Public trust in the charity sector has been falling for the past few years, with research by the Charity Commission highlighting a drop from 65% (2015) to 58% (2017) in public confidence. As a result, the need for strong charity governance and regulation has never been more important. Good governance is no longer optional; it’s fundamental to the effectiveness and success of the charity sector.
Replacing the Charity Commission’s ‘Hallmarks of an Effective Charity’, the new Charity Governance Code sets about establishing higher standards for charities and introduces a number of new recommendations aimed at strengthening accountability.
The Code focuses on seven key principles; leadership; integrity; decision-making, risk, and control; board effectiveness; diversity; openness and accountability; all ultimately supporting organisational purpose.
These principles are based on a foundation consisting of the trustee role and charity public benefit. As a starting point, this means trustees understand the cause, roles, and legal/regulatory responsibilities of their charity.
Each principle is accompanied by a rationale, key outcomes and recommended practice. Some of the big changes included recommendations that:
- No trustee should serve more than nine years without good reason
- External evaluations should be held every three years for larger organisations
- Stakeholders should be involved in key decisions
- The board should evaluate its own performance and the charity’s impact by measuring and assessing results, outputs, and outcomes
- Charities should consider mergers with other organisations that have the same aims
- Trustees should publish on their charity’s website and in its annual report the amount paid to senior staff and the process for setting pay
Smaller charities (defined as those with a typical income of less than £1m a year) naturally face different problems to bigger and more structurally complex charities. As a result, the Code is also accompanied by a bespoke set of recommended practices for smaller organisations.
Using the Code
Charities need to really explore the new Code and what it means for their organisation. The Code is designed to be an aspirational set of principles which charities should strive to achieve. While not every aspect of the Charity Governance Code is applicable to every charity, trustees must be able to justify why certain principles are or aren’t being met.
Trustees should aim to actively and regularly engage with the Code. This could mean setting aside time in trustee meetings to review and discuss applying the Code, or setting up a sub-group to comprehensively evaluate the charity’s position in relation to the new Code.
The intention of this new Code moves beyond just evading negative headlines; it is about emboldening your charity to be the best it can be and in turn ensuring trust is maintained with stakeholders. Think of the Charity Governance Code not as a statute of law, but as a model of what good governance looks like, a model which your charity should constantly be working towards. While your charity will be better for implementing it, the Code is less about perfection and more about ensuring the effectiveness of the charity sector as a whole is upheld.
Haines Watts – Specialist Charity Accountants Newcastle
We work with a diverse mix of charities and not-for-profits in Newcastle, Darlington and the surrounding North East area. Our specialist advice in helping non-profit organisations has helped us to become a leading advisor for charities in the region.
If you’re looking for financial advice from an experienced charity accountant in Newcastle, Darlington or the surrounding North East region, get in touch with us on 0191 2699960 or contact Gillian Hollier directly on firstname.lastname@example.org
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