Charity Governance Essentials

By D. Brown

Looking to effectively manage your charitable organisation? Look no further than Charity Governance Essentials, the comprehensive guide to understanding the legal, financial, and managerial components of running a successful charity.

 

From understanding the legal frameworks surrounding charitable organisations to implementing essential requirements for good governance, this ebook covers all the key aspects of charity governance. Discover how to develop and implement effective organisational policies, utilise data and resources to respond to legislative requirements, and produce a governance report for your board of trustees.

 

Featuring best practices for effective charity governance, this ebook is a must-read for anyone looking to strengthen their organisation's operations and build lasting partnerships with stakeholders. Whether you're a charity executive, board member, or volunteer, Charity Governance Essentials provides invaluable insights into the complex world of charity governance. Don't miss out on this essential guide - get your copy today.

• Language: English
• Publisher: D Brown
• Release date: Mar 18, 2023
• ISBN: 9798215698723

D. Brown

David Brown, University of Bath, UK

Book preview

Charity Governance Essentials

By D. Brown

I. Introduction

Charities play a crucial role in society, providing essential services and resources to individuals and communities in need. As such, they must be held accountable for their actions and be transparent in their operations. This is where charity governance and legal principles come in. In this section, we will explore the importance of charity governance and legal principles in ensuring that charities operate effectively, efficiently, and in compliance with the law.

Charity governance refers to the way a charity is run, managed, and overseen. This includes the roles and responsibilities of the board of trustees, the way decisions are made, and the systems in place to ensure the charity operates within legal and regulatory frameworks. The board of trustees is responsible for overseeing the charity's work and ensuring that it is fulfilling its mission and objectives. They also have a legal duty to act in the best interests of the charity and to manage its resources effectively.

Good governance is essential for the effective and efficient operation of a charity. It ensures that the charity is transparent in its operations, accountable for its actions, and maintains the trust and confidence of its stakeholders. It also ensures that the charity is financially responsible and operates within its means. By implementing good governance practices, charities can operate effectively and efficiently, delivering their services to those in need while minimising the risk of mismanagement or misuse of funds.

Legal principles are another crucial aspect of charity governance. Charities must comply with a range of legal and regulatory requirements, including charity law, tax law, and employment law. Failure to comply with these laws can result in financial penalties, loss of charitable status, or even legal action against the charity or its trustees.

Charity law provides a legal framework for the operation of charities. It outlines the requirements for registering as a charity, the duties and responsibilities of trustees, and the reporting and accounting requirements for charities. Charities must also comply with tax law, including registering for tax exemptions and filing tax returns. Employment law governs the way charities employ staff and volunteers, including health and safety requirements and discrimination laws.

Compliance with legal principles is not only a legal requirement but also a matter of public trust and confidence. Charities must be transparent in their operations and comply with legal requirements to maintain the trust and confidence of their stakeholders. Failure to do so can damage a charity's reputation, hinder its ability to fundraise, and ultimately impact the services it provides to those in need.

In addition to complying with legal requirements, charities must also demonstrate good governance practices to maintain the trust and confidence of their stakeholders. This includes having robust financial controls and reporting, effective risk management systems, and transparent decision-making processes. It also involves ensuring that the charity's resources are used effectively and efficiently, and that the charity operates in a way that is consistent with its values and objectives.

Charity governance and legal principles are essential for the effective and efficient operation of charities. They ensure that charities operate transparently and within the law, maintain the trust and confidence of their stakeholders, and deliver their services to those in need. By implementing good governance practices and complying with legal requirements, charities can fulfil their mission and objectives, making a positive impact on society.

In conclusion, charity governance and legal principles are crucial for the effective and efficient operation of charities. By implementing good governance practices and complying with legal requirements, charities can maintain the trust and confidence of their stakeholders, operate transparently, and deliver their services to those in need. Charities must prioritise good governance practices and ensure compliance with legal requirements to fulfil their mission and make a positive impact on society.

The history of charity governance in the UK can be traced back to the Middle Ages when religious organisations, such as the Church, were the primary providers of charity. During this time, charity was seen as an obligation for the wealthy, and the Church was responsible for collecting and distributing funds to the poor. However, with the dissolution of the monasteries in the 16th century, charity provision became less centralised, and the responsibility fell to local authorities and private individuals.

The concept of charity regulation emerged in the 19th century due to concerns about the misuse of charitable funds. In 1853, the Charitable Trusts Act was passed, which gave the Court of Chancery the power to supervise charities and ensure that their assets were used for their intended purposes. This act was followed by the Charitable Trusts Amendment Act in 1855, which required charities to register with the Charity Commission.

The Charity Commission was established in 1853 as the first charity regulator in the world. Its role was to oversee charities and ensure that they were operating in the public interest. The Commission’s powers were strengthened in 1960 with the Charities Act, which gave it the power to investigate charities and remove trustees who were deemed unfit to govern.

The Charity Commission has played a significant role in the development of charity governance in the UK. According to David Emerson, former Chairman of the Charity Commission, The Charity Commission has a unique role in the governance of charities in England and Wales. It is the regulator, the enforcer, the adviser, and the champion of charitable causes. (Emerson, 2015).

In the 1990s, there was a growing recognition that charities needed to operate in a more business-like manner to be effective. This led to the introduction of the concept of best practice in charity governance, which emphasised the importance of transparency, accountability, and good management. The Charity Commission published its first set of Best Practice Guidelines in 1997, which provided guidance on good governance, financial management, and fundraising.

The 21st century has seen further developments in charity governance in the UK. The Charities Act 2006 modernised charity law and introduced the concept of public benefit as a requirement for charitable status. The act also gave the Charity Commission greater powers to regulate charities and to remove trustees who were deemed unfit to govern.

The recent scandals involving charities, such as the Oxfam scandal in 2018, have led to calls for further regulation and oversight of the sector. In response, the Charity Commission has launched a new Statement of Recommended Practice (SORP) that sets out the reporting requirements for charities. The SORP emphasises the importance of transparency and accountability in charity governance and requires charities to report on their activities, governance, and finances in a clear and accessible manner.

In conclusion, the history of charity governance in the UK has been shaped by changing social, political, and economic contexts. From the Middle Ages to the present day, charity regulation has evolved to ensure that charities operate in the public interest and that charitable assets are used for their intended purposes. The Charity Commission has played a significant role in this process, and its role as a regulator, enforcer, adviser, and champion of charitable causes is critical to the effective governance of charities in the UK. The concept of best practice has also emerged as an essential aspect of charity governance, emphasising the importance of transparency, accountability, and good management.

Good governance is a critical aspect of any charitable organisation's success, and it encompasses the process of making and implementing decisions, ensuring accountability, and managing resources effectively. Charities with good governance enjoy a range of benefits that help them operate sustainably and maximise their impact. This section explores some of the benefits of good governance for charitable organisations in the UK.

One of the benefits of good governance for charitable organisations is the establishment of a robust and reliable framework that ensures accountability, transparency, and ethical conduct. This framework helps build trust and confidence among stakeholders, including beneficiaries, donors, and volunteers. According to the Charity Commission for England and Wales, Good governance means charities are run effectively, efficiently, and accountable. It underpins everything charities do and is fundamental to their success (Charity Commission, 2017). A strong governance framework that encompasses clear policies and procedures for financial management, risk management, and safeguarding, among others, ensures that the charity's activities are ethical, legal, and in line with the organisation's values and objectives.

Another benefit of good governance for charitable organisations is improved decision-making. Effective governance structures help ensure that decisions are made based on data, evidence, and best practices. This approach ensures that charities can respond effectively to emerging issues and changes in the operating environment. The Institute of Chartered Secretaries and Administrators (ICSA) notes that Good governance enables charities to be more agile, responsive, and better equipped to navigate an ever-changing and increasingly complex world (ICSA, 2018). A governance structure that includes diverse perspectives, such as that of beneficiaries, staff, and trustees, ensures that decisions are informed and comprehensive, enabling charities to optimise their impact.

In addition to improved decision-making, good governance enables charitable organisations to manage risks effectively. Charities operate in complex and dynamic environments that are often characterised by uncertainty, and therefore, effective risk management is critical for their sustainability. A robust governance structure that includes risk management policies and procedures ensures that charities can identify and assess risks, develop appropriate mitigation strategies, and monitor risk exposure. The Charity Governance Code emphasises the importance of risk management for charities, noting that An effective board should be able to identify, assess and manage the risks that the charity faces (Charity Governance Code, 2017). Good governance practices, such as regular board meetings, internal controls, and external audit, enable charities to mitigate risks effectively and enhance their long-term sustainability.

Good governance practices also help charitable organisations to attract funding and maintain donor confidence. Donors are increasingly interested in charities' governance practices and expect organisations to demonstrate ethical and transparent conduct. The UK Charities Aid Foundation notes that Good governance, accountability, and transparency are crucial in building trust with donors and other stakeholders, attracting new funding, and retaining existing donors (Charities Aid Foundation, 2018). Charities that prioritise good governance practices are more likely to attract funding from a range of sources, including individual donors, foundations, and corporations.

Finally, good governance practices help charitable organisations to achieve their objectives and maximise their impact. A strong governance framework ensures that the charity's resources are allocated efficiently, and activities are aligned with the organisation's mission and objectives. The Charity Governance Code notes that Effective governance helps to ensure that a charity has a clear direction, that resources are well used, and that its work is sustainable over the longer term (Charity Governance Code, 2017). Charities with effective governance structures are more likely to achieve their goals, operate sustainably, and have a positive impact on their beneficiaries and wider society.

In conclusion, good governance is critical to the success of charitable organisations in the UK. Charities that prioritise good governance practices enjoy a range of benefits, including improved accountability, better decision-making, effective risk management, increased funding, and maximised impact. These benefits not only support the organisation's immediate objectives but also contribute to the long-term sustainability of the organisation. Charities that operate with good governance practices are more likely to build trust and confidence among their stakeholders, attract funding, and ultimately achieve their goals.

As noted by the Charity Commission, Good governance underpins everything charities do and is fundamental to their success. (Charity Commission, 2017) Therefore, it is imperative that charitable organisations prioritise good governance practices in all aspects of their operations. This includes establishing clear policies and procedures, developing effective risk management strategies, and ensuring that decision-making processes are evidence-based and inclusive.

To achieve good governance, charities should consider adopting governance codes such as the Charity Governance Code or the Code of Good Governance. These codes provide guidelines and principles for best practices in governance, helping charities to ensure that their governance structures are robust and effective.

Moreover, charities can also seek advice and support from various sources, including the Charity Commission, professional bodies, and consultancy firms. These resources can provide charities with insights and expertise that can help them improve their governance practices and enhance their overall effectiveness.

In conclusion, good governance is essential for the success and sustainability of charitable organisations in the UK. By prioritising good governance practices, charities can build trust, attract funding, and maximise their impact on society. Charities that operate with effective governance structures are better equipped to navigate the complex and dynamic operating environment, respond to emerging issues, and achieve their long-term objectives. Therefore, it is vital that charitable organisations prioritise good governance practices in all aspects of their operations to ensure their continued success and impact.

Charities play a vital role in society, providing essential services and support to those in need. Effective governance is essential to ensure that charities operate efficiently, transparently and sustainably, and maintain the public trust necessary to attract funding and support. However, charity governance faces several challenges, including financial pressures, regulatory complexity, and reputational risks. In this book, we will explore these challenges and their impact on charity governance in the UK.

One of the primary challenges facing charities in the UK is financial pressure. Charities operate in a highly competitive environment, with many organisations vying for limited resources. According to the Charity Commission, in 2019, there were over 168,000 registered charities in England and Wales alone, with a combined income of £77.4 billion. This intense competition can lead to financial instability for smaller charities, with some struggling to maintain their operations. This situation can put a strain on the governance of these organisations, with trustees forced to make difficult decisions about how to allocate resources.

As Sir Stuart Etherington, former Chief Executive of the National Council for Voluntary Organisations (NCVO), observed, The most significant challenge facing charities is financial...Smaller charities are often struggling to survive, and larger charities are finding it more challenging to raise funds. We are seeing the creation of a two-tier charity sector, with those at the top doing well and those at the bottom struggling (Charity Times).

Financial pressures are not the only challenge facing charities. The regulatory environment for charities in the UK is complex and can be difficult to navigate. Charities must comply with numerous legal requirements, including registration, reporting and accounting regulations. The Charity Commission, the independent regulator of charities in England and Wales, provides guidance and support to help charities navigate this environment. However, the complexity of the regulatory landscape can make it challenging