In our dealings with many hundreds of charities, both to set them up and provide ongoing support, there are consistent themes and questions that arise. One of the sources of confusion relate to how boards can improve governance.
There are core duties that must be applied in charity governance to ensure not just legal compliance, but strong governance. But how can your organisation ensure these duties are not only acknowledged, but genuinely put in practice?
In this article, we break down key principles to implement strong governance. As well as this, make sure to check out our free governance resources for Boards to learn even more.
1. Purpose
A strong understanding of your charity’s purpose provides an anchor for all governance decisions. This allows a board to assess whether the actions align with the organisation’s mission and redirect where decisions have “drifted” from this purpose. This also has the benefit of providing a clearer path for navigating the strategic direction and future growth.
2. Foundations
A strong legal foundation, including the legal structure, governing document, and charitable purposes, are all paramount in the organisation’s ongoing success. Board policies also form part of these foundational elements. These create written rules and standards to prescribe operational processes. It is important that board members have a complete understanding of these legal aspects, including a true comprehension of the governing document. There is now an obligation on charities to review procedures every three years as well and ensure they are fit for purpose. Depending on your legal structure individual trustees, committee members or directors should also understand their individual legal obligations under legislation, including as officers under the Charities Act 2005.
3. People
Strong foundations need the right group of people to make a mission a reality. A board should consider whether they have the experience, skills and viewpoints needed to successfully reach goals. This includes recruiting board members with diverse backgrounds and skills, ensuring strong succession planning and fostering a culture that effectively encourages governance and continual learning.
4. Practice
In practice, strong governance requires collective decision-making, clear delegation, and role clarity. All viewpoints need to be heard and genuinely considered, with a focus on big picture governance issues rather than minor operational matters. A common downfall is where lines blur between management and governance roles. Although in smaller organisations it is common for individuals to wear multiple ‘hats’, board members should keep in mind which function they are acting under and keep these roles distinct.
5. Management
There must be an active management of risks, finances, and potential conflict of interest. Risk management should be approached proactively rather than focusing on mere compliance. Financial risks should also be considered in this manner with outlook to future planning. Consider whether you have genuine confidence in the effectiveness of these processes should the worse happen.
6. Accountability
Finally, there must be both public accountability and internal evaluation. Externally your organisation should ensure that all reporting requirements are met to support transparency with stakeholders and regulators. While internally accountability can be met with regular evaluations of board effectiveness. In New Zealand, the registered charities must now review their governance procedures every three years. This will aid ensuring that these key principles and reflected in governance documents and practices. Read more about the requirement in our article here.
This accountability and review should guide improvement of the other principles encouraging updated legal foundations, governance practices, management and even purposes.
If you would like to discuss any aspects of how your governance board operates, feel free to reach out and contact us. We also provide many resources in the form of articles, guides, videos, webinars and more.
