Third Sector Governance

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Third sector governance is a really important topic.

How good is governance in your third sector organisation? When did you last review this critical area? Do you know what makes an effective board? Are your governance arrangements up to date and working well?

We examine this important topic on how to measure the effectiveness of your governance arrangements and how your board can take clear actions to improve it.

When was your last corporate governance review?

Charity boards should undertake regular corporate governance reviews with an internal review at least annually and an external review every three years.

If you did undertake a review within the last 12 months, what format did it take? What were the outcomes? What actions did you take? When is your next one planned?

If you don’t undertake an annual review of corporate governance, then how do you really know how effective your charity board really is?

  • A positive bank balance or good reserves?
  • Dedicated trustees?
  • No significant complaints?
  • Positive feedback from beneficiaries and other stakeholders?
  • Good, dependable staff?
  • Or something else?

The Charity Commission NI states that “Charity trustees are the people who are legally responsible for the control, management and administration of a charity.” Trustees of incorporated charities also have legal duties and responsibilities as company directors.  By undertaking regular corporate governance reviews (and acting on them), trustees can therefore reduce their personal risks and demonstrate they are meeting the requirements of their role.

Board Effectiveness and Corporate Governance

Board effectiveness and corporate governance are inextricably linked.

Corporate governance is often defined as “the system by which organisations are directed and controlled.”  An effective board will ensure that good governance arrangements are in place and this will help to make the board more effective. They go hand in hand with each other.

Third Sector Governance in Charities

Most charity trustees are very conscious of the need to demonstrate good governance arrangements and the requirement to benchmark themselves against their relevant Charity Governance Code:

Despite the different codes, they all emphasise similar key areas such as the need for boards to review governance regularly, at least internally and every year.

Third Sector Governance Reviews

Third Sector governance reviews should incorporate benchmarking against good governance code standards for the sector.

Depending on where your charity is registered, generally your board should review:

  1. Board Roles & Responsibilities
  2. Board Composition & Development
  3. Strategic Leadership & Performance
  4. Operating the Board
  5. Audit Risk & Financial Management
  6. Legal & Compliance
  7. External Relationships

Your governance review – internal or external?

Internal reviews

Internal reviews allow your board to annually “self-assess” your governance arrangements, so that trustees can refresh themselves about best practice and address any gaps over time. Sometimes when problems emerge, you can focus on specific areas such as policies; conflicts of interest; financial management; risk management; strategic planning; stakeholder engagement. 

External reviews

Your board should complete an external review every 3 years or when there is a crisis of some kind. This will usually follow the methodology of the external reviewer or consultant. Cost may be an issue as they tend to be based on consultancy days, however, they will bring to your board some external specialist expertise.

Whether internal or external, a corporate governance review is usually set against sector benchmarks or best practice standards. These include key elements of what is in the paper checklists that accompany the relevant Charity Governance Codes.

Third Sector Governance Reviews – how?

So how do you undertake an internal assessment of your corporate governance arrangements?

Paper checklists? Many boards that undertake an internal corporate governance review use paper checklists, with the trustees and relevant staff meeting face to face. The staff or secretariat write up and agree the reports/actions afterwards. This can save you costs but it can be time consuming to complete and uses considerable trustee and senior management time. It can also be a little unstructured and confusing if the governance benchmarks are unclear to all those involved.

One alternative is to involve an external specialist in all reviews but this can be expensive and also time consuming if conducted over 3 to 4 weeks.

Third Sector Governance Reviews – use our online tool

Our online Third Sector Governance Tool will reduce the time taken to conduct your reviews. It will also ensure you are assessing your voluntary organisation against key benchmarks and therefore maximise the time you spend addressing your issues.

Our online Third Sector Governance Tool allows your board to work collaboratively (and with senior management if relevant) so you can self-assess how effective your governance arrangements are. Your board can complete this face to face or remotely via an online meeting portal such as Zoom, MS Teams or Google Hangouts.

You can complete it in one or two sessions and immediately download your own personalised Third Sector Governance SMART Action Plan. This saves your staff valuable time at meetings and writing up reports.

Watch our short Third Sector Tool Explainer Video and see how the Third Sector Governance Tool can improve your charity.

Governance Reviews – Benefits

Using the online Third Sector Governance Tool to show you how effective your charity board is, has the following advantages:

Saves you time – you generate your online Report and SMART Action Plan instantly

Saves you money – cost is significantly less than it would be to hire specialist consultants

Use it easily – the questions and terminology are easily understood

Complete it at your own pace – all at once or in bite sized chunks over several weeks, you choose

Benchmark your arrangements against the code standards – good governance practices are included within the review

You have online access to an interactive tool – complete it with your team, bringing everyone together with the board

Reassure key stakeholders – demonstrate to key stakeholders (and potential new trustees) that you are committed to complying with the highest board effectiveness and good governance standards

Third Sector Governance Tool – find out more

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