Following the launch of the new Charity Governance Code this week, Ellie Williams, an expert in charity law at Higgs & Sons solicitors, looks at what this much anticipated guidance contains and its implications for those operating in the charity and not for profit sector.

“The Charity Governance Code, which was launched on 13^th July, sets out the principles, recommended standards of governance and best practice for charities in England and Wales and their charity trustees,” explains Ellie who is a Solicitor in Higgs’ specialist Charity and not for Profit team.

The Code now exists in two forms, one for larger charities (those typically with incomes over £1 million with accounts externally audited), and another for smaller charities. Each is based on the same seven principles and common outcomes.

The Code, which is an overhaul of the Charity Governance Code: a code for the Voluntary and Community Sector published in 2010, was overseen by a steering group of umbrella bodies comprising of the Association of Chairs, ACEVO, ICSA, the Governance Institute, the National Council for Voluntary Organisations, the Small Charities Commission and the Wales Council for Voluntary Action.

The Charity Commission has endorsed the Code and will be directing people to it in future, having now withdrawn its Hallmarks of an Effective Charity (CC10).

Ellie continues: “Charities are being encouraged to set out in their annual accounts whether they have followed the Code. This highlights the expectation on charities to pro-actively make use of the Code which may now be used as an indication of good governance.

“The steering group have highlighted they do not want to see the Code used in a punitive way to prevent charities from receiving funding, but that it is likely to be used by funders to assess governance structures.

“Rosie Chapman, Independent Chair for the steering group reinforced this message stating that she did not think it was right for the Code to be used as a regulatory requirement, but rather that it would be an ‘…essential tool for charities to use and will greatly assist them to grow in their effectiveness.’”

Sir Stuart Etherington, Chief Executive of NCVO commented ‘…there is a clear consensus within the Sector that we must focus more on governance… we will soon see a commitment to following the Charity Governance Code become a requirement for many funders. Taking action now is a way of getting ahead of the game.’”

Ellie, who previously worked for the Charity Commission, believes trustees and senior leadership teams of charities should read the Code and take on board its key recommendations which include:

1. An agreed term of office for Trustees - ideally not for more than nine years. If longer than this, a rigorous review should take place and the Trustees’ Annual Report should explain the reason for the longer term of office taking into consideration the need to continually refresh the board of trustees.
2. Encouraging Trustees to review their own performance and that of other trustees, to include the chair. In larger charities it is recommended this happens every year, with external evaluation every three years.
3. Publishing the process of setting remuneration for senior staff on charities’ websites and in their annual reports.
4. Considering carefully diversity on the board and ensuring they recruit a range of skills and experiences.
5. Highlighting the key role of the chair and the vice chair in supporting charities to achieve good governance.
6. Identifying and dealing with and recording conflicts of interest and loyalty, to include a register of interests, hospitality and gifts.
7. Placing greater emphasis on the need for openness on charity boards.
8. Trustees having greater oversight of any subsidiaries established by their charity and any agreements with third party service providers, such as for fundraising or data management.

Ellie concludes: “Charity trustees ought to consider creating a regular review point for the Code as part of their own governance reviews. The Charity Commission themselves have stated that they encourage all charities to use the Code and to follow and apply its principles proportionately to their circumstances.

“All those involved in the sector including trustees and those who manage charities should give some focus to the Code which will be a hugely valuable tool for the administration of charities, inducting new trustees and carrying out governance reviews.”

For further information on the new Charity Governance Code, please contact Ellie Williams at Higgs & Sons solicitors on 0345 111 5050, or via ellie.williams@higgsandsons.co.uk

To find out more about Higgs’ specialist Charity and Not for Profit team and, in particular the advice and support the team can give on governance and regulatory matters, go to https://www.higgsandsons.co.uk/services/charity-not-for-profit/