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Posted 14 November 2018
by James Evans

Governance: Top Tips For Charities

We keep hearing that public trust in charities can no longer be taken for granted. But what can charities do about it?

Good governance is key, not only to help to ensure charities achieve their purposes and operate effectively, but also to help them ‘live their values’ and insulate themselves against dented public trust in the sector.

So how can charities get governance right? And where do you start?

Review how you measure up to the Charity Governance Code

All charities need to be familiar with the Charity Governance Code, which aims to help charities develop high standards of governance. The latest version of the Code, published in July 2017, is not legally binding, but the Charity Commission encourages all charities to apply it proportionately to their circumstances as a tool for continuous improvement.

If a charity comes under Commission scrutiny, the Commission will take non-compliance with the Code into account when it considers whether charity trustees have fulfilled their duties.

If your charity has not yet reviewed how it measures up to the latest version of the Code, now is a great time to take a good look in the mirror, and be prepared to ask some fundamental questions.

Have you got the right people on board- and do they understand their role?

It starts with people – have you got the right trustees on board? Charities need trustees with the required skills, knowledge, experience, commitment, and time to dedicate to the role. Regular skills audits can help identify gaps.

The Code expects all trustees to be approaching the role from the right starting point. It is a ‘given’ that all trustees understand their legal duties and are committed to their cause and good governance.

It surprises me how often I come across trustees who are not familiar with their charity’s governing document, or have not read Charity Commission publication CC3 “The essential trustee: what you need to know, what you need to do” – this really is essential reading.

Proper induction processes and access to good quality trustee training will be key, particularly for those new to the role.

Clear, relevant, understood objectives and strategy

Perhaps, most importantly, do the trustees know and understand the charity’s purposes and have a clear strategy as to how it is going to achieve them?

The trustees are responsible for setting thestrategy and values of the charity and ensuring these are reflected in all aspects of the organisation’s work.

Charities shouldn’t be afraid to review their purposes, as reflected in their legal objects from time to time to check are they still relevant and clearly understandable. Objects can usually be updated with the Charity Commission’s consent within reason.

Are you doing all you can to encourage greater board diversity?

The latest version of the Code contains an increased emphasis on the need for diversity on charity boards, taking the standpoint that if trustees come from more diverse backgrounds with diverse experiences, the board is likely to make better decisions.

Sadly, it seems the typical charity board is still ‘stale, male and pale’. Recent research set out in the ‘Taken on Trust’ report indicated that two-thirds of trustees were male, 92% were white, and the average age range was 55 to 64.

One potential way to increase diversity, which may not be being explored as much as it could be, is partnering with larger employers operating in the communities served by the charity. Those employers with more sophisticated CSR strategies, who are increasingly recognising the developmental benefits of encouraging their own staff to become trustees, should be a good source of potential new trustees.

Also, look at when, where, and how board meetings are held – do these present barriers to diversity?

The Code also encourages progressive refreshing of the board with a strong recommendation to have a maximum term of office of no more than nine years. Whilst we would always recommend building in some flexibility to extend terms for a limited period in exceptional circumstances, the Code would expect significantly heightened board scrutiny and explanation for any such exceptions.

Review board operational effectiveness

Charities should also look under the bonnet and ask; are the basic board mechanics working effectively?

This includes considering if you have too many or too few trustees – the Code suggests a board of at least five but no more than twelve trustees is typically considered good practice.

Are trustees getting the right information, in easily digestible form, at the right time, in order to take informed decisions?

Are the board decision-making processes effective, and is the board even considering the right issues, or could more be delegated to committees? The board’s role is one of strategy, performance and assurance. Not micromanaging!

And if you do delegate, how effective are any existing delegations and is there a proper written framework in place for these?

For example, a problem we often see is the lack of a clear governance and financial delegation and reporting framework between a parent charity and its trading subsidiaries. The Code also recommends charity boards regularly review their own performance on a regular basis, not just the board’s effectiveness collectively, but atindividual trustee level as well.

Manage conflicts of interest effectively

Poorly managed conflicts of interest are often the cause of reported charity problems, so charities should have a detailed conflict of interest policy to help the board manage issues when they arise, and ensure their trustees receive training in this area. Central to this is stamping out any ‘self-certifying’ by individual trustees that they don’t have a conflict of interest, or that it is OK for them to remain in the room– this is a matter for the other trustees to decide!

Put a code of conduct in place

Constructive working relationships between board members are vital. Charity boards should operate with cabinet-style collective responsibility, so once a decision is made, everyone should unite behind that decision. Sadly that doesn’t always happen!

Putting in place a code of conduct for the board can be a useful tool in reminding trustees, where necessary, of expected standards of behaviour.

It is also important for the governing document to allow the board in appropriate circumstances to remove trustees who do not act in best interests of charity and refuse to resign – a backstop if there is an irretrievable breakdown in the working relationship.

To quote Sarah Atkinson, Director of Policy and Communications at the Charity Commission, “Good governance is no longer an optional extra. It’s essential to charities’ effectiveness and probably their survival too.Charities need to be able to demonstrate that they take it seriously.

Reviewing how your charity measures up to the latest version of the Code is a good place to start.

For more information and advice, please contact the Charities solicitors team on 01392 207020.

Article written for Quilter Cheviot’s annual review publication

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About the author

James Evans

Partner and Solicitor

Partner and solicitor. Head of Charities and Social Enterprise