This blog is for you if you are a chair, trustee or charity CEO who wants to understand the top reasons for good charity governance and how to achieve it.
There is an increasingly high expectation of good governance standards in charities and 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 top reasons why good governance is essential to you and your charity. We explain the difference good governance makes and how to assess and improve it in your charity in 5 simple steps.
Reason 1: Good governance helps meet your legal responsibilities
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 are extended 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.
Reason 2: Good governance lowers your risks
Risk exists 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, 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.
Reason 3: Funders and donors expect good governance standards
Funders and donors are increasingly focused on making sure their resources are put to best use and 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 you should consider being more proactive about demonstrating good governance in your charity and offer the evidence to support any funding application.
Reason 4: Good governance makes organisations more effective
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.
Reason 5: Good governance results in greater use of limited resources
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.
Reason 6: Good governance can improve the impact your charity makes
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. Key Performance Indicators and other metrics when properly set and measured will help ensure that as a trustee you are on top of your charity’s impacts on a timely basis.
Reason 7: Good governance helps you attract new trustees
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 and 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 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.
Reason 8: Regulators require good governance
The Charity Commission in England & Wales regulates about 167,000 charities and their Northern Ireland and Scottish counterparts regulate a further 30,000 charities. In the Republic of Ireland, the Charities Regulator oversees about 10,000 registered charities. What all of these regulators have in common is that they all endorse good governance standards in charities. They also have extensive powers to investigate charities and enforce actions where they believe governance standards are below an acceptable level. So, as a trustee, your activities are being monitored and regulated. Credit Unions are also faced with 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 Charity Commission and other Regulatory Body legal and fiduciary requirements.
Reason 9: The general public expect good governance
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 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.
Reason 10: Good governance gives you peace of mind
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. With the rewards come risks too. Risks that have personal reputational and other consequences if matters go wrong.
To give you peace of mind, you should 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 and that the assurances you receive give you the peace of mind you deserve.
How Good is your Governance?
So, now you know 10 top reasons why you need to ensure that governance in your charity or other not-for-profit body is good and effective. What if it’s not? Or what if you aren’t sure how good your governance is?
If you don’t know or aren’t sure, then you and your board/committee should investigate and review your governance arrangements against sector standards. You can complete this review internally or with the specialist governance support that we provide.
Remember the 10 top reasons set out above to ensure your governance is good and 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 and the cost of bringing in an external governance consultant could be prohibitive.
So, we have an alternative. Our online Governance Improvement Tool helps you and your board to complete a governance review and develop your own report action plan for a fraction of the cost of bringing in external support. It also saves time as it can be completed online and without the need to write up your own report.
Watch Professor Frank Clark CBE explain the importance of good governance and how you can improve your charity governance in 5 simple steps.
If you would like some more information or some guidance on assessing and improving your charity or other not-for-profit governance, contact us today on firstname.lastname@example.org or through our How Good is your Governance website.
You can also sign up to our good governance newsletter with future blogs on topics like:
- Not-for-profit Top 10 Board meeting tips
- Credit Union Challenges heading into 2020
- Top 5 Recruitment Tips - attract and retain trustees
- Conflicts of Interest – how to identify and deal with them
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