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Home / News and Insights / Insights / Reviewing your charity’s governance

It is well publicised that this year’s pandemic has hit the charity sector hard. Charities were stress tested in a number of ways from the start of the lockdown, from service delivery to fundraising. Such multifaceted emergency challenges remind us that clear delegation and reporting lines can help underpin the hard work and perseverance of charity trustees and management.

On top of this, Charity Commission inquiry reports, such as that published in June 2020 on the RNIB (Royal National Institute of Blind People) investigation, demonstrate again that strong governance and comprehensive policies and procedures are also essential to protect a charity’s beneficiaries on a day-to-day basis, and not only to ensure long term support of a charity’s wider social cause.

2020 has arguably, therefore, already provided too many reminders as to why reviewing charity governance is something to do regularly to ensure that internal management, procedures and policies remain fit for purpose. Keeping a charity’s governance healthy will help a charity’s response to an external crisis, but will also help avoid an internal one.

Below are some key findings and considerations arising out of the RNIB report (and the Commission’s subsequent regulatory alert to approximately 600 large charities), and more generally for charities considering their next governance review.

  • The RNIB report – Governance lessons learnt. On 25 June 2020 the Commission issued a report into a statutory inquiry at RNIB, providing details and commentary on what it considered to be misconduct and / or mismanagement within the charity.

Serious incident reports

The problems at RNIB began to come to light after the charity submitted two serious incident reports in March 2018, one reporting a safeguarding incident; the other notifying the Commission of Ofsted’s intention to cancel the registration of one of RNIB’s care homes for vulnerable beneficiaries and which outlined a series of incidents and repeated breaches at that same care home.

The Commission began a safeguarding investigation but, as things came to light, the Commission expanded the inquiry’s remit to include consideration of broader governance and decision-making at the charity. The inquiry was then widened again to look at financial management when the regulatory action at the care home caused two institutional creditors to call in their loans, causing the charity to seek emergency refinancing.

The Commission also approved the engagement of two consultancy firms alongside the inquiry, one to conduct a safeguarding review, the other an independent governance review which assessed RNIB’s governance against the Charity Governance Code.

The Commission and the independent consultants found ‘systemic shortcomings’ in areas such as safeguarding, reporting and management structures, and regulatory compliance. The independent governance review found that RNIB was not fully compliant with the Charity Governance Code and, although the code is not a legal requirement, it represents a recommended standard of good governance practice.

The Commission’s inquiry report looked to highlight how things can go wrong when charities become large, with a complex structure, and seek to deliver multiple and highly regulated services for vulnerable beneficiaries.

Openly and honestly

RNIB embraced the inquiry and governance review openly and honestly, and was entirely willing to establish what went wrong and to address it. Part of this was to consider the complexity of the charity’s governance structure and its management and skills deficit.

Among other things, as part of an ongoing governance action plan, the RNIB trustees strengthened their board of trustees, bringing in specialist expertise in safeguarding and governance and made key appointments to their leadership team, including appointing a Director of Care, Education and Safeguarding, a Director of People and Organisational Transformation, and a Company Secretary to manage a new Governance Directorate.

The trustees also strengthened the delegated committee structure, with new terms of reference setting out clear lines of responsibility both for delegation and reporting throughout the organisation.

  • The subsequent regulatory alert from the commission – spot checks this autumn. In light of the Commission’s findings in the RNIB inquiry, the Commission issued a regulatory alert to leaders of around 600 large, complex charities which directly support beneficiaries or provide amenities or facilities to the public. The alert was designed to remind charities of the importance of suitable oversight that takes into account the complexity, scale and nature of their activities, in order to help avoid potential harm to their beneficiaries, finances and / or reputation.

The Commission reiterated in the alert that safeguarding should be a priority for all charities, even where a charity faces financial difficulties due to COVID-19, stating:

‘protecting people from harm is not an overhead to be minimised, it is a fundamental and integral part of operating as a charity for the public benefit’.

Fit for purpose

The Commission explained in the regulatory alert that it will conduct spot checks this autumn on selected recipients. Those 600 charities in particular should be considering their governance to ensure it is fit for purpose, but it is important for all charities to keep their governance under regular review.

  • What does good governance look like? The regulatory alert and report together highlight what is arguably becoming an ongoing dilemma for big operating charities, especially those involved in highly sensitive services. namely how strong management and communications structures, which ensure that problems are identified, escalated and addressed quickly, can be put in place and effectively managed to ensure volunteer trustees maintain sufficient oversight. Trustees need to have the confidence that they have the information they need to manage the charity effectively.

Governance must be suitable for your specific charity. This is why governance reviews should take place regularly (at least annually), as well as at certain trigger points, for example if your charity grows, takes on new activities, or when the Commission issues new guidance (eg identifying a new risk area for trustees to consider).

This regularity will provide an opportunity to be objective about the charity’s governance structure and to consider what changes may be needed to ensure it has appropriate management and reporting structures in place to reflect the scale and complexity of activities that the charity carries out.

Governance reviews need not be cumbersome, and should certainly not be seen as an afterthought. If there is a new project on the horizon, for example, then trustees should include governance considerations as part of the planning. A good way to keep a hold on the situation is for certain committees to be responsible for the annual review of their designated policies as well as to consider revisions because of new charity activities, or updates in the law, Commission policy, or best practice.

Governance remaining manageable

Any necessary amendments can then be escalated (where necessary subject to terms of reference) to board level for sign off. This delegation provides clear responsibility to ensure governance is kept on the agenda but remains manageable.

There are also a number of resources to assist in governance reviews. The Charity Governance Code is a good place to start and, as mentioned, whilst it is not a legal obligation, it sets out best practice. There is also guidance available online (eg NCVO issued helpful guidance in response to the RNIB report).

The precise look of a charity’s governance structure will depend upon its size and operations, but in general charities (especially larger charities) should have:

  • suitably skilled trustees and executives, meaning that there is the necessary expertise to support and execute the strong governance structures. This should be assessed regularly through skills audits;
  • suitable delegation and reporting structures (with appropriate terms of reference) so that the trustees are properly informed of their charity’s activities and that there is suitable oversight of all elements of the charity’s work;
  • a risk register and supporting policies so that key risks are regularly revisited and that when things do go wrong there are clear reporting structures to protect charity beneficiaries. This should include appropriate systems in place for recording, reporting and escalating serious incidents, including for handling complaints;
  • processes for monitoring safeguarding and ensuring safeguarding concerns are consistently investigated and reported where necessary to the appropriate bodies; and
  • proper arrangements with other entities in a group of charities / subsidiaries, so that relationships are properly documented and agreed – meaning there are no gaps or overlaps and that the division of responsibilities and how issues will be dealt with are clear (from matters such as data sharing to regular reporting). This should include ensuring there is also proper oversight and management of any conflicts of interest and / or benefits.

Dynamic trustee boards

A charity’s frontline operations are clearly its priority, in pursuit of its public benefit. However, this should be underpinned with strong strategies and procedures which are put in place to protect its beneficiaries, staff and volunteers. This should include a dynamic trustee board, benefiting from a diverse skill set, together with sufficient delegated authority for the charity to move quickly and coherently, as well as effective reporting to enable the board to make informed decisions.

2020 has so far proven to be quite the challenge for a number of sectors, but the charity sector is resilient, driven by the aspirations and dedication of a charity’s trustees, staff and volunteers. As we saw in the aftermath of the 2008 financial crisis, recovery is possible.

Reviewing a charity’s governance can sometimes seem like a luxury, especially in the face of the sort of challenges thrown up by the pandemic. However, investing some time now can help charities get ‘match-fit’ to put themselves in the best position to meet those challenges, as well as to avoid circumstances such as those found at the RNIB.

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