The Charity Governance Code, which outlines a set of standards that all charities in England and Wales should aspire to, was launched in 2005 and revised for the third time in 2017.
Following the code is not a legal or regulatory requirement but implementing good governance can be key to running a successful charity; whether large or small.
The Charity Governance Code is based on seven key principles:
- Organisational purpose
- Decision-making, risk and control
- Board effectiveness
- Openness and accountability
Each principle starts with a definition and rationale, then describes key outcomes and steps for achieving best practice. There is a separate version of the Code for larger charities.
Demonstrating adherence to the code can not only help the charity’s board to improve its approach to decision-making and risk-management, amongst other issues, but it can also help to gain the trust and respect of potential donors and volunteers.
Accountancy firm, RSM, found that just under half of 85 charities, with income exceeding £5m, had aligned themselves with the new code in the 18 months following its publication.
Charities with income below £5m were purposely excluded from the study based on the reasoning that larger charities would be better placed to adopt the code because of the greater resources at their disposal.
The study also found that those charities that stated they had adopted the code also demonstrated higher adherence to the principles outlined within it.
Other key findings included:
- Nine charities failed to report anything about their policy on executive pay;
- only one charity failed to include any mention of risk in their report;
- one-fifth of the charities had trustees in post that had served for longer than the nine years recommended by the Code; and
- 70 per cent of charities failed to outline a board effectiveness review process.
There are plenty of smaller charities who have already aligned or are working to align themselves with the code but, in such a diverse sector, it can be difficult to accurately evaluate take-up.
For many, adopting the Charity Governance Code is a ‘work in progress’ as they navigate new discussions about diversity, risk and leadership.
For the Code to serve its purpose, charities and trustees have to understand the need to keep their house in order and take the initiative to do so.
Toni Hunter, partner and resident charities expert at George Hay, said: “Adhering to sound governance practices is important for any business, not least of all for charities.”
“While taking up the Code does not guarantee that nothing will ever go wrong again, it is an invaluable tool that can help charities to take the right steps to ensure their arrangements are in good shape. Ultimately this will help to consolidate the public’s trust in charities’ important work.”
“Good governance should aid compliance with legislation and regulation and promote a culture where the fulfilment of the organisation’s vision is a priority.”
How can George Hay help?
We know that managing a charity or social enterprise in the current economic climate can be challenging. That is why we have a specialist team on hand to support the not-for-profit sector; providing audit, independent examination reports, accounting, taxation and advisory services to charities, academies, clubs and social enterprises of all sizes.
Whether you need help with appraising governance procedures, setting accounting policies or tax planning, or you need advice about diversification of income streams, we are here for you.
To speak to one of our experts about how we can help, contact us today by calling 01480 426500.