Governance A Charity Commission perspective Neal Green – Senior Policy Advisor Title

The Charity Commission Independent regulator & registrar for charities in England and Wales Our objectives (Charities Act 2006): –increase public trust & confidence in charities; –promote understanding of public benefit; –promote compliance by trustees with their legal obligations in governing charities; –promote the effective use of charitable resources; –enhance charities’ accountability to donors, beneficiaries & the public.

Charity regulation and governance The law - “you must” Good practice - “you should (consider)”; “we recommend/advise” Governance is about good practice: Good governance can enhance effectiveness Good governance can help ensure compliance with legal responsibilities

Different ways of looking at governance 1. Systems and structures… systems and processes concerned with ensuring the overall direction, effectiveness, supervision and accountability of an organisation (Cornforth 2003) not necessarily about doing; it is about ensuring things are done (Adirondack 2002)

Different ways of looking at governance 2. People and relationships “Everyone is clear about their role” (Genny Kiff, Wellcome Trust) Being clear about/managing: –Responsibilities –Boundaries –Relationships with others –Accountability

In other words… Leadership Authority Accountability Transparency Control Delegation Effectiveness Impact Legitimacy

When things go wrong… It’s often because of a governance problem! “The elections were unfair” “The Finance Director kept us in the dark – now we’ve found out we’re bankrupt!” “S/he controls everything” “We were a youth club, then we got the contract for Meals on Wheels…” “They are trying to take over!” “Our ex-CEO is suing us!”

Common governance issues Election/appointment of trustees Membership (records) Independence, control, dominance Conflicts of interest & trustee benefits Mission drift Financial control & management Staffing/management issues Handling complaints

Governance good ideas – Proportionate Governance 44% of registered charities have income below £10k No paid staff (i.e. managers) Trustees’ role: doing, managing or governing? One size does not fit all! In practice, not a sharp division between governance and management Principles not prescription! Tailor it to fit the organisation

Governance good ideas – Relational Governance The banks had all the “right” committees, policies and procedures in place; but Board members failed to: –Really understand their role and functions –Give sufficient time –Ask the right questions –Understand the answers –Challenge and hold executives to account –Tailor governance to suit the organisation (David Wilson, ICSA)

By the sector, for the sector Joint project by Acevo, CTN/SCC, ICSA, NCVO Supported by the Commission First published 2005 Second edition (full and summary) - Oct 2010 Version for smaller organisations – Nov 2011 Good Governance – a code for the voluntary and community sector

Second Edition – what’s new? Shorter (26 pages) Clearer principles Emphasis on delivering the mission Focus on “what” and “why” rather than “how” Designed to be proportionate and adaptable Focus on people as well as systems

The Code for smaller organisations Mainly for organisations with no paid staff Groups for smaller organisations wrote it Same key principles Simpler language Jargon buster Supporting activities and resources (more help with ‘how’) – to follow!

The Code – summary (“small” version) An effective board will provide good governance and leadership by: 1.Understanding their role - what they are responsible for and what they have to do 2.Making sure the organisation does what it has been set up to do 3.Working effectively as individuals and as a team 4.Exercising effective control 5.Behaving with integrity – showing their honesty and having strong ethical principles 6.Being open and accountable

For each principle: The principle unpacked (what it means) Why do it? Supporting material –Summary of key legal requirements (“you must”) –Key examples of good practice – “important things to consider”

Helping a charity to apply it “Do you understand the principles?” “What would they mean for your charity?” “Apply the principles and use relevant examples of good practice” “What are you already good at? Well done!” “Where are the risks and weaknesses that you need to work on? What actions will you take?”

Challenges for the future… or the present? Challenges to independence Funding challenges Competition, blurring of boundaries Risk of mission drift Litigation and liability Crime/fraud targeted at charities

Accountancy and good governance – you can help! Are there sufficient and appropriate financial controls? Is delegation effectively managed? Do trustees get adequate financial and management information that they can understand? Are risks properly assessed, logged and managed? Are conflicts of interest properly dealt with? Do annual accounts/report comply with SORP? Do annual accounts/report give readers a true picture of the charity? Are filing requirements being met? NB please file accounts in time and online!

Where to find the Code Copies of the Code, and other useful resources: Acevo ( Charity Trustee Networks ( ICSA ( NCVO ( The Code Group is developing its own website :