The new Charity Governance Code was published yesterday, and sets out a range of new governance-related standards and measures which charities should aim to comply with.
The Charity Governance Code replaces the Code of Good Governance, and has been developed by a steering group of charity umbrella bodies comprised of the Association of Chairs; Acevo; ICSA: The Governance Institute; NCVO; the Small Charities Coalition; and the Wales Council for Voluntary Action, and with an independent chair, Rosie Chapman. Over 200 charities, individuals and related organisations also responded to consultation on the draft Code. The Code of Good Governance was last updated in 2010, and the Charity Governance Code builds upon the foundations set out in the Code of Good Governance, whilst containing a range of new and updated requirements and standards.
A new website has been created to launch the Code, which can be found here.
Structure of the Code
The Code is not in itself a legal or regulatory requirement, but is based on a foundation of trustees’ basic legal and regulatory requirements. To underline the importance of this new Code, the Charity Commission has withdrawn its guidance on governance (‘The Hallmarks of an Effective Charity (CC10’), and instead is referring organisations to the Code. As such, the Charity Commission will be expecting trustees to be familiar with the new Code and applying it to their charity.
The Code is deliberately drafted to be aspirational, and acknowledges explicitly that not all charities will be able to achieve all of the standards set out in the Code. It is designed to be a tool for continuous improvement for charities, setting out best practice and measures which charities should be striving towards.
There are two versions of the Code – one for larger organisations, and one for smaller organisations.
The Code adopts an “apply or explain” approach – in other words, charities should either apply the recommended practice set out in the Code, or explain why they have not followed a particular practice and explain what they have done instead. Charities are encouraged to publish a brief statement in their annual report explaining their use of the Code.
The Code is divided into principles – it sets out a relevant principle, then explains how this principle should be complied with in practice. The relevant principles are: organisational purpose; leadership; integrity; decision-making, risk and control; board effectiveness; diversity; and openness and accountability.
The Code is drafted in a clear and user-friendly style, is easy to navigate and will be a useful tool to help charity trustees to be clearer on what is expected from them.
Key changes introduced by the Code
The new Code introduces a range of more stringent measures for trustees . Some of the key changes from the previous position include:
- An explicit statement that generally, trustees should not serve for terms of longer than 9 years (unless exceptional circumstances apply);
- A wider focus on ensuring that the board has the right mix of skills, knowledge and experience to deliver the charity’s purposes effectively, and an explicit statement that a board should typically consist of 5 – 12 individuals;
- A requirement that the board should review its own performance and that of individual trustees each year, with an external evaluation by a third party every 3 years;
- A greater focus on diversity, with the board taking part periodically in diversity training, and making a positive effort to remove obstacles to people being trustees. The board should see diversity as an integral part of its board reviews;
- A greater focus on openness and transparency;
- A greater role for the Chair to provide leadership to the board and take responsibility for ensuring that the board has appropriate priorities and structures in place; and
- An explicit requirement that trustees should consider the benefits and risks of partnership working, merger or dissolution if other organisations are fulfilling similar charitable purposes more effectively.
Trustees of all charities should be aware of the Code, and should begin considering how it applies to their charity, and any key governance changes required to ensure compliance.
Posted on 14/07/2017 in Legal UpdatesBack to Knowledge