Good governance is essential for charities to be successful and accountable.
Governance is the responsibility of all the trustees on the board and they must run their charity in compliance with the charity’s governing document and the law and relevant regulations. They are also responsible for making sure the charity achieves its purposes.
Here are some practical steps trustees can take to effectively achieve and maintain good governance in their charity.
The first step for trustees is to review the charity’s governing document. It contains the charity’s aims or purposes (often referred to as its ‘objects’) and rules for how it must operate.
The governing document may also contain rules on how the charity must be managed which trustees will need to know and comply with. For example, it might say how trustees must be appointed, how often they must meet and how many trustees are needed to make a valid decision and avoid disputes or it could say if there are activities trustees cannot do, such as sell the charity’s land. The governing document may also state whether trustees have powers to invest or borrow money.
Everything in good governance should point to the charity’s purposes and the strategy for achieving them. Trustees are responsible for only delivering the charity’s purposes and the charity’s funds can only be spent on supporting the delivery of these purposes. It is important not to use resources or spend money on purposes that the charity is not set up to do.
When trustees review the charity’s governing document, they need to gain a strong understanding of what charity is set up to achieve (its purposes), who the charity is there to benefit (its beneficiaries) and what the charity can or cannot do to carry out its purposes (its powers).
Charities must be run in a way that benefits the public. Trustees must report on public benefit in the charity’s annual report so when it comes to making decisions, trustees need to be clear about who should benefit from the charity and what these benefits are, manage any incidental private benefits and manage any risk to beneficiaries and the public that might arise from the charity’s work.
Charity law gives trustees a legal responsibility for their charity and the Charity Commission expects trustees to take their responsibilities seriously and to do their best to comply with their legal duties. As a trustee it’s important to have an understanding of what laws apply by reading the relevant guidance or by getting appropriate professional advice.
The Charity Governance Code is a practical tool supported and endorsed by the Charity Commission to help charities and their trustees develop high standards of governance. It is not a legal or regulatory requirement but it sets the principles and recommended practice for good governance. A public consultation has launched to refresh and reshape the Charity Governance Code and while this is ongoing it is recommended that users of the code continue utilising the tool as normal rather than postponing important governance work.
The Charity Commission has produced useful guidance to help ensure your charity is governed effectively and in compliance with your governing document and charity law.
If you’re looking for charity accounting advice, then get in touch with our expert team who will be happy to help.
