Funding Advisory Hub

Bishop Fleming Funding Advisory Service

Our Funding Advisory Hub, curates insights and expertise together in one place, to assist your company in raising finance.

The importance of transparent and accountable governance

8th July 2020

On 25 June 2020, the Charity Commission issued an alert, which was aimed at larger charities (income over £9m) with complex governance and management structures place. 

The alert was also aimed at service-providing charities, with front-line staff that directly serve and interact with beneficiaries, some of whom may be vulnerable. 

The alert offers advice to charities on how to mitigate the risks which can result from governance and management failures. The advice is particularly important for charities facing financial difficulties as a result of the Covid-19 pandemic and that may be considering restructuring or merging. A couple of specific points noted on the alert include:

  • Communications breakdown
    Complexity in structures can increase the risk of communication breakdowns, particularly where there are weaknesses in Trustees’ ability to hold their executives to account.
     
  • Rapid growth
    There are risks associated with charities significantly expanding their operations (for example in response to the Covid-19 pandemic) without implementing robust governance structures.

Advice for Trustees

The guidance goes on to re-iterate that Trustees’ must ensure they have robust oversight of their charity’s operations and structure, considering the complexity, scale, nature and associated risks of its activities. To address the risks, the following steps are suggested:

  • ensure there is a strategy for regular and effective communication with executives about the charity’s purposes, values, work and achievements
  • regularly review the charity’s process for identifying, prioritising, escalating and managing risks. Review the effectiveness of the charity’s approach to risk at least every year
  • review whether your charity’s governance and management committees have suitable terms of reference and membership, with suitably skilled people, and the extent to which they have effective oversight of the charity’s activities. Make sure there are clear lines of responsibility and reporting between all bodies involved
  • ensure that there is a transparent, well-publicised, effective and timely process for making and handling a complaint. Handle any internal or external complaints constructively, impartially and effectively

The Charity Governance Code provides more guidance to Trustees.

Advice for charity executives

The alert recommends that charity executives take the following steps to help promote effective oversight in charities:

  • regularly report to the board on significant incidents occurring within the charity’s operations, including how these will be managed, mitigated, and lessons learnt 
  • consider how to provide assurance to the charity’s Trustees on the quality and safety of the charity’s activities. Assess whether the current information provided is adequate
  • where a charity uses third party suppliers or services, make sure you, as the executive, can be confident about how they will carry out this work. Regularly review these arrangements so that they remain appropriate

The alert concludes that, as a board of Trustees, you should check that your general governance arrangements are appropriate, in particular your risk management measures, assurance mechanisms relating to the charity’s activities and people protection arrangements, especially if not done so in the last 12 months or if the charity is planning significant changes in the near future.

The Commission will contact a sample of recipients of the alert later in 2020 to understand what measures are in place to manage identified risks.

Keep up to date

Related sectors