Governance is the system by which an entity is controlled and its direction managed. Good governance has always been key to the success of a charity both through fulfilling their strategy (both long and short-term) and also ensuring compliance with law and other regulations.
The Covid-19 pandemic means that good governance is more important than ever. Failures in charity governance can have significant consequences for those involved.
In this article we highlight the many online sources available to help charities consider their governance, both for charities registered in England & Wales and those registered in Scotland.
Charity Governance Code for charities in England & Wales
The Charity Governance Code was developed by a steering group including NCVO, ACEVO and others, and draws upon guidance from the Charity Commission.
There are two versions of the code for larger or smaller charities which both outline seven key principles for good governance:
- Organisational purpose
- Leadership
- Integrity
- Decision making, risk and control
- Board effectiveness
- Diversity
- Openness and accountability
Whilst not a regulatory requirement, charities are encouraged to use an ‘apply’ or ‘explain’ approach and explain their use of the code in their Trustees’ Report.
Both smaller and larger versions of the code along with a diagnostic tool can be found here. The diagnostic tool is important for evidencing a charity’s consideration of governance and to identify areas for improvement.
In April 2020, the Charity Commission also produced specific guidance for charities during the Covid-19 pandemic. This provides further guidance in terms of charity governance, including things to consider when holding meetings online or postponing meetings. There are also important sections about using reserves and restricted funds as well as how to get further advice on dealing with financial difficulties.
The full Covid-19 guidance can be found here.
The Scottish Governance Code for the Third Sector
For charities registered in Scotland, OSCR encourages charities to consider The Scottish Governance Code for the Third Sector. The Scottish Code sets out five core principles:
- Organisational purpose
- Leadership
- Board behaviour
- Control
- Effectiveness
The full Scottish Code can be found here.
OSCR has also produced Covid-19 specific guidance which includes a section on charity meetings and governance. The full guidance can be found here.
Conclusion
Good governance has always been important, but during these uncertain times it is crucial that governance is properly considered and that this consideration is documented.
The above sources aim to provide tools for charities to support continuous improvement to strengthen governance. This aim is mirrored across other codes for more specialist entities, such as housing associations.
Key points to take away:
- Has your charity reviewed itself with reference to an appropriate governance code in the past year? Does this now need to be revisited given the Covid-19 pandemic?
- Has this review been documented and discussed at board level?
- Will a reference to this review be included in the trustees’ report where desirable?
