The Charity Commission should require charities to report on their impact through the Statement of Recommended Practice, and amend guidance on paying trustees, a paper from New Philanthropy Capital has said.
The paper, It starts from the top: Improving governance, improving impact, argues that “regulatory reform is needed to help trustee boards which are ‘coasting’ rather than focusing on having the greatest social impact”.
It offers recommendations to both charities and the Charity Commission on how they can make governance more robust. The paper states that they are nearly one million charity trustees in the UK, and charity boards have faced unprecedented scrutiny since the high-profile collapse of Kids Company.
NPC said that it should be “up to charities to choose whether or not to pay trustees, and to determine whether or not senior staff can sit on boards”. It said that the regulator should amend its guidance to “avoid disincentivising charities from exploring this where they have a reasonable case”.
It also said that board-level volunteering should be encouraged and facilitated by employers.
NPC has made a number of recommendations about charity accounts. It called on the Commission to extent the SORP to require information on charities’ impact. It says that, at the very least, this should include updates on what a charity has achieved in a given year, how this compares with the year before, and what is included in future plans.
It also said that the Commission should have the power to sanction organisations that repeatedly refuse to engage with reporting on impact and improved governance. It said that these powers should be used proportionately to the size of the charity or the vulnerability of the people directly helped.
NPC has also called on charities, especially larger ones, to “review their own governance practices and consider what improvements could be made”.
Iona Joy, head of the charities team at NPC and the co-author of the paper, said: “The buck stops with trustees. At the thousands of organisations all over the UK doing amazing work, trustee boards deserve enormous credit. Equally they face tough questions if things go wrong, or if they allow their organisations to coast along complacently.
“The Charity Commission has a key role in getting the most out of trustees. It’s important to get the right balance between the carrot and the stick, but ministers should certainly look at extra powers for the regulator if charities repeatedly fail to provide the sort of information asked of them.
“Beneficiaries and donors rightly expect charities to do an effective job. Getting the governance right is at the heart of making sure this happens.”
It also called on major funders, such as government and the Big Lottery Fund, to “consider whether governance is due significant investment to build governance capacity and the market to support this”.
Charity Commission responds
In response to NPC's paper, a Charity Commission spokesman said: “We welcome NPC’s contribution to the ongoing debate on how to improve public trust and confidence in charities. The Charity Commission has published an action plan on charity governance and we will carefully consider NPC’s proposals over the coming weeks.
"The current SORP, which applies to large charity accounts from 1 January 2015, goes much further than the previous one in encouraging charities to demonstrate the difference that their activities have made in their annual reports. There is an ongoing consultation on the charity SORP and we encourage those with views to respond to the open consultation.”
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