You may already be aware that the long-awaited update to the code of governance for charities (“the Code”) – developed by a steering group of charity umbrella bodies – was published in July this year.
This new guidance, which has the Charity Commission’s backing and effectively replaces their “Hallmarks of an Effective Charity” guidance, presents an opportunity for your school board to review and refresh your governance.
Two versions of the Code have been published, one for smaller charities and another for larger charities. The recommendation is that charities with an annual income of over £1 million and those who have their accounts externally audited should use the guidance for larger charities – so it will be this version that will be most appropriate for most, if not all, schools.
There is no legal obligation to follow the Code. Instead, it assumes that charities are already complying with their legal and regulatory responsibilities - the “foundation principle” – and sets out seven best practice principles for good governance: organisational purpose; leadership; integrity; decision-making, risk and control; board effectiveness; diversity; and openness and accountability. For each principle, the Code helpfully sets out what outcomes you should expect to see if the principle is adopted and recommendations on how to put it into practice.
The Code acknowledges that one size will not fit all and suggests an “apply or explain” approach. This means that governors are encouraged to apply the new Code where appropriate and explain the reasons why they have chosen a different approach.
This approach will be attractive to some boards who feel they are due a governance ‘spring clean’. Others may feel this approach is an unnecessary burden to their already overstretched agendas or restatement of principles they already abide by!
The key changes for your board or governance committee to consider are set out below and, we hope,this may whet your appetite to review the Code in full.
Key Changes and Impacts
- The new Code requires charities to consider merging with similar organisations that have the same aims. For struggling schools, the Code may provide a helpful catalyst for discussions at governor level about a merger which would be in the best interests of the school and pupils.
- The board will be expected to annually review its own performance as well as that of individual trustees and the Chair. The Code also recommends an external evaluation every three years. The sector is probably ahead of most charities as most school boards we deal with already set aside governance time for self-assessment. Various sector associations provide template self-assessment questionnaires and offer external reviews, if of interest.
- The Code recommends that governors publish the salary of senior members of staff on the school’s website and in its annual report. Most boards find the setting of staff salaries painful and complicated and will not want to have the salary levels they have approved published any more widely than they need to be. It will be interesting to see whether any schools follow this recommendation. Given the high degree of benchmarking data already publically available, this may be a principle boards decide to depart from.
- A board should pay particular attention to recruiting a diverse range of governors in both skills, experience, career paths and backgrounds. Boards should also undertake diversity training and take positive steps to remove any obstacles to people becoming trustees. Recruiting good governors is a real challenge for some schools. The Code may, among other things, provide a springboard for a governor audit to determine whether you have the diversity and skills you need in order to effectively govern the school. This will be different from school to school and should reflect the specific ethos, background and culture of the school.
- The Code says that the board should typically consist of 5 – 12 individuals and each trustee should be limited to a maximum term of nine years unless there is a good reason not to. Although there may be good reasons why school boards may wish to depart from this recommendation, for some it may prompt a discussion about what best serves the interests of the school – which may not have ever been considered previously.
- Boards should be transparent and accountable and, where appropriate, consult stakeholders in key decisions. Most schools provide – and parents demand – a great deal of information about their activities and performance! Consulting with parents may be both a blessing and a curse and the Code may provide some boards with an opportunity to consider whether their parents and pupils feel they are transparent and accountable for the good running of the school.
- The Code recommends that boards effectively balance resources and risk to ensure they do not hinder innovation. This may be a helpful steer for some schools to consider risk more commercially.
- A greater focus on the role of the Chair and Vice Chair to provide leadership and ensure the board has the appropriate structures and achieves good governance.
- The Code suggests that boards should pay close attention to any relationships with subsidiary companies and third parties, such as fund raising agencies or commercial ventures. They should embrace the relationship, but be clear of the benefits and risks of such arrangements and continue to review them.
For further advice on the above topics, please call us on 01483 543210 or alternatively email email@example.com