Decision

Alert for charities - the importance of transparent and accountable governance

Published 25 June 2020

You are receiving this alert as a charity that appears to have the following profile:

• your charity is large (income over £9 million) and has a more complex governance and management structure (governed by a board of trustees and run by a separate group of executives); and
• your charity is a service-providing charity, in that your front-line staff directly serve and interact with beneficiaries – some of whom may be vulnerable – and/or provide amenities or facilities to the public. Services can vary from locally provided health, education, advocacy, and transport services, to on-the-ground disaster relief overseas

Whilst your charity may not have faced issues in how it is governed and managed, it is still crucial that you are aware of the risks which can result from governance or management failures. We want to help you mitigate these risks, and so are offering the following advice to help you avoid potential harm to people or to your charity’s finances or reputation, which may undermine trust in the whole sector.

Identifying and mitigating these risks is even more important for charities facing economic difficulties as a result of the Coronavirus pandemic, and which may be considering restructuring or merging.

It is crucial that charities making significant organisational changes such as these ensure that they have robust people protection and risk management arrangements in place, now and in the future.

Your charity is large and has a more complex governance and management structure

Large charities are often complex organisations, governed by a board of trustees and run by a group of executives. They may have sub-committee structures that operate under different levels of leadership. Complexity can increase the risk of communication breakdowns, especially if oversight is weak or compromised.

Weaknesses in trustees’ ability to hold their executive to account, especially if coupled with a lack of expertise in the services that the charity provides, can lead to safeguarding, governance and other failures.

There are also dangers of a charity growing too quickly, or pursuing funding to take on complex projects, without putting in place effective governance and oversight to manage risks.

Charities that have merged, or significantly expanded their operations (or may plan to do so in response to the COVID-19 pandemic) should be particularly mindful of this risk, especially when implementing new governance structures.

No charity is more important than its purpose. Neither size nor complexity should distract a charity from the needs and interests of the people it exists to serve, or the vulnerable people it cares for.

Our advice for your charity’s trustees

In a large and complex charity, it is normal for the executive to have significant decision-making authority – but the trustees must still be willing and able to hold the executive to account. As a trustee, it is your role to make sure you have robust oversight of your charity’s operations and structure, considering the complexity, scale, nature and associated risks of its activities.

Here are some steps that you and your co-trustees can take to make sure you have the oversight you need:

• 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

You can find more advice on how to govern your charity through the Charity Governance Code.

Our advice for your charity’s executives

As an executive, you should feel confident that you can identify failures to protect people from harm, learn lessons from these incidents, and fully and frankly disclose them to trustees, regulators, and/or agencies. This helps build trust between the executive and trustees around how the charity is being run and its management of risks.

Here are some steps that you, as an executive, can take to have effective oversight:

• regularly report to the board on significant incidents occurring within the charity’s operations, including how you will manage, mitigate, and learn from them
• consider how you provide assurance to the charity’s trustees on the quality and safety of the charity’s activities. Assess whether the current information you provide and are provided is adequate
• where your charity uses third party suppliers or services, make sure you can be confident about how they will carry out this work. Regularly review these arrangements so that they remain appropriate

Your charity employs staff or works with volunteers and provides a service directly to beneficiaries

Service-providing charities are those in which front-line staff or volunteers directly serve and interact with beneficiaries – some of whom may be vulnerable. While expectations around safeguarding for some charities may be higher, protecting people and safeguarding responsibilities should be a governance priority for all charities, not an optional overhead.

Our advice for your charity

• establish effective safeguarding policies and procedures that all trustees, staff and volunteers follow. Trustees, staff and volunteers should undergo regular training on the organisation’s safeguarding policy and know how to manage and record risks adequately
• ensure there are sufficient resources, including appropriately skilled and trained staff/volunteers/trustees, for safeguarding and protecting people
• where relevant, appoint a senior safeguarding lead to help co-ordinate and drive your safeguarding strategy, and who can engage with other agencies and partners. Create a plan for responding to concerns overseas, where appropriate. Embed a “speak up” culture throughout the organisation, so your staff feel acknowledged and protected when whistleblowing on misconduct by management, regardless of how senior the personnel involved may be. Set out clearly the process of reporting misconduct, and how you will investigate and manage misconduct with clear and proportionate consequences. Put in place anti-retaliation policies
• when you work with or through other bodies, have appropriate safeguarding procedures in place with clear lines of responsibility, reporting, and escalation
• regularly review the sufficiency of your charity’s arrangements for safeguarding and protecting people that come into contact with the charity

If your charity delivers a service but has faced financial difficulties because of COVID-19, it remains essential that you consider and, if required, allocate sufficient resources to fulfilling safeguarding obligations.

Follow up

The Charity Commission expects charities to be mindful of the risks raised in this alert, and to take steps to mitigate them where necessary.

If you have not done so within the last 12 months or if you are planning significant changes to your charity in the near future, 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.

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