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New Edition of Charity Governance Code - What Do Schools Need to Know?

on Monday, 09 October 2017.

The Charity Governance Code has been with us for over a decade and as of July, is now in its third edition. The code is sector, rather than regulator generated, but it has the regulator's endorsement.

Given charity is such a broad umbrella, what can charitable schools take away from this guidance?

The code's ambition is huge. Its claim is to be equally applicable to all charities, whatever their size or activities. Of course, it does not deal specifically with the challenges particular to charities operating in one unique sub-sector or another. But that does not dilute its relevance. The need for good governance is universal - particularly so for charities like schools whose sectors place specific organisational, financial and regulatory demands on that governance core.

An Authoritative Statement of Principles and Good Practice

Given the Charity Commission's endorsement and its sector origin, it represents an authoritative statement of principles and good practice - a standard that sophisticated charities like schools can expect to be held to by the Charity Commission. The code itself encourages charities to state in their annual reports where they apply the code and, where they don't, to explain.

The code is structured around seven principles:

  • organisational purpose
  • leadership
  • integrity
  • decision making
  • board effectiveness
  • diversity
  • openness and accountability

Highlights and Noteworthy Content

  • Organisational Purpose
    The code calls on governors not only to have a shared understanding of the school's charitable purposes, but also of its external environment. This is to fulfil the purposes as effectively as possible but also to review regularly the purposes and ensure they stay relevant and valid. The code also calls on governors to consider partnership working as well as the more unfamiliar territory of merger and dissolution as options.

  • Leadership involves the governors providing oversight and direction to the charity as well as support and constructive challenge, creating an environment in which staff are confident and enabled. The board is expected to accept collective responsibility whilst the chair provides it with leadership. Roles and responsibilities should be recorded and reviewed. A paragraph is dedicated to subsidiary organisations, with the governors expected to be clear about the rationale, benefits and risks of the arrangement, recording details of the relationship and keeping it under review.

  • Integrity
    As well as recognising, recording and managing conflicts, integrity involves maintaining the respect of beneficiaries, other stakeholders and members of the public. The code specifically refers to not being unduly influenced by special interest holders and that this standard of independent decision making is expected of all governors however they have been elected, nominated or appointed. The code recommends that governors consider other standards, like the Nolan standards, and that they adopt a written code of conduct.

  • The section on decision making, risk and control recognises that the governors cannot take every decision, but must decide what to delegate, whilst retaining ultimate responsibility. Schemes of delegation and committee terms of reference should be set-out and reviewed. The focus of the governors should be strategy, performance and assurance. In terms of risk management, the governors should set the process and procedure for identifying, prioritising, escalating and managing risks including setting the accepted risk level and should themselves regularly review the school's specific significant risks. The code pointedly notes that being over-cautious and risk averse can be an innovation-hindering risk.

  • Board Effectiveness
    Two areas really stand-out. First, there is a focus on creating an environment where it is safe to suggest, question and challenge, and in which differences can be aired and resolved. The code sees the Chair's role as pivotal in this. The other stand-out area is governor appointment, with a focus on skills audit and robust, transparent and objective recruitment procedures and standards. Where governors are appointed by a wider membership, the Board should assist the members to play an informed role. The code also recognises the importance of access to professional advice to support governance.

  • Diversity includes, but is wider than the protected characteristics of equality law. It is about ensuring the board includes people with different backgrounds, people who think in different ways, as a variety of perspectives helps good decision making. Achieving diversity is not just about skills, experience and diversity audits, but also about practical measures to remove obstacles to being a governor, including thinking about timing of meetings, availability of expenses and format of papers. As well as achieving a diverse board, it is important for the organisation to have diversity objectives.

  • Finally, openness and accountability involves openness as the default position of the school, except when there is good reason not to be. Openness includes thinking about ways of engaging with stakeholders like parents, whether it be keeping them up-to-date with developments, holding question and answer sessions, consulting on plans or just having a publicised and accessible complaints process.

Conclusion

The Charity Code of Governance is not only relevant to charitable schools because it is the de-facto authoritative statement of governance good practice in the charity sector, but because it contains a core of good governance practice which will contribute to organisational resilience. Most schools will already be implementing much of what the code recommends.

Perhaps the most interesting new challenges posed by the latest edition are the expectation to consider the environment in which the school operates and deep strategic thinking about purposes, partnership and merger alongside an express recognition that being unduly risk averse is a risk in itself.


There is much to be said for regularly reviewing your charity's constitution to ensure it is up to date with the latest law and best practice and also for having a written Scheme of Governance. For more information, contact Barney Northover, in our Education team, on 0117 3145 395.  

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