The global Pandemic has significantly affected the charity sector, whereby many trustees are prioritising safeguarding cash flows and maintaining charitable activities during a lockdown, in times of increasing demand and constraints on resources. Despite economic uncertainty, effective governance and skilled trustees making informed decisions are crucial ingredients to ensure charities maximise the fulfilment of their aims and objects. The Charity Governance Code (the Code) is an important resource assisting charities to develop high standards of governance and many charities are turning to the Code to help them consider best practice and improved governance in their organisations.
The Code outlines the principles and recommendations for good governance and was created by a sector steering group. The Code is made-up of the following seven principles:
- Organisation purpose
- Decision-making, risk and control
- Board effectiveness
- Equality, diversity and inclusion
- Openness and accountability
In an ever-changing world, the Code’s steering group recognise the importance of evolving the Code where required to ensure it continues to be fit for purpose.
Following feedback from an extensive consultation process, the refreshment of the Code in December 2020 focuses on enhancing Principles 3 (Integrity) and 6 (Equality, Diversity and Inclusion), which occurred as these principles received the most consistent feedback concluding amendments were required.
The Integrity principle
This principle has been updated to emphasise the importance of applying ethical principles to decision making, and ensuring a welcoming and supportive culture is embedded into the charity’s values.
The rationale significantly refocuses from the primary concerns of protecting charitable assets and reputation and now additionally highlights culture, values and the right of everyone to be safe. Key outcomes now include:
- Ensuring Trustees understand their safeguarding responsibilities
- Ensuring everyone in contact with the charity is aware of how to raise concerns
- To address power imbalances/conflicts of interest where they exist or arise
- To establish appropriate procedures, which are integrated with risk management and training
Thus embedding the values, ethics and culture of the charity into everything it does and its decision making – the personal behaviour of Charity Trustees for instance is paramount which has been clarified in the Code.
The equality, diversity and inclusion (EDI) principle
The ‘Diversity’ principle name was renamed ‘Equality, Diversity and Inclusion (EDI)’ principle following consultation conclusions that the principle should be reworded to work towards inclusive cultures as well as Board diversity.
Effective EDI is considered a journey and sits at the heart of good governance. The rationale of principle 6 is to aid boards to maximise public benefit, redesign their charitable purpose where necessary and make robust and informed decisions. The EDI principle now recommends Boards to consider the following four stages of practice:
- Assessing an understanding of EDI and considering why it is important for the charity to consider.
- Formulate context-specific plans and targets and assess the charity’s starting point.
- Taking action and monitoring EDI performance.
- To be transparent and learn from progress to date.
The Code’s principles, rationale and outcomes are considered to apply to all charities regardless of size or activities. Governance practices can differ significantly depending upon a charity’s activities, complexity, income or size; different versions of the recommended practice have therefore been published to address some of these differences, split between ‘larger’ and ‘smaller’ charities.
It is worth noting that some of the principles and recommended good practices set out by the Code are deliberately aspirational, and a stretch for many charities to achieve. This is intentional, as the steering group want the Code to be a tool for continuous improvement towards the highest standards.
The full Charity Governance Code, along with additional information, can be found here.
This post was written by Simon Rowley, Manager and charity sector specialist at Price Bailey LLP.
We always recommend that you seek advice from a suitably qualified adviser before taking any action. The information in this article only serves as a guide and no responsibility for loss occasioned by any person acting or refraining from action as a result of this material can be accepted by the authors or the firm.