Lianne Lodge: Good governance is key to charity sector continuing to thrive

The charity sector has gone through a period of significant change and increased scrutiny. As well as the recent ?charity law review, charities are also grappling with accounting changes and heightened criticism in the press and, like many others, uncertainty around what Brexit will mean for the sector.

Lianne Lodge is a Partner at Gillespie Macandrew

That said, it is not all bad news! In our charity practice we are helping charities find innovative ways to make resources go further and there is still a considerable amount of new money entering the sector. The question then is how to access these funds?

While it may sound trite, the answer is relatively simple: good governance. Gone are the days where grant-giving organisations would simply write a cheque and wave goodbye to the funds. We are now in an era where all charity trustees need to evidence that they are working effectively even in grant-giving organisations. It is therefore important that they can measure the impact of their grants with good governance being the key to demonstrate this effectiveness.

Recently, we have seen the launch of Governance Codes both north and south of the Border. As you can imagine, the codes are very similar in their philosophy, however they differ in terms of specifics. The Scottish Governance Code has five core principles which are:

■ Organisational purpose

■ Leadership

■ Board behaviour

■ Control

■ Effectiveness

There is also useful practical help which can be found online at www.governancecode.scot.

The English Code is more detailed and has an overarching principle of organisational purpose and then the following six sub-purposes:

■ Leadership

■ Integrity

■ Decision making, risk and control

■ Board effectiveness

■ Diversity and openness

■ Accountability.

For a board which is perhaps struggling, the English Code is particularly helpful as it provides more detail and provides an excellent framework for charities who are either setting up, relatively inexperienced or keen to ensure they are “ticking all of the boxes”.

The Scottish Code however is much less prescriptive, which can be useful when dealing with charities of varying sizes since not all charity boards have the resources available to implement some of the suggestions under the English Code.

While the Scottish Governance Code is not mandatory it does show very good governance in itself to evaluate your performance as a charity against the Code, and use this as part of your strategyin the future.

Another way to evidence good governance and stewardship is the use, where necessary, of notifiable events procedure with the Office of the Scottish Charity Regulator (OSCR). Despite some recent press coverage, the regime does not seem to be particularly well-recognised or understood within the sector.

OSCR should be contacted by the board of trustees following an instance or event which may have a significant impact on the charity. In my experience, OSCR is very reasonable when dealing with notifiable events and indeed view the fact that a board notifies them to be in itself a sign of good governance. The main objective is to ensure that you provide OSCR with the information as to what has happened, what you have done about it and what, as a board, you are doing to try to minimise the risk of it happening again.

My advice to Trustees is, if in doubt, you should report these matters, otherwise you may be on the back foot should anyone outside of the charity raise concerns with OSCR. If the decision is taken not to notify, then justification for that decision should be Minuted, this again shows OSCR that due consideration has been given and signals good governance.

Finally, there has also been an increase in the number of charities moving from appointing Trustees on an indefinite basis to fixed terms of office. I think that this is positive for the sector, as it can assist in keeping boards fresh, vibrant and engaged, while reducing the pressure on charity trustees to be there for life.

Despite a degree of negative press over the past few years the charity sector has certainly evolved and, in my opinion, risen to the occasion. While there are some who struggle, many charities are thriving despite difficult economic times and I believe that good governance is the key to this.

Lianne Lodge is a partner at Gillespie Macandrew