Charities must do more to adopt governance code, research shows

The research by the audit firm RSM also finds that medium-sized charities are lagging behind on good governance

The RSM report
The RSM report

Charities need to make significant improvements in adopting the Charity Governance Code, because less than half currently include its recommendations in their policies, according to new research.

The research, carried out by the audit, tax and consulting firm RSM, found that 44 per cent of the charities included in the research acknowledged the governance code in their annual reports.

The research studied 85 charities of a wide range of sizes and cause areas, and gave each charity a score for its core adoption, core compliance and implementation of the code’s seven principles.

The Charity Governance Code is an optional code promoting best practice in charity governance in areas including organisational purpose, leadership, integrity, diversity, decision-making, board effectiveness and accountability.

The research also found that only a quarter of charities in the study had a consistently high level of governance, deemed to be a mark of 70 out of 100 in RSM’s research.

The highest score in the research was 91 and the lowest was 17 out of 100, according to RSM.

The average score was 52, RSM said.

Larger charities with more than £20m in income had an average score of 58 per cent, compared with smaller charities of between £5m and £10m of revenue, which scored 47 per cent on average.

However, medium-sized charities with incomes between £10m and £20m scored just 39 per cent.

RSM said that medical and health charities, animal and environmental charities, and overseas aid charities achieved relatively high scores, whereas sporting and arts charities came bottom.

Diversity was the lowest ranked principle in the governance code in terms of compliance among the charities featured in the research.

Nick Sladden, head of charities at RSM and the author of the report, said: "Several high-profile scandals have rocked the reputation of the charity sector as a whole. Further deterioration could hit charities’ bottom lines, with knock-on effects for staff and the services provided to beneficiaries."

Sladden said that charities should do more to promote good governance, including adopting the governance code.

"One of the more interesting findings in our research was that those charities that have adopted the latest Charity Governance Code scored higher governance ratings than those that hadn't," he said.

"For charities that have been watching and waiting, now is the opportunity to embrace the code and drive up governance standards."

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