New code says large charities need governance review every three years

The Charity Governance Code, published today, replaces the Code of Good Governance

Larger charities will be expected to submit to external governance reviews every three years under the new Charity Governance Code, published today.

The revised code, previously called the Code of Good Governance, was put out for consultation between November and February after its first overhaul since 2010 and is available in two versions: one with guidance for large charities and another tailored to the needs of smaller charities.

The new code requires charities to consider mergers with other organisations that have the same aims and says they should impose a nine-year maximum term on trustees unless there is a good reason not to. Both of these measures appeared in the draft version of the guidance.

The final version also calls on trustees to publish on their charity’s website and in its annual report the amount paid to senior staff and the process for setting pay.

The new code will, in effect, replace the Charity Commission’s Hallmarks of an Effective Charity guidance, which the regulator withdrew as a gesture of support for the code and to encourage charities to use it.

Rosie Chapman, chair of the steering group developing the code, told Third Sector that the final version of the code had been altered to include elements of the commission’s defunct guidance that were not in the consultation version.

She said the code’s recommendations had also been "beefed up", and now called for charities to go above and beyond the legal minimum in ensuring diversity.

The new version of the code, Chapman said, was "as much about behaviours as it is about mechanical practices, but it also has some clear suggestions of what good practice looks like".

But she said she believed the code should be reviewed much more frequently than it had been in the past.

The steering group Chapman chaired comprised the Association of Chairs, the charity leaders body Acevo, the governance institute the ICSA, the National Council for Voluntary Organisations, the Small Charities Coalition and the Wales Council for Voluntary Action.

The bodies involved in developing it welcomed the code, saying it was important for charities to focus on governance and the new code would help them do it.

Sarah Atkinson, director of policy and communications at the Charity Commission, said: "The Charity Governance Code represents a standard of good governance practice to which all charities should aspire. We encourage all charities to use it, following and applying its principles proportionately to their circumstances."

But Patrick Murray, head of policy and external affairs at the think tank New Philanthropy Capital, said the code could have gone further on some recommendations, particularly concerning impact reporting.

"In particular, NPC believes that encouraging boards to report on impact annually will help to focus the minds of trustees on the ultimate public benefit of what their organisation achieves," he said.

"It’s also important for boards not just to assess and understand impact, but to take appropriate action on the basis of the findings.

"And while we are pleased to see the section on risk include a reference to the opportunities a charity faces, as we suggested, it needs to be more explicit about the types of risk boards need to balance.

"This would help trustees understand the dangers of missing out strategic risks by focusing too conservatively on other risk areas, such as financial or operational."

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