Governance is the process by which an organisation’s aims are set and fulfilled and its arrangements designed and managed to achieve that.
It is the responsibility of the board and the senior leadership team, if there is one. This includes decision making, risk management, taking care of day-to-day activities, regulation, accountability and culture.
This is essential for all charities and social enterprises. You may not think you need help on governance, but if there is any aspect of these processes you think could be improved, appropriate advice will help.
The answer depends on what the charity will be doing and the risks it is likely to face.
The many types of structure for charities can be divided into corporate ones (like companies and charitable incorporated organisations) and non-corporate ones (like trusts and associations).
Corporate types protect the trustees from risks and liability better than non-corporate types. So, an idea of the likely scale of risk should guide the decision as to structure.
Not really: the two are similar, in having community or public benefit aims, but there are differences.
A charity is a particular characteristic prescribed by law and applies to many kinds of structure, such as trusts, companies and charitable incorporated organisations.
A social enterprise is not a legally restricted term but tends to mean an organisation with community benefit aims and profits restricted to supporting those aims.
The Commission is the main regulator for charities in England and Wales (Scotland, Northern Ireland and the Republic of Ireland have their own regulators).
Most charities are required to register with the Commission, although some are permitted not to do so, e.g. many schools, universities, housing associations and very small charities.
If registered, charities must file annual returns and accounts with the Commission. The Commission has objectives, functions and duties set out in law. It publishes a great deal of guidance on the law, regulation and governance of charities.
Aiming to do something charitable or philanthropic does not necessarily mean setting up a charity: this is just one option.
Others include being a volunteer, a trustee or donor (occasional or regular) for an existing charity, donating via a Community Foundation or charitable foundation, creating a personal philanthropy strategy, or setting up a social enterprise or community organisation.
Additionally, there are many different charitable and community causes, and often a range of national, regional and local charities and community organisations operating in all these areas.
Although this is possible, safeguards are necessary.
Being either a trustee or a senior employee carries a duty to act in the best interests of the charity but there is likely to be a conflict of interest – certainly for a senior employee owing to being paid, and quite possibly for a trustee depending what the board is dealing with.
Trustees must act with complete independence when undertaking their role. The Charity Commission is very alert to this independence and the influence of founders: appropriate governance policies and decision making must be demonstrated.
Yes, some training is absolutely recommended. Whilst it is true that training is not mandatory either when a trustee is first appointed or afterwards, every trustee must take their legal duties and responsibilities seriously, and to do that a trustee needs to know them.
Responsibilities include to act in the charity’s best interests, manage its resources responsibly, manage risks, comply with the law and the governing document, and ensure the charity is accountable.
Even those who have experience, and certainly those who do not, will benefit from training on the essentials of the role as well as particular aspects which are relevant for the charity in question.
You need a risk management system. This should be tailored to your charity’s particular needs and circumstances.
However this should include agreed guidance and processes for trustees and any appropriate staff for how to identify, assess, prioritise, act on and review the most significant risks likely to arise for your charity.
This system will also need to incorporate the named person or persons responsible for management or particular risks and the required mitigation, together with ideal timescales.
Fundraising in relation to charities has complex and sometimes subtle rules in law and under Charity Commission, Fundraising Regulator and HMRC regulation.
A charity can and should protect and maximise its assets, including the funds it raises and holds for charitable purposes. However, rather surprisingly, fundraising in itself is not a charitable purpose and must only be done within strict rules.
Trading for fundraising purposes can only be undertaken to a limited extent or via a separate trading company. Additionally, investment of charitable funds is carefully circumscribed.
Every charity is different in its size, activities and operational needs. Some charities operate effectively with no staff and only the trustees undertaking all necessary activities, management and governance.
Staffed charities vary hugely, from those with just a few essential staff to those with very many staff or whole teams. The numbers and type of staff will depend on the charity’s own needs.
To consider this specifically, trustees must consider their charity’s operational, administrative and leadership needs. Staffing will also, naturally, depend on the charity’s funds.
That depends what the charity does; there is no definitive list applicable to all charities. However, some areas do need a policy and it would be a very rare charity indeed that needed none.
Just some areas which need a policy include: risks, safeguarding, data protection, finance, health and safety, fundraising and trustees’ duties. Relevance and tailoring is crucial: a policy might be just a single page long or have extremely detailed provisions, depending on the charity and the situation to which it relates.
There are on-line resources to guide you further.
The reputation of charities in general is a very valuable commodity; an individual charity may also have a reputation in the work they do.
Trustees’ duties include managing significant risks and that can mean reputational risk in certain situations. Ensuring the charity’s reputation is managed is therefore strongly linked to risk management (see the FAQ as to this).
There are aspects of reputation which concern communications and publicity, so these also need a governance strategy.
There is always a way to manage, but it may be more straightforward or radical than you think.
Admin needs a system to help you manage, to ensure deadlines are not missed, annual paperwork and filing is taken care of, projects are run well, meetings are effective and risks are managed.
External assistance can be sought but of course will need to be paid for. If trustees, staff or external support is not available or affordable, then the charity could consider collaborating or merging with another similar charity.
At some point, every charity faces the challenge of replacing trustees, adding skills to their board or planning for the future.
Additionally, trustees should not serve for too long, as this risks staleness, and good practice is for time limited terms of office.
Unless it’s obvious what’s needed, a good way to begin the process is to conduct a skills and experience audit of existing trustees. Then you need to devise a plan for recruitment, selection and induction.
Every charity has an uncertain future. Some difficulties are within the trustees’ control but some are not; the resolution will follow accordingly.
Matters within trustees’ control include choice of activities, structure of committees, management of risks, and focus of fundraising. Those which are not include changes in the charity’s sector, economic pressures, and decisions of third parties and institutions. The resolution can be radical, like merger or closure, or gradual, like an evolution of projects. Resolving uncertainty is a matter of decision making in an order of suitable priority.
The Charity Commission is critical of trustees who baulk from decision making but not of trustees who make informed and reasonable decisions.