External reviews for larger charities every three years, more openness and limits on how long trustees may serve are among new recommendations unveiled today by a group of leading charity membership bodies to strengthen governance and accountability in the voluntary and community sector.
The new Charity Governance Code will outline the high standards that all charities in England and Wales should aspire to and is designed to help charities and their trustees to develop high standards of governance.
The renamed code is an updated version of the previous Code of Good Governance. It has been devised by a cross-sector steering group headed by independent chair Rosie Chapman and comprising the Association of Chairs; the Association of Chief Executives of Voluntary Organisations; ICSA: The Governance Institute; the National Council for Voluntary Organisations; the Small Charities Coalition; and the Wales Council for Voluntary Action.
The Charity Commission has marked its endorsement for the new code by withdrawing its publication, Hallmarks of an Effective Charity, in favour of encouraging charities to use the code.
The guidelines come in two versions which share common principles and outcomes: one set of recommended practice applies to smaller charities and another to larger organisations, where accounts are audited.
Key recommendations include:
- more oversight when dealing with subsidiary companies; registers of interests and third parties such as fundraising agencies or commercial ventures.
- an expectation that the board will review its own performance and that of individual trustees, including the chair, every year, with an external evaluation for larger organisations every three years.
- no trustee should serve more than nine years without good reason.
- boards thinking carefully about diversity, how they recruit a range of skills and experience, and how they make trusteeship a more attractive proposition.
- boards should operate with the presumption of openness.
- stronger emphasis on the role of the chair and vice chair in supporting and achieving good governance.
A new website www.charitygovernancecode.org has also just launched to host the code online.
The work on the code has been funded by the Barrow Cadbury Trust and the Clothworkers Foundation. Charities were asked for feedback on a draft version of the code. Between November 2016 and February 2017, when the draft guidelines were circulated, there were more than 200 responses, with a clear majority backing the draft proposals.
Vicky Browning, chief executive of ACEVO, said:
‘We know effective governance is crucial to the running of any charity. The new governance code is a key tool in ensuring this is achieved. I would recommend that all charity leaders – whether they’re chairs or CEOs – read it and take on board its recommendations.
Rosie Chapman, chair of the Charity Governance Code steering group, said:
’The code for the first time sets out clear aspirations for a charity board to meet. This code is a great stepping off point to help charities navigate the changes. It will be an essential tool for charities to use and will greatly assist them to develop and grow in their effectiveness.
‘It has been achieved through a great deal of effort from many people in many organisations and it is all the richer for their input.’
Sir Stuart Etherington, chief executive of NCVO, said:
‘This new code represents a significant contribution to strengthening governance throughout the sector. I’m particularly pleased that is has been written by the sector, for the sector.
‘There is a clear consensus within the sector that we must focus more on governance. With this in mind, I envisage that we will soon see a commitment to following the Charity Governance Code become a requirement from many funders. Taking action now is a way of getting ahead of the game.’
Peter Davies, chair of the board of trustees at the Wales Council for Voluntary Action, said:
‘Strong governance is essential in building trust with funders and ensuring the effectiveness of services to beneficiaries. WCVA welcomes the new code in providing clear guidance to trustees and will be working to support its implementation across the sector in Wales.’
Rosalind Oakley, executive director of the Association of Chairs, said:
‘The new code is a welcome and useful resource. By using it, chairs can work with their board to explore what good governance looks like and to identify and close any gaps in their approach.’
John Barrett, chief executive of the Small Charities Coalition, said:
‘We welcome this update of the Charities Governance Code – and the work that has gone into it to make it simpler, more proportional and supportive for small charities.
‘The code sets the aspirations for good governance, and in applying it, small charities should take a proportional approach and remember application of the code is about continuous improvement, not perfection.’
Louise Thomson, head of policy at ICSA: The Governance Institute, said:
‘ICSA is proud to be associated with this new version of the code. The recalibration of the code makes it more relevant, flexible and aspirational in establishing good governance in any size of charity.
‘We particularly welcome the emphasis on the importance of people and behaviours in delivering good governance. This is just as important as having appropriate structures in place.’
The new recommendations have also been endorsed by the Charity Commission, which acted as an observer to the steering group.
Sarah Atkinson, Director of Policy and Communications at the commission, said:
‘The Charity Governance Code represents a standard of good governance practice to which all charities should aspire. We encourage all charities to use it, following and applying its principles proportionately to their circumstances.’