During the early part of this year we have held several seminars on ‘Trustees Responsibilities – Good Governance’, using the good governance code approach. This article looks at the Code.
The Charity Governance Code is fundamental in enabling a charity to prosper and succeed. Adhering to the Code not only achieves compliance with laws and regulations but promotes a culture of working towards fulfilling your charity’s ultimate vision.
The Code is designed as a toll to support continuous improvement, with its principals being universal and applying equally to all charities, irrelevant of size or activity. The code aims to ensure that trustees are: committed to the cause; mindful to ensure public benefit; and that they understand their roles and responsibilities.
The Code is divided into seven sections, being:
The Code states that ‘the board is clear about the charity’s aims and ensures that these are being delivered effectively and sustainably.’
The underlying reason that your charity exists is so that it can fulfil the agreed upon charitable purpose. To enable this to happen the Board must focus on what strategy to implement and the performance against this strategy, to meet agreed outcomes. This includes frequently assessing how these results may affect future outcomes and using forward planning to ensure future sustainability.
The agreed upon organisational charitable purposes must be periodically reviewed, in order to ensure their ongoing need and relevance.
The Code states that ‘every charity is headed by an effective board that provides strategic leadership in line with the charity’s aims and values.’
Your charity’s Board must lead by example, with strong and effective leadership being key in order for the delivery of charitable aims and to ensure that the charity is living its own visions and values and continuing to enhance its reputation to the wider world.
The Board must take on a collective responsibility for the charity, including applying proper arrangements for: appointments and dismissals; support; appraisal; and remuneration.
The Code states that ‘the board acts with integrity, adopting values and creating a culture which helps achieve the organisation’s charitable purposes. The Board is aware of the importance of the public’s confidence and trust in charities, and trustees undertake their duties accordingly.’
Lurking in the background is, unfortunately, always the risk of reputational damage and bringing the charity and its work into disrepute. It is essential therefore that your Board must continue to always safeguard the Charity and promote its reputation both externally and internally.
The Board must always act in the bets interests of the Charity and its beneficiaries, whilst maintaining independence in its decision making and ensuring compliance with the laws and regulations by which it is governed.
Decision-Making, Risk and Control
The Code states that ‘the board makes sure that its decision-making processes are informed, rigorous and timely, and that effective delegation, control and risk-assessment, and management systems are set up and managed.’
Although your Board is ultimately responsible, it cannot and should not do everything. The Board must ensure delegation of operational matters, which it will then oversee via an agreed monitoring framework. This includes, for example, working with senior management to ensure plans and forecasts are reasonable and in line with the Charity’s purpose, including, where possible, benchmarking against other similar organisations.
The Board should identify, document and regularly review the key risks to which the Charity is exposed, and should also take the same approach towards potential opportunities that may arise.
The Code states that ‘the board works as an effective team, using the appropriate balance of skills, experience, backgrounds and knowledge to make informed decisions.’
To have the required affect the Board must have an appropriate blend of skills, knowledge and experience, as well as being comprised of individuals who are willing to challenge ideas and address difficult topics.
Your Board must also ensure that meetings are regularly convened, with it being suggested that a Board size of between 5 and 12 members is good practice, and that all Board members have received suitable and up-to-date training.
The Code states that ‘the board’s approach to diversity supports its effectiveness, leadership and decision making.’
Diverse boards offer a fantastic variety of perspectives, experience and skills and it is this blend that makes them much more likely to be able to encourage debate and to reach better decisions.
A different perspective could lead to the development of a different and more effective way of delivering the Charity’s services.
Openness and Accountability
The Code states that ‘the board leads the organisation in being transparent and accountable. The charity is open in its work, unless there is good reason for it not to be.’
Public trust in deliverance of public benefit is crucial to the reputation of both your own charity and the wider sector as a whole. Openness and accountability helps to build this trust and to ensure that the charity’s work is appreciated by all of its stakeholders and the wider public. This includes the need to have understanding and openness about potential conflicts of interest.
The Board needs to identify who its stakeholders are and to implement a strategy for regularly and effectively communicating with these stakeholders.
In summary the Code is a good one for all charities to follow, with the key points being: to act sensibly; to use a common-sense approach; to openly and constructively challenge; and to never be afraid to ask questions.
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