The chief executive of the Charity Commission has revealed it is working with umbrella bodies to develop new quality standards for charities by subsector.

And the regulator has expressed interest in a proposal to limit trustee terms at larger charities.

Speaking this morning at the launch of the report Realising the potential of governance, compiled by the Acevo governance commission, Sam Younger said one of the recommendations was the creation of a kitemark for good governance.

Younger said the Charity Commission had traditionally had problems with endorsing quality standards, but said it was working with umbrella bodies to get them to develop such standards linked to charity subsectors.

“Going forward the regulator will be focusing on its core regulatory activity so it’s right that we develop an alliance with umbrella bodies to develop standards,” he said.

This was one of the recommendations made by Lord Hodgson in his Charities Act review, but it did not get much publicity at the time. He raised it again at a sector event last week.

The governance commission surveyed 200 charities about governance in general, and used the results to highlight areas of concern to the Charity Commission. The report aims both to flag up key issues and serve as a practical guide for trustees.

Re-examine guidance on trading subisidiaries

Another of the recommendations is that the regulator should re-examine its guidance on the governance of charities with trading subsidiaries.

Patrick McHugh, member of the governance commission and founding chairman of Cass Business School's Centre for Charity Effectiveness, said he was surprised by the response from charities around the complexities of governance of trading subsidiaries. He had not previously thought this was a major issue.

“There’s a conflict between the two roles,” said McHugh. “Charities exist for public benefit, while companies exist for the success of stakeholders.”

Younger said the Charity Commission was “looking very hard” at the recommendations.  “We take it very seriously,” he said.

Younger added that his organisation would consult on the Acevo group’s recommendation that charities be required to report on key governance processes and standards within their annual reports, but warned that the Commission had to be careful not to place too high a burden on charities. “It’s good for transparency, but at the same time we are looking at minimising the regulatory burden,” he said. “This is a tension we have to manage.”

Younger also endorsed the governance commission’s recommendation to have defined terms for trustees. “We could make it a rule with larger charities that terms of office for trustees should be no longer than six to eight years. But it will be very difficult to do this for small, local charities which might find it harder to get new people,” he said.

Acevo recommendations

The governance commission, chaired by former Scouts chief executive Derek Twine, made a series of recommendations on charity governance, including:

• Charities should ensure that they have processes for appraisal of trustees, individually and collectively, as well as for the chief executive
• Trustees should discuss and consider the potential benefits of establishing a subcommittee or a designated trustee with ongoing delegated responsibility for governance
• Charities should be required to include in their annual report a section reporting on key governance processes and standards
• Funders and commissioners should explicitly consider the strength of an organisation’s governance as part of their assessment process
• Charities should use an open, advertised process to publicise trustee vacancies and request applications
• Boards should consider implementing defined term limits for trustees, staggered to ensure an appropriate rate of turnover
• The Treasury should review its funding of the Charity Commission in order to assess whether current and planned levels of investment are sufficient to enable it to carry out its investigative functions effectively.