“How wonderful it is that nobody need wait a single moment before starting to improve the world.”
Anne Frank inspires us that there is no better time than now to do good.
As a charity’s sole purpose should be to offer improvement, one of the simplest ways to achieve this is to practise effective governance.
Being an expert in the charitable sector and finance, I deal on a daily basis with legislation.
While legislation sometimes has little to commend it, the new Charity Governance Code has much to offer your charity.
Published in July 2017, the new Charity Governance Code is a set of principles and recommended practice.
The Code is designed to be a practical tool that charities can use to develop high standards of governance.
It isn’t a legal requirement, so charities that choose not to apply it won’t find themselves being fined or financially penalised.
However, a conscious decision to adopt the seven principles of the code almost certainly reaps the rewards for your charity and positions you to excel.
The code is based on seven principles, each of which contains some financial aspects for consideration:
1) Organisational Purpose
‘The board is clear about the charity’s aims and ensures that these are being delivered effectively and sustainably’.
Your charity will need to have a clear strategic plan demonstrating how it will achieve financial sustainability.
You also need processes in place to measure and assess financial results and outcomes.
‘Every charity is headed by an effective board that provides strategic leadership in line with the charity’s aims and values’.
The charity should ensure that appropriate remuneration policies are in place.
If there are subsidiary companies, the financial relationships should be documented and regularly reviewed.
“Earn your leadership every day.” Michael Jordan
‘The board acts with integrity, adopting values and creating a culture which helps achieve the organisation’s charitable purposes.
The board is aware of the importance of the public’s confidence and trust in charities, and trustees undertake their duties accordingly’.
A policy on interests, hospitality and gifts should be in place, and a register maintained.
Processes to handle any conflicts of interest should also be in place.
4) Decision-Making, Risk and Control
‘The board makes sure that its decision-making processes are informed, rigorous and timely, and that effective delegation, control and risk assessment, and management systems are set up and monitored’.
The board needs to be aware of the financial risks to be monitored and managed.
Financial policies need to be reviewed regularly, together with budgets and management accounts.
If the charity has an audit committee, they should possess recent and relevant experience.
“We measure everything – why not governance?” Mo Ibrahim
5) Board Effectiveness
‘The board works as an effective team, using the appropriate balance of skills, experience, backgrounds and knowledge to make informed decisions’.
The board may choose to access independent professional advice, particularly if there is a financial matter that is outside the board’s collective skill-set.
‘The board’s approach to diversity supports its effectiveness, leadership and decision making’.
The board is encouraged to make a definite effort to increase board diversity.
This could mean allocating a budget to improve accessibility or payment of reasonable expenses.
7) Openness and Accountability
‘The board leads the organisation in being transparent and accountable. The charity is open in its work unless there is a good reason for it not to be’.
The board is encouraged to publish the process for setting the remuneration of senior staff, and their remuneration levels, on the charity’s websites and in its annual report.
The code also urges charities to include a note in their annual accounts explaining if they have adopted the code.
This may also benefit charities seeking funds, as many grant providers look more favourably upon charities following the code, or even insist on it as part of their approval process.
The code is designed to help charities operate effectively, and to help them to achieve their ambitions and aim.
“Governance is a way of organising, amplifying, and constraining power.” Rebecca Mackinnon
Perhaps you’ve already adopted the code, or are about to take the first practical steps?
If so, speaking to an independent finance professional brings an external perspective and can help to challenge existing mindsets.
As a finance professional with a wealth of experience working with charitable organisations, I provide advice on the best way for you to implement the financial aspects of the Code.
To book an initial consultation to explore how you may benefit, click here.
The Charity Governance Code can be read in full here.
About Michael Ware and Horus Consulting
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