In this blog, we show you the importance of regular governance reviews and how to complete them more effectively.
Charity boards are expected to undertake regular governance reviews. These are not compulsory, however best practice suggests that you should complete an internal review of governance arrangements in your charity at least annually.
You should also undertake an external review every three to five years.
The Charity Commission 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 governance reviews (and acting on them), trustees can reduce their personal risks by demonstrating how they meet the requirements of their role.
What the governance codes say about reviews
• In Northern Ireland, the paper checklist that accompanies The Code of Good Governance implies governance reviews should be undertaken annually
• The Charity Governance Code for England & Wales states that small charities should undertake “regular” reviews and that larger charities (£1m+ annual income) are expected to submit to external governance reviews every three years
• The Scottish Governance Code for the Third Sector highlights the need for “maintaining and regularly reviewing…internal governance”
• In the Republic of Ireland, the Charities Regulator requires charities to report annually and indicate whether or not they are meeting The Charities Governance Code
Despite the codes being different, they all have substantially common emphasis on key areas such as the need for boards to review governance regularly, at least internally and every year.
When asked about their governance arrangements, trustees often say they are “ongoing” or refer to strong reserves, positive funding arrangements, satisfied donors or other measures. However, governance reviews are meant to be an “event” or “process” that your board organises and that has identifiable outputs – results; impacts; learnings; actions; responsibilities; timeframes; priorities.
Governance review process
So, how do you undertake a corporate governance review of your charity?
External governance reviews
These generally relate to larger charities and should occur perhaps every 3-5 years or when there is a crisis of some kind. This will usually follow the methodology of the governance reviewer or consultant. Cost may be an issue as they tend to be based on consultancy days, however, they will bring to your board external governance expertise.
Internal governance reviews
These are for all sizes of charities and are more frequent, usually annually and certainly at least every two years. These internal “self-assessment” reviews allow the board to take a good look at all their governance arrangements so that trustees can refresh themselves about best practice and address any gaps over time. Sometimes when problems emerge, they can focus on specific areas such as policies; conflicts of interest; financial management; risk management; strategic planning; stakeholder engagement.
Whether internal or external, a governance review is usually set against sector benchmarks or best practice standards such as those in the paper checklists that accompany The Code of Good Governance in Northern Ireland.
Governance reviews and paper checklists
Governance codes usually come with paper checklists that provide the opportunity for a board to undertake a self-assessment analysis of their governance arrangements. These are free to use and provide a structured framework for the governance review.
Paper checklists can however be time consuming in terms of the work involved in completing them, the time spent by trustees and senior staff in meetings and phone calls, emails etc. Then there is the considerable time spent in writing up the report and securing agreement on the outputs between all the various trustees and others involved.
An online governance review
There is now an alternative to governance reviews based on paper checklists that overcomes the problems of time and wasted resources. Our online Governance Improvement Tool is aligned with the principle requirements of the various governance codes and looks at seven key areas of a charity’s governance arrangements:
- Strategic Leadership & Performance
- Legal & Compliance
- Board Effectiveness & Development
- Audit, Risk and Financial Management
- Exercising Effective Control
The interactive self-assessment tool facilitates an internal governance review, with the added benefit of an external reference point.
Using the online Governance Improvement Tool has the following advantages:
Saves you time – your online Report and SMART Action Plan can be generated instantly
Saves you money – cost is significantly less than it would be to hire consultants
It is easy to use – the questions are in plain English that can be easily understood
Complete it at your own pace – in a few hours, a day, or over a few weeks, whatever you prefer
Benchmark your governance against the highest standards – your governance arrangements are measured against sector best practice
Have online access to an interactive tool – complete it with your team, bringing everyone on board
Obtain reassurance – key stakeholders (and potential new trustees) are assured that you are committed to complying with the highest governance standards./ (Read our Blog on Top 6 Recruitment Tips to fill Trustee Vacancies)
Find out more – online governance review
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