In July, the new Charity Governance Code was published to a warm welcome from the Charity Commission, which declared it “essential reading” for charity trustees, and withdrew its own guidance on best governance practice – “The Hallmarks of an Effective Charity” – in response to the publication.
From now on, if a charity trustee looks to the Charity Commission website for information on good governance, they will be referred to the Charity Governance Code. This means that, although not official Charity Commission guidance, the Charity Commission will expect trustees to be familiar with the contents of the Code and to apply it to their charities.
Created by a steering group of sector umbrella bodies, including the NCVO, ACEVO, ICSA and others, the online Code is easy to navigate, with seven principles stated to be applicable to all charities, in the areas of:
Decision making, risk and control
Openness and Accountability
Each principle has a brief description of the overarching principle, and explanation as to why it is important, key outcomes that you would expect to see where the principle is adopted by a charity, and recommended practice for charities to achieve successful adoption of each principle.
The recommended practice varies depending on whether a charity is a large charity (with an income of over £1 million) or a small charity. It is recognised by those responsible for the preparation of the new Code that it is deliberately aspirational in places, and that it will be a stretch for some charities to achieve some aspects of the Code.
Key changes from the last Charity Governance Code include:
The expectation that no trustee should serve more than nine years without good reason, and that term limits are important for accountability.
An emphasis on the role of the chair and vice chair in supporting and achieving good governance.
The expectation that the trustee board should involve stakeholders in key decisions, and operate with the presumption of openness.
The expectation that large charities should ensure there is increased oversight when dealing with third parties, such as subsidiary companies, registers of interests and third parties such as fundraising agencies or commercial ventures.
A recommendation that the trustee board should evaluate its charity’s impact by measuring and assessing results, outputs and outcomes.
The trustee board is expected to review its own performance, including that of individual trustees (particularly the chair) every year, with an external evaluation for larger organisations every three years.
The recommendation that the trustee board should think carefully about how best to recruit a diverse range of trustees, who have the skills and experience necessary to lead the charity.
So, what should charities do in respect of this new Code? Well, as stated above, the Charity Commission considers it to be essential reading, so it would be sensible for all charity trustees to take the time to review its contents.
One approach might be for each charity trustee to take one or two principles and review these, then report back to their fellow charity trustees at a trustee meeting, allowing a discussion around the principle and the recommended best practice. In this way, trustees should be able to identify areas in which changes should be made to allow the charity to seek to achieve the key outcomes set out in the Code.
Charity trustees are encouraged not simply to treat compliance with the Code as a “tick box” exercise, but either to apply the recommended practice, or explain what the charity has done instead (or why the charity has done nothing in this area), if the recommended practice is not suitable for their charity, in a brief statement in the charity’s annual report.
Although its creators have called the Code “aspirational”, that does not mean that its provisions can be written off as unachievable and ignored. The Code was intended to provide a clear set of governance standards towards which charities can work, and it is aspirational in places so that charities with already high governance standards have something at which to aim.
This means there is something for all charities in the new Charity Governance Code, whatever their size and the current state of their governance.