

Governance leaders will find some of these developments and changes of very real help in raising standards in their organisations. However, regulations and standards alone are not enough to ensure charities thrive – at least as much attention and effort should be applied to nurturing a healthy culture through the organisation. 

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