Report identifies 13 'red flags' that show whether a charity is governed well

The report, produced by the governance institute the ICSA, says warning signs include strong personalities in leadership roles and undue influence from funders

Trustees: red flags identified
Trustees: red flags identified

Strong personalities in leadership roles, a "sticking plaster" approach to major challenges and undue influence from funders are all warning signs that a charity is not governed properly, according to a report from the governance institute the ICSA.

The report, Cultural Markers in Charities, which is based on discussions at a round-table event held by the ICSA last year, identifies 13 "red flags" it says act as an early warning system for charities.

The ICSA says the flags are issues that either indicate that a charity might have a poor organisational culture or are good ideas that charities should implement.

Among the flags highlighted in the report is a warning about the "power of personality" in a charity, where strong personalities can "unduly influence" others and dictate policy.

The report warns that charities need to be able to withstand stress and says a "sticking plaster" approach to major challenges is detrimental to a charity’s long-term survival.

It argues that membership charities must balance the views of members with the legal duties of trustees, and the board and members should be alert to funders having undue external influence on the organisation.

Competing cultures within a charity, especially in national charities or those operating in different areas, is highlighted as a risk in the report, which says that charities should consider changing their original aims in accordance with developments in wider society.

A single-minded focus on increasing funds to support a charity’s cause can lead to questionable decisions and actions by the board, according to the report, which recommends more considered discussions to ensure the charity sticks to its values and ethics.

Other factors that should be present, the report says, include a strong commitment to good governance, ensuring that "doing things right leads to doing the right things" and a strong, ethical and considered leadership.

Boards should have "considered and reflective" discussions about culture, values and ethics, discussions on remuneration packages for employees should be transparent and consistently scrutinised, and charities should be able to demonstrate they are delivering public benefit, it says.

Simon Osborne, chief executive of the ICSA, said: "Boards need to question whether or not they have managed to implement a positive culture in their organisation and whether good governance practices are in place.

"Charity governance is most effective when it provides assurances not just that legal requirements are met, but also that the behaviour of people working for the charity, and those who come into contact with it, is proper and ethical. Culture, alongside good governance, can be pivotal to whether a charity achieves its stated objects."

The ICSA has helped to develop the new edition of the Charity Governance Code, which was published last year for consultation.

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