If you have been asking if your charity is doing everything it can to achieve its goals or have been questioning the quality of its governance, structure, or simply could be doing more, then you’re not alone. You might have considered a governance review but thought it would be too challenging or would consume too much time and resources.
Help is at hand, because the aim of this article is to provide guidance on how a charity governance review is carried out, as well as its benefits, so that you can be confident about moving forward.
What is charity governance?
Charity governance refers to the systems, processes and structure that ensures transparency, accountability and effective delivery of the charity’s goals. A well-established governance structure influences how decisions are made to how finances are managed to ensure maximum impact on the cause you care about.
The implications for poor governance are varied, from loss of public trust through scandals and financial mismanagement to operational inefficiencies to deliver its services effectively and non-compliance with laws can result in fines and reputational damage.
What does good charity governance look like?
At Verita, in our extensive experience carrying out governance advisory work for public and private sector companies, we have seen that strong governance builds trust with stakeholders and plays a fundamental role in the quality of leadership and risk management.
In the case of charities who need to attract donors, volunteers and beneficiaries, this means being transparent and accountable. Fostering a culture of honesty builds trust in the charity and means people are more likely to donate and support the charity.
Effective governance can also help identify and mitigate potential risks such as handling complaints, financial mismanagement or safeguarding concerns.
The role of trustees
Charity trustees are volunteers who are responsible for the overall strategic leadership and direction of the charity. They ensure financial decisions are sustainable, that risks are mitigated and all relevant laws and regulations are complied with. Trustees may take on specific roles, such as chair, vice-chair, secretary and treasurer. Trustees play a critical role to ensure the effective and ethical operation of a charity.
What is the Charity Governance Code?
The Charity Governance Code, published in 2017 by the Charity Commission, is a standard of recommended practices in charities. Even though it is not a legal requirement, adhering to its principals demonstrates to all stakeholders the charities commitment and accountability in achieving their goals.
The code isn’t a “one size fits all” approach and it encourages charities to apply the code differently depending on the charities size, income, activities or complexity. For example, there are separate versions of the code whose income is under £1million to those with larger incomes. A highly complex charity may require a more robust governance structure and may influence the level of detail required in governance practices.
At the core of the governance code are a set of seven key principles that outline what good governance consists of. It highlights that the Board of Trustees should act with integrity by fostering a culture that aligns with the charity’s goals and that their decision-making should be informed and risk mitigating. The Board’s leadership should function as one cohesive effective team with multiple differing skills and experiences as well as promoting equality, diversity and inclusion across all functions of the charity and its partners.
Above all transparency and accountability to all stakeholders are essential for any charity, with the Board leading by example. The Trustees should also understand their legal duties and be committed to the charity’s organisational purpose and be well-communicated.
Why is a charity governance review important?
Undertaking regular governance reviews can be beneficial to charities looking to adapt to change. This can be a result of adopting new regulations, changing societal needs or a need to evolve priorities. A periodic review of governance structure ensures that the charity remains relevant and effective through this change.
Charities that undertake regular governance reviews can ensure that the Board of Trustees are adhering to the seven principles of the Governance Code. They can ensure that the structure of the Board is diverse and effective so that if there was ever a change in leadership or a change in charity direction the Board’s make up is diverse enough to mitigate any risks associated with this change.
A governance review might be triggered by a complaint that has been received. A review in this instance would help identify further risks and by taking proactive steps to address those risks not only mitigates further complaints but also charities can protect their assets and reputation from negative harm.
Regular reviews ensure accountability and transparency to the charity’s stakeholders that decision making and financial management have been undertaken effectively. A charity is more likely to achieve its mission and goals when undertaking regular reviews as it identifies areas for improvement which sets a clear road map to reach those objectives more efficiently and effectively.
How often should a charity review its governance?
The frequency of governance reviews can vary depending on the charity size and complexity of its structure. However, the Governance Code recommends that charities undergo external governance reviews every three years which allows charities time to adapt and track progress. More frequent reviews may take place during times of significant change for the charity or if there are specific concerns regarding the charity’s practices. Internal reviews can happen more regularly to allow for performance improvement and ensure the charity is achieving its goals.
How is a charity governance review carried out?
A consultancy like Verita can review a charity’s governance in several ways, including undertaking audits to assess the Boards skills, experience and diversity. It can help facilitate discussions that focus on key issues and performance areas resulting in individual development plans for Trustee members.
A consultancy can also review the charity’s policies and procedures to assess the effectiveness of them and to ensure they are embedded into the charity’s everyday work. Policies would also be reviewed to ensure they are in line with any changes in law and regulation and are fit for practice.
It is also vital that a governance review examines the financial health of a charity including income and expenditure, savings and investments, and advise accordingly. Risk management processes can also be reviewed to ensure risk mitigation practices are fit for purpose.
Above all, the charity’s governance should be reviewed against the charity Governance Code so that valuable insights and recommendations can be provided to help charities improve and achieve their goals.
How Verita can support your organisation
We believe in a collaborative approach, working closely with your Board to ensure the review process is smooth and informative. Our goal is not to point out shortcomings, but to identify areas for improvement and provide actionable recommendations to strengthen your governance structure.
A regular governance review is an investment in your charity’s long-term success. It helps identify and address potential issues before they escalate, ensuring your charity operates ethically, efficiently and effectively. By supporting charities in undertaking governance reviews we can help build a stronger, more impactful charity where decisions are based on the best interests of the charity, not personal gain.
If you’d like to learn more about our governance reviews for charities and how we can help your organisation, please book a free consultation or contact Ed Marsden on 020 7494 5670 or [email protected].
