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You don’t have to look far these days for examples of when corporate governance in charities has gone badly wrong.
Conflicts of interest and financial mismanagement in charities can cause real problems. And a genuine loss of confidence in the trustees whose job it is to maintain good governance standards.
There is an increasingly high expectation of good governance standards in charities. And also in other not-for-profit organisations such as credit unions, housing associations and sporting bodies.
Why is good charity governance important?
What difference will it make?
How do you improve your charity governance?
In this blog we identify 10 reasons for good charity governance and you will see why it is essential to you and your charity.
We explain the difference good governance makes and how to assess and improve your charity governance in 5 simple steps.
Read more about the importance of regular Charity Governance reviews here.
As a trustee, you have legal and fiduciary responsibilities that include data protection, employment rights, health and safety, fundraising, anti-money laundering and tax reporting obligations. Your responsibilities extend further if your charity is a registered company and must meet statutory legal and other reporting requirements.
Having good governance arrangements in place will mean that you and your organisation are more likely to comply with all of your legal and compliance responsibilities.
Risks exist in every organisation. As a trustee, you establish the risk policy for your organisation and the framework for managing the risks. Risks that are not well managed can bring your charity into disrepute. They can create pressures on funding and resources and even jeopardise the future of your charity.
Good governance will incorporate a robust framework for setting risk policies and managing risks better with clear procedures and an effective risk register.
Funders and donors are increasingly focused on making sure their resources are put to best use. Evidence of good governance standards is high on the list. Sometimes the only obstacle to providing funding is evidence that you, the trustees have good governance arrangements in place. Many trustees often find it difficult to provide evidence that you are on top of your governance.
As a trustee, be proactive about demonstrating good governance in your charity and offer evidence to support any funding application.
Charities and other not-for-profit organisations have many similarities with private and public sector bodies. As a trustee you want to ensure that your charity is effective in achieving its objectives and make the most of your limited resources. You want to focus your own time and the resources of your organisation to greatest effect.
Building a strong governance framework will help ensure that your charity board runs effective meetings; makes decisions that are well communicated; manages staff and motivates them; sets objectives and achieves them; develops appropriate documentation covering delegation of powers, terms of reference, code of contact, register of interests, standing orders and much more.
Resources and funding challenges will always be issues for charities. As a trustee you must make decisions about where best to apply your charity’s limited resources. You will identify competing priorities for these resources and as a trustee you must ensure that you apply them to meet the “Public Benefit” requirement of each of the charity’s objectives.
Having good governance arrangements will ensure that as a trustee you can dedicate sufficient time to making the best use of limited resources. Spending time on deciding priorities and where resources should be applied to meet your objectives will ensure a clear focus on maximising limited resources.
Increasingly charities are asked to measure and report on the impact that you are making in relation to your charitable objectives. As a trustee, you may find it difficult to measure and report on your charity’s impact in a concise and meaningful way. Often this is because you haven’t fully identified the measurements, you aren’t tracking them and/or you don’t have a reporting system in place for reviewing and challenging them.
A good governance framework will include high quality reporting arrangements that track and measure the impacts of your charity. To help ensure that as a trustee you are on top of your charity’s purposes, then set up Key Performance Indicators and other metrics to measure them, review them and take actions.
Charities need a good mix of trustees and with recent scandals (Kids Company; Save the Children and Oxfam) affecting the sector, some prospective trustees may need to be persuaded that the rewards outweigh the risks.
As a trustee you can improve your charity’s recruitment successes by adopting a clear approach to identifying skills gaps on the board. then implement a clear recruitment, induction and ongoing development plan for new trustees.
Good governance arrangements will help you ensure that you have a relevant skills matrix. And you will have a trustee recruitment and retention policy that you can rely on to target, attract and retain the trustees that you need. The prospective trustees will be more attracted to your charity if they believe that you have a professional approach to implementing and improving good governance standards.
The Charity Commission in England & Wales regulates about 167,000 charities and their Northern Ireland and Scottish counterparts regulate another 30,000 charities. In the Republic of Ireland, the Charities Regulator oversees about 10,000 registered charities. What all these regulators have in common is that they endorse good governance standards in charities. They also have extensive powers to investigate charities and enforce actions where governance standards are below an acceptable level. So as a trustee, your activities are being monitored and regulated. Credit Unions also face increasingly stringent regulations that focus on encouraging good governance.
Ensuring your charity operates to good governance standards means that you will be able to adhere to Regulatory Body legal and fiduciary requirements.
With recent scandals referred to in Reason 7 above, the public has reason to be wary of charities that demonstrate weak governance standards. These very high profile cases and the broader industry issues relating to Fundraising Scandals can cause problems. Credit unions and sports governing bodies aren’t exempt from close examination by the public and by their own members.
Adopting a professional approach to good governance and communicating that to key stakeholders will help allay any doubts that your organisation is weak on governance.
There are rewards that come with a voluntary trustee role in a charity or a director/committee member role in another not-for-profit organisation. You are helping fulfil a need in the community and in society and making an impact is really important. With the rewards come risks too. Risks that have personal reputational and other consequences if matters go wrong.
To give you peace of mind, proactively take steps to ensure that your organisation operates to high standards of governance. Make sure that good governance as an objective is brought up at board/committee level. So that the assurances you receive give you the peace of mind you deserve.
And where do you start to ensure your charity governance is good and effective now that you know 10 top reasons for doing this?
While you can start by tackling individual areas of governance concern, why not take a more holistic approach? You can review all areas at once. It will give you a clear idea of where you are strong on governance already and where you aren’t. Then you can start to prioritise and improve the most important areas first.
There are free paper checklists if you want to use them. However they can be time-consuming and confusing for some trustees, especially those new to your charity board.
Or you can now complete your charity governance review using an online tool so you can eliminate paper checklists and handwritten reports.
You can complete this review online using Zoom, MS teams or another video provider. Or you can complete it face to face, using a shared screen. You choose.
And if you need help with your review, we can provide that for you as well.
Remember the 10 top reasons above for ensuring your charity governance meets the governance code standards. And now you can take steps today to assess it and improve it.
We recognise that not every board/committee has the time or expertise to complete an internal governance review on its own.
We also recognise that resources are limited, paper checklists are time-consuming and external governance consultants can be costly.
You now have an alternative. Our online Third Sector Governance Tool helps you and your board to complete a governance review quickly and easily. And you will produce your own SMART Report and Action Plan for a fraction of the cost of external support. It also saves time as you complete it online and without the need to write up your own report and actions.
Watch our Governance Explainer Video and how you can improve your charity governance in 5 simple steps:
Register for the Admor Third Sector Governance Tool and follow these 5 easy steps:
Step 1: Organise a board or a sub-committee meeting (face to face or online)
Step 2: At the meeting, share the Third Sector Governance Tool questionnaire screen and answer the questions in all seven sections
Step 3: Generate your Report and SMART Action Plan
Step 4: Name and save your Report and SMART Action Plan
Step 5: Complete the SMART Action Plan with responsibilities, priorities and timeframes and provide evidence where you meet the standards
And now you’re ready to implement the agreed actions to improve your organisation’s governance arrangements!
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If you would prefer a quick check on how the Admor Third Sector Governance Tool works, try our Free Preview version. This provides full access to one of the seven sections so you can see how easy the tool is to use. And you won’t need to commit your payment details!
If your board would like a free live demo using Zoom or MS Teams (with no hard sell and no obligation!), please get in touch with Admor Business Solutions today.