Member Article

Good governance counts because without it a charity’s impact can be much diminished, but it is also important not to be overwhelmed by all the detail and to focus on what matters.

There is a lot of guidance on governance for charities

Someone once said, “With proper governance, life will improve for all.” Good governance is fundamental to the operation of any charity: its trustees need to be clear about their responsibilities and the proper application of the assets with which they are entrusted. 

It is easy for charities to focus on continuing to do their core work in order to make a positive difference, without necessarily dotting all the i’s and crossing all the t’s during the process, especially when they are working in difficult and fast-changing situations. 

Nevertheless, policies and procedures (properly implemented) are there to free us up, not to thwart us, providing a framework for good practice to minimise and mitigate against the risk of things going wrong. 

Recently the Chief Executive of the Charity Commission highlighted that over 40% of trustees never approach the Commission when looking for advice and guidance. There is much to commend the extensive suite of online Commission guidance available to charities, but there is a lot of it. If you subscribe to the Commission’s news feed then this morning you will have received around 20 emails with links to updated guidance. Volunteer trustees and busy executives may have had a sick feeling in the pit of their stomachs - until it became apparent that most of the guidance has just been tweaked so it is consistent with legislative changes being brought into force today under the Charities Act 2022. 

In fairness to the Commission, it is alive to the danger of information overload for those running charities. It has introduced simplified five-minute guides for charity trustees on key governance topics and is in the process of harnessing the use of data to develop deeper relationships with all charity trustees through the roll out of the online ‘My Charity Commission Account’ Setting up ‘My Charity Commission Account’ - GOV.UK (www.gov.uk)

So how can charities keep on top of all the compliance?

Increasing regulation is a fact of life but as someone else once said, “corporate governance should be done more through principles than through rules” and aiming to comply with the Charity Governance Code is a good place to start.

Maybe also a member of each trustee board could be entrusted with a specific governance compliance role, to keep the rest of the board updated on developments, to identify and act upon those of relevance to their charity in order to navigate all the risk – and just to remind their colleagues of the detail of their governing document (you’d be surprised how many trustees are not familiar with it).

It is about working out what matters for your charity. And amid all today’s revised guidance we highlight just two key points. Frist, changes now in place include simplified legal requirements that charities must comply with before selling, transferring or leasing land (see our last Insight here: Charity land disposals: new law) and, secondly, new statutory powers enable:

• charities to spend, in certain circumstances, a proportion or all of their permanent endowment fund where the market value of the fund is (£25,000 or less) without Commission authorisation; and
• charities to borrow, in certain circumstances, up to 25% of the value of their permanent endowment fund without Commission authorisation.

Despite the continuing cost-of-living crisis, long established charities may remain reluctant to sell the family silver, mindful that trustees’ overriding duty to act in the best interests of their charity includes making balanced and adequately informed decisions, thinking about the long term as well as the short term.

So this new option of borrowing from permanent endowment provides another tool in the box for boards to manage cashflow in these challenging times in order to remain sustainable and to be able to carry on delivering their charitable purposes.

Join us to hear more about the ‘G’ for Governance, which can get overlooked by some charities - as well as the ‘E’ for Environmental, and ‘S’ for Social - next Tuesday 20 June when together with RSM and Charities Aid Foundation we will present A Practical introduction to ESG for Charities (shoosmiths.com).

 

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