To discuss issues raised by this article or any other charity-related matter, please contact Anthony Epton, charities partner at Goldwins Chartered Accountants on 020 7372 6494 or email@example.com
The National Council for Voluntary Organisations (‘NCVO’) describes governance as a term used to cover the trustees’ role in: the long-term direction of the charity, including its objectives or purposes; implementing policies and activities to achieve these objectives or purposes effectively; complying with legal requirements, and accountability to those with an interest or ‘stake’ in the charity.
Good governance should occur throughout a charity. It is the trustees who are responsible for good governance but they rely on many different people to be able to govern well: staff, volunteers, advisors and stakeholders. When governance is weak, high profile scandals such as Kids Club and Oxfam can result, which damage the public’s trust in the sector as a whole. Governance is the systems and processes concerned with ensuring the overall direction, effectiveness, supervision and accountability of a charity. Moreover, good governance ensures that the charity: complies with the law and regulations; is well run and efficient; identifies problems early and deals with them appropriately; preserves the reputation and integrity of the sector as a whole, and makes a difference and advances its objects.
Trustees are more concerned about decision-making and the strategy of the charity. By way of contrast, management is about implementing the strategy agreed by the trustees e.g. by detailed planning, putting procedures in place and by raising money. In July 2017, the Charity Governance Code’s steering group launched a new version of the code designed to support charities in meeting governance good practice. These seven principles are now universally acknowledged to underpin good practice in governance. The Charity Governance Code is a practical tool to help charities and their trustees develop high standards of governance. This Code has been developed by a steering group including NCVO and other charity representative bodies, with the help of over 200 charities, individuals and related organizations.
1. Organizational purpose: The board is clear about the charity’s aims and ensures that these are being delivered effectively and sustainably. This means trustees need to understand: the charity’s aims as set out in its governing document; what the charity will do and what it wants it to achieve; how all of the charity’s activities are intended to further its purposes, and how the charity benefits the public by carrying out its purposes.
2. Leadership: Every charity is led by an effective board that provides strategic leadership in line with the charity’s aims and values.
3. Integrity: The board acts with integrity, adopting values and creating a culture which help achieve the organization’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.
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.
5. Board effectiveness: The board works as an effective team, using the appropriate balance of skills, experience and knowledge to make informed decisions. This includes necessary negotiations with those who have an interest in the charity. This could be donors, supporters, beneficiaries, staff and volunteers.
6. Diversity: The board’s approach to diversity supports its effectiveness, leadership and decision-making.
7. Openness and accountability: The board leads the organization in being transparent and accountable. The charity is open in its work unless there is good reason for it not to be.