The Captain Tom Foundation, Fashion for Relief, Mermaids – three charities that hit the headlines, but sadly for the wrong reasons after governance issues were flagged as contributing to scandals surrounding mismanagement. 

Charity governance is the process by which a charity’s board of trustees manages the organisation to achieve its goals, fulfill its purpose and comply with the law. The importance of charity governance and whether it’s fit for purpose in today’s world is a subject being tackled by ICAEW’s Big Trustee Breakfast on 19 March.

While the largest charities have established governance structures in place, smaller charities may underestimate the governance challenges they face, experts warn. “From a trustee perspective, it is about having the right people with the right skills,” says Stephen Dean, a director in Grant Thornton’s not-for-profit audit team.

Dean says there is a balance to be struck between trustees stepping back and letting management get on with implementing the strategy, and being sufficiently involved that they can challenge management. “If trustees are too involved, they may not see the big picture. At the other end of the spectrum, there may not be enough scrutiny from trustees of what management is doing and they’re left to get on with it. If you’re not getting that challenge at whatever level, don’t be afraid to make changes,” Dean says.

Key skills for trustees

What’s key for trustees is a sufficient understanding of the sector, Dean says, supplemented by more in-depth understanding depending on any subcommittee they may sit on, and a grasp of the role of trustees in ensuring good governance. “For example, having people on a finance, audit or investment committee without experience of those areas might mean they miss the questions that come from a deep knowledge.”

Training is, arguably, the easy bit. In contrast, understanding what you don’t know can be harder, Dean says. “If you’re a new trustee, you should make sure you’re familiar with all that guidance, understand what your responsibilities are and, when you identify gaps in knowledge and skill, work with the rest of your board and management to get upskilled sufficiently.”

Useful resources

The Charity Commission produces many useful resources for trustees, including five-minute guides on a range of governance issues. Meanwhile, ICAEW’s Charity Community provides a raft of guidance, reports and practical information for those working with or volunteering in the charity sector. A session at ICAEW’s recent Charity Conference, co-presented by Dean, focused on key aspects of the governance environment of modern charities.

With the best intentions in the world, there is almost always scope for improvement in governance, Dean says: “Nothing is perfect, and you always need to think about how you can tighten up controls and procedures and whether boards are giving enough oversight. Trustee skills aside, it’s a challenge encouraging people to become trustees, especially the younger generations, and encouraging a diverse mix of people.”

Dean’s advice to addressing governance challenges is to recognise that procedures alone aren’t enough to avoid problems: “In addition to having the right people, it’s also making sure that at the bottom of the governance chain, management is in the thick of it. You need written policies and procedures, and the senior leadership team is there to oversee that and make sure these things are in place and are implemented.”

Training is key

Joe Saxton, chair of the Association of Chairs, says the biggest single factors that could raise governance standards at charities is education and training, and developing more of a learning culture for trustees with better training resources aimed specifically at them.

“Over the last few decades, charity sector staff – including fundraisers, communications teams and service delivery people – have become increasingly professional,” he says. “My worry is that trustees are not keeping up with that and therefore there’s an imbalance in those two relationships.” 

It matters, Saxton says, because of the 170,000 or so charities in England and Wales, only about 

20,000 of them have staff, highlighting the reliance of the charity sector on trustees to keep its governance house in order. 

“A lot of trustees may go through an entire period and have no external training at all. There’s also a question about the value of trustee qualifications. Our members tell us succession planning is a nightmare. Nobody wants to be a chair and that’s partly because we don’t have programmes for aspiring chairs. Some people might be daunted by that training, whereas it would give others the confidence to step up.”

Formalising expected behaviours

Saxton also wonders whether formalising expected behaviours for those sitting on charity boards – akin to the Nolan Principles that guide the behaviour of people in public office – could help to set the bar for governance standards: “People who are on a charity board should be prepared to challenge and be challenged. They should be prepared to learn about the organisation, the governance, the processes and so on. Perhaps we should have a set of principles that outline what good looks like. The Charity Governance Code offers guidance about how the board as a whole should behave, but not necessarily about the individual.” 

• The Association of Chairs is running a consultation until 25 April about what a strategy for improving charity governance might look like. Find out more and submit your views.

ICAEW’s Trustee Training Modules help trustees explore the knowledge and skills required to be effective in their board role and are free for members and non-members.