CHARITY MATTERS 2021 - The right change can change everything - RSM UK
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March 2021
The right
change
can change
everything
CHARITY MATTERS 2021
1 RSM | Professional
RSMServices
| Charity
Proposal
Matters
1
2 RSM | Charity Matters Contents Part 1 – Coronavirus and charities Fundraising and ensuring ongoing compliance with CC20 04 Understanding how to use your reserves in a pandemic 07 Bidding and applying for funding – putting your best foot 08 forward The new board agenda: 10 How charities can better manage their contingency risks How to run your charity post pandemic 12 Tips for managing risk during and post coronavirus 14 Part 2 – Governance Code An update on the Governance Code 17 Key findings 2020 18
3 RSM | Charity Matters Introduction Welcome to RSM’s Charity Matters As we begin to prepare for a post coronavirus world, we are taking a look at the uncertainty in the charity sector and the impact it has had. Through many conversations with clients, associations and our internal experts, we have pulled together the key topics that are at the forefront of minds. This toolkit is intended to provide information on these key areas, understanding and solutions to help manage your charity in 2021 and beyond. Please contact a member of the RSM team if you would like further information on any of the areas covered in this document. In the meantime, we hope that you enjoy reading this publication, and are keeping safe and well. Nick Sladden Head of Charities
4 RSM | Charity Matters
Fundraising and ensuring ongoing
compliance with CC20
The sector has seen a wide range of challenges in relation to fundraising over the
last few months. Traditional fundraising streams have been affected and often
decimated by the impact of the coronavirus at a time when there are significant cost
pressures.
Large scale physical events such as marathons, fun runs The consequences of improper or poor fundraising
and sponsored walks through to coffee mornings and practice can include:
bake sales have all been paused. • Negative reputational consequences and complaints
which can cause lasting damage to a charity with the
This has caused charities to become inventive and potential to jeopardise the vital public support that
identify potential new ways to raise much needed funds. charities rely on to fund their long-term work;
Although innovative, trustees must ensure that • Impacts on other income streams such as
fundraising activity remains compliant with the Charity Partnerships, Philanthropy and Grants due to
Commission requirements and specifically CC20*. concerns over fundraising practices;
• Legal consequences such as fines or penalties, or
As the regulator of charities in England and Wales, the trustee liability if the charity incurs a loss as a result
Commission expects charities that fundraise to do so in of a breach of trustee duty;
a way which protects their charity’s reputation and • Regulatory challenge or intervention which can be by
encourages public trust and confidence in their charity. the Fundraising Regulator, the Commission, or other
This includes following the law and recognised organisations and agencies with a role in regulating
standards, protecting charities from undue risk, and fundraising.
showing respect for donors, supporters and the public. The Commission expects the trustees of charities that
fundraise to comply with their trustee duties, specific
Where trustees do not keep their charity’s fundraising in fundraising law, and to follow recognised standards.
line with the law and recognised standards, or fail to
balance their need to raise money with an approach Further guidance in relation to this standard can be
which protects their charity from risk, there can be found
serious consequences for the affected charity and, here: https://www.gov.uk/government/publications/charit
potentially for the wider sector from a trust and ies-and-fundraising-cc20/charities-and-fundraising
confidence perspective.
*CC20 is the Charity Commission requirements for
Trustees in relation to managing a charities fundraising
activities in relation to the public.
5 RSM | Charity Matters
Fundraising and ensuring ongoing
compliance with CC20 - continued
Checklist
We have compiled a checklist to provide you with some questions to ask in this area.
Fundraising plan
• Do we have an approved fundraising plan in place?
• Does this plan define our overall approach to getting the resources we need to fund our work?
• Has this plan significantly changed during coronavirus?
• Does the plan include areas such as:
o the fundraising methods to be used
o the resources your charity will use and the costs it will incur
o the financial, reputational and other risks your charity may face and how they should be avoided or
managed
o how your charity’s fundraising will reflect your values;
• Do we regularly monitor progress against the strategy?
Delegation to employees
If you and your co-trustees do not carry out the fundraising yourselves, it is likely to be run by your charity’s staff
or by other organisations.
• Is delegation is clearly documented (for example in staff job descriptions, volunteers’ role descriptions and
committees’ terms of reference) understood and implemented?
• Are there clear reporting procedures are in place, which include guidance on any particular matters that are to
be reported to the trustees?
• Are there checks that the delegated authority is exercised properly?
• Do trustees receive regular and fully documented reports back on agreed matters, presented in a way you can
understand and use, and which allows you to exercise proper oversight?
Working with volunteers
Many charities rely on significant volunteer effort to raise vital funds for their work. As with your fundraising staff,
you and your co-trustees should have effective systems in place so that the work of the fundraising volunteers
recruited by your charity is overseen.
• Are volunteers clear about what they are supposed to do?
• Are volunteers aware of the rules and boundaries within which they must work, for example, when
representing or speaking on behalf of the charity?
• Can they work safely, especially in a social distancing way?
• Do volunteers know what to do if there’s a problem?
• Do volunteers know what they need to report and who they report to?
There should be appropriate systems in place, so that volunteers get appropriate training and know they must
comply with policies and procedures.
6 RSM | Charity Matters
Fundraising and ensuring ongoing
compliance with CC20 - continued
Working with commercial partners
Working with commercial partners to raise funds can bring significant benefits to your charity, provided risks are
identified and managed.
You and your co-trustees must have sufficient systems in place so that your charity’s arrangements with any
commercial partner:
• Is the arrangement in the best interests of the charity?
• Does the arrangement prevent remuneration or reward for the commercial partner which is excessive in
relation to the funds raised?
• Is the arrangement fully compliant with any specific legal requirements that apply?
• Make clear in any statement soliciting funds from the public for the charity:
o the remuneration or reward to the commercial partner, or
o how the funds raised will be distributed between the charity and the commercial partner
Managing your assets
You and your co-trustees should have effective financial controls and safeguards in place which are appropriate to
your charity’s size, activities and complexity.
• Do we have systems for making sure that the charity receives all of the money to which is entitled, where
people are given permission to raise money on its behalf?
• Do we protect income received from:
o public collections?
o other fundraising and sponsored events?
o trading activity?
• Have we clarified to the public, and been clear internally, which funds are being raised on a restricted basis -
these restricted funds must only be used in the way specified?
• Do we have a policy on donations which identifies when accepting donations may not be in the interests of the
charity?
• Do we have a process in place to deal with suspicious donations?
• Do we have processes in place to detect fraud in relation to fundraising?
• How do we ensure complete and accurate returns are made so that the charity receives tax reliefs to which it
is entitled?
• Do we have a process to be aware of and deal with, unauthorised fundraising on our behalf?7 RSM| |Charity
RSM CharityMatters
Matters
Understanding how to use your
reserves in a pandemic
The onset of the coronavirus pandemic has left much of the economy facing financial
difficulties, and charities are no exception, with an unprecedented level of funding estimated
to be lost for the sector.
Most trustees will never have been faced with such challenging conditions and will now be
forced to revisit their financial plans with a view to refocusing on essential spending and
cutting back on non-urgent projects and non-core activities. The management of reserves is
a key financial strategy and for many, reserves have previously been held as a contingency
for unforeseen financial situations or a 'rainy day' fund. Across the UK that financial rainy
day has now arrived.
Charities need to identify which of your funds or assets have limits on their use.
Free reserves are funds that your charity has which are available to spend at the discretion
of the charity trustees. They are unrestricted and are generally intended for future
unexpected need and so can be spent to help cope with unexpected events like the current
coronavirus emergency.
Your charity may also have funds which the charity trustees decided to earmark for a
particular purpose or project – designated funds. A decision may be taken to re-prioritise
these in this time of need.
If you do decide to use reserves, it may mean that you will have to take steps to cancel or
defer projects or other commitments which might otherwise have been funded from them. If
you hold reserves as financial investments, you will have to judge whether drawing them
down is in the charity’s best interests given the likely loss in value.
While reserves can often be diverted into operational use, there may be certain funds that
are earmarked for a particular purpose and cannot be spent at the trustees’ discretion. In
some instances, there may be ways to amend these restrictions, but accessing or releasing
restricted funds should be considered with care, and professional advice should be sought.
Charities need to carefully consider the wider and longer-term impacts of making such a
decision on their financial resilience and donor relationships.
Now would also be the time to consider whether restricted funds are definitely restricted and
not designated as the two are quite different, and errors in classification can easily occur. If
charity trustees are in doubt, they should consider the paperwork that they have to support
the restriction.
The events of the past year have also underlined the importance of having a reserves policy
to cope with unforeseen financial difficulties such as this. Whilst this has been one of the
fundamentals of charity governance, it's how the reserves policy works in practice that will
be the true test over the next twelve months.
A reserves policy is not a one-off exercise. It has always been good practice to consider the
need to revisit your reserves policy which sets out a target level of reserves and a plan for
how to get there. As your charity’s circumstances change, so too must your reserves policy.
Trustees and financial managers of charities will need to ensure that the coronavirus
pandemic is factored into their forecast reserve levels for the foreseeable future and for
many this will require an update to their reserves policy for the minimum level of reserves
being held beyond 2021. In doing so, trustees will need to consider not only their short-term
viability but also the longer-term impacts on their future financial resilience and donor
relationships.RSM | Charity Matters
Bidding and applying for
funding – putting your best
foot forward
The charity sector is one that has suffered considerably through the current
coronavirus pandemic. Challenges have included closures of charity shops, loss of staff,
reduction in funding and less access to the beneficiaries they are working to assist.
Applying for funding and bidding for aid will therefore be even more critical as we
continue move out of lockdown and into a new normal. Competition will be greater, and it
is likely that funding could have been repurposed for other causes.
We have outlined some key steps and considerations for charities to note when they are
approaching the application process. This is not an exhaustive list but should go some
way to help guide your thinking.
The basics
Make sure you have the right people writing your applications: we
1 appreciate that there has been significant disruption to your workforce but
make sure you’ve deployed the right resources. Utilise the right skills and the
process will be much easier.
Have a strategic funding plan: know who you will be approaching and if you
2 are applying for multiple sources of funds then understand how they will work
together. Evaluators will be looking for this.
Do not rush your application: it is tempting to apply for every source of
3 available funding. This can mean you rush your application and the standard
drops. If you are making multiple applications allow enough time to put
adequate effort into all of them. Do not allow substandard submissions.
Align your strategic funding plan with your business objectives: do not
4 fall at this first hurdle.
Decide who you are, and how you want to position your organisation: if
5 you do not have clear vision then this will become clear the more you write.
Lean on tangible evidence of how effective your organisation is and the
impact you have already had. Evidence has more of an impact than
hypotheticals.
Be clear on what you are asking for: asking for money and support should
6 be a strategic process that has been clearly thought through. Having specific
projects and a clear vision for how any funds will be used is always critical.
Try to keep it short: include core information that gets your case across
7 clearly, but don’t make it difficult for those who are making the decision. You
will not be the only organisation asking for funds.
If there is a formal application process, which there often is, then stick
8 to it: it is an easy win. They will be asking for certain information for a reason
and if it is missing from your application, then you will likely fall to the bottom
of the pile.
Cold review the application: involve someone not close to the application
9 process. They can challenge, flag areas to strengthen and correct errors.9 RSM || Charity
RSM Charity Matters
Matters
The content
Outline the issue you’re trying to solve, but also
✔ highlight how you’re working to overcome it:
use evidence, outline why you are the best choice,
how this funding will make a difference and what will
success look like. Positivity will make a big difference.
Keep it simple: no one assessing applications wants
✔ to feel confused and on the back foot. Make your
application accessible to any audience because you
do not always know who will be reading it.
Financials can be intimidating: but if you are asking
✔ for money, you need to be transparent as to how
you’ll be making the most of it. Be honest and
realistic.
Have return on investment references through-
✔ out: this should underpin all of your evidence based
content in your application.
Make it clear who can be contacted for further
✔ information: you will not be able to include
everything in an application, so make it easy for
funders to find out more.
Align any content with online messaging: if
✔ evaluators find conflicting information in collateral and
on websites this will work against you.10 RSM | Charity Matters The new board agenda: How charities can better manage their contingency risks Much has been spoken and written about coronavirus, and as a result primary risk focus has been on crisis management and business continuity planning. In this article we are going to explore other contingency type risks that may sit outside of the traditional business continuity threat analysis and examine how you and your charity can manage these types of risks more effectively. The potential to overlook some of your risks Crudely, if you split your risk scoring matrix into four quadrants you will have four types of risk, depending upon where it is positioned. The high impact / high likelihood risks, we are going to call ‘Primary risks’. These risks usually occupy majority of a management team and board’s risk agenda, as they require immediate action to address - and can sometimes require an element of ‘firefighting’ due to the risk’s proximity to the ‘here and now’. This focus on primary risks mean that other high impact / lower likelihood risks can be overlooked, and this is what we are going to explore further. How can these high impact / lower likelihood risks be better managed? Over the years these types of risk have often fallen off the radar because they are seen as so unlikely to occur from a likelihood perspective or complacency sets in in terms of how effective the control environment is, that they don’t get the airtime that the primary risks do. We have all heard at some point, the phrase “that will never happen to us” or “we’ve got that under control”. This leads charities into making assumptions about how effective the controls are that are mitigating the risk, and less effort is made in truly understanding the risk itself and its current state. Should this happen, and the risk then moves towards fruition, the likelihood increases, and the result is that the risk sits squarely in the primary box. This could be for a number of reasons, either that controls have failed or something outside of the organisations’ control has occurred and impacted the risk, meaning that management and board’s time again is focussed on responding to an additional primary risk. Here we are going to consider a number of challenges that board’s face and what can be done to help: Challenge 1 The tip of the iceberg, can you see what is under the water? Having a broad and frequent board risk reporting cycle is fundamental, as it provides a wider and rounder picture of the charity’s risk profile and provides insight into those risks that could be on the horizon or where the charity might be required to react. Having these risks visible at board level helps to inform decision making and the triangulation of information. Having key risk indicators in place for contingency risks will also have a role to play as that can help identify the trajectory of the risk and again, provide deeper insight. It is common for risks that are high impact / low likelihood to sit within departmental / directorate risk registers, and therefore the board may be unsighted on these risks should there not be a periodic deep dive into certain areas within the charity. Bringing these risks to the fore and understanding how they impact upon other, perhaps more primary / red risks, will aid this discussion at board level.
11 RSM | Charity Matters
Challenge 2 Challenge 4
What are you going to do if it does happen? These controls work, but who says?
Not many charities out there thought that a As charities have become more complex, and
pandemic of coronavirus' scale was that high on the landscape riskier or more opportunistic,
the list of events that might occur in 2020, yet depending upon your outlook, there is a
with a crisis management plan and a business requirement to ensure that resources are
continuity plan most charities have been able to focussed effectively. Knowing where to deploy
‘muddle’ through. Most business continuity time and cash can be challenging in all charities
plans would have be written to accommodate but sight must not be lost on the contingency
fire, flood, loss of IT etc, and been heavily reliant risks, a robust assurance map, providing insight
on remote working as a recovery strategy. into the effectiveness of the controls managing
those risks is key. There are a multitude of
Now it isn’t suggested that a full business assurance sources available within charities, as
continuity plan is drawn up for every high impact well as external sources, identifying and
/ low likelihood risk on the risk register, as this capturing these may seem a lengthy task
would make them too lengthy and unwieldly. however the benefits will be seen and hopefully
However, being able to understand what action provide comfort to management teams and
would need to happen and what the impacts boards for many contingency risks.
would be is a strong starting point and will
provide management with more confidence that Linking this assurance mapping to the charity’s
the risk is understood and the charity’s ability to risk appetite will assist as it will help to provide
respond effectively and appropriately is in place. direction on whether further actions are required
to strengthen any underperforming controls or
whether the board are satisfied that enough has
been done.
Challenge 3 Challenge 5
When do you want to know about this risk? Have you got one eye on the horizon, and
the other on existing risk?
Setting a charity risk appetite can be a
challenging process but once in place and We will all be familiar with risk reviews and risk
understood, it will enhance the charity’s identification workshops, however tying the two
approach to risk management not just aspects together can get overlooked on
continency risks. However, in the case of occasion as they are often done in isolation.
contingency risks, if appetite levels are set and Over time it is sometimes the case that risks are
risks are appropriately prioritised, it will assist in not “new” but they are morphed versions of
deciphering whether or not further action is previously identified risks. Recognising this can
required to mitigate the risk. save valuable time, particularly from a
contingency risk perspective as the control
A contingency plan is required or whether the environment will be similar but being specific on
charity is willing to live with the risk in its current the causes and articulating the risk is a crucial
state. In turn this will help decision making at all part of telling the story. Those who aren’t the
levels of the charity. risk owner are expectedly not as close or
familiar with the risk so therefore need a fuller
understanding if they are to use it to make risk-
based decisions. When did your charity last
consider the way in which it manages
contingency risks?12 RSM | Charity Matters
How to run your charity post pandemic
Charities need to be agile However, this may be a false economy where the over
The coronavirus pandemic changed the world at an reliance on manual intervention and older generation IT
alarming rate. In the UK, many charities have been able creates a cost envelope larger than the potential gains
to demonstrate the critical role they play in society. But in from newer, more automated, and secure finance IT
any downturn only the stronger and more agile systems. Being able to operate finance in the cloud was
organisations survive, and then thrive. In Spring 2020, essential during the 2020 and 2021 lockdowns and aided
those charities that failed to quickly implement continuity.
contingency and business continuity plans, or consider
alternative scenarios, will have significantly increased
Improved decision-making processes
their risk of financial failure. Conversely, trustee boards
that acted decisively at the start of the pandemic to The spread of coronavirus in the UK happened at great
ensure the survival of their charities, through cost-savings pace in the early stages. As a result, it was a necessity for
and staying focussed on core services, greatly increased charities, particularly amongst trustees at board level, to
their charity’s chances of survival. increase the speed at which decisions were, and are now,
being taken. Trustee boards that waited weeks, if not
months, for future board meetings would have been too
Making the most of technology late in reacting appropriately to the crisis.
2008 demonstrated that recessions can accelerate the
uptake of new technologies. In the coronavirus downturn,
The most agile trustee boards were those that recognised
home working during the pandemic has helped mitigate
the need to adopt modern business practices particularly
the impact of reduced employee production. The better
through video conferencing. Having widely adopted
use of technology and reduced travel enabled charities to
applications such as Skype for Business, Microsoft
work efficiently in the short-term. However, it is not a
Teams, GoToMeeting and Zoom all quickly became
particularly longer-term solution to replace the much-
prevalent in the first few months of the pandemic and
missed social interaction that can only be achieved face
most offer easy and intuitive access for users. However,
to face.
every video conferencing software has its own nuances
and in order to make use of the full functionality it is
Technology can also be more cost efficient, if you already important that users are sufficiently familiar with the
have the infrastructure in place, especially when charities operating basics of the chosen application. This can be
have been under such pressure. Digital can help to easily achieved through the timely provision of online
improve the information flow from frontline operations to training for users. New technologies introduce other
leaders thereby improving the efficiency of decision- challenges such as ensuring that all delegates have
making. This is particularly useful when providing KPIs access to sufficiently fast broadband or the same
and feedback on projects that are essential to meeting a software.
charity’s objects.
Although video conferencing quickly became the
Digital finance accepted practice, it is by no means the only useful
Financial monitoring, budgeting and planning becomes technology available to charities to aid decision-making.
more important than ever during a recessionary Other applications including messenger services such as
environment and the most effective boards show WhatsApp are excellent, if quick and straightforward
leadership through scenario planning and applying the decisions are required without the need for too much
‘what if’ question to all income streams. This process is discussion. Charities do, however, need to ensure that
made much easier if the information exists to allow their governing documents permit such decision-making
strategic decision-making. Effective IT comes at a price electronically and virtually.
and understandably charities have often relied on older
systems, making do with what they have rather than
spending valuable funds on state of the art technology.13 RSM || Charity
RSM Charity Matters
Matters
Documenting your plans
When trustees and charity leaders are holding meetings by
telephone, video conferencing or using other digital means
then it is essential that any decisions are appropriately
documented. This will help to demonstrate good governance
by providing a permanent record, which also meets the
expectations of regulators such as the Charity Commission
and OSCR.
Many charities will have referred to their business continuity
plans during the crisis putting them into action for the first
time. This underlies the importance of undertaking pilot tests
of plans to ensure they are as clear and up to date as
possible. A good business continuity plan will identify risks
and, importantly, set out responses. Variations to plans that
have been considered in light of the pandemic have been
considering what happens when key people named in the plan
are sick or unavailable.
Out of adversity comes creativity, often through necessity.
Many of the most successful charities have recognised the
need to change their modus operandi to ensure they are fit for
purpose and able to deliver much needed services into the
next decade.14 RSM | Charity Matters
Tips for managing risk through and
after coronavirus
We have been having conversations with many charities recently about coronavirus
and its implications from a risk management perspective. This article explores some
tips to help charities with their risk management thinking as we head into the ‘new
normal’.
Firstly, some context: Tip
• most if not all charities have been significantly affected Adapt your governance arrangements to ensure that your
by coronavirus, be this positively, negatively or both; Board is able to function effectively. This will allow it to set
• the NHS are expecting coronavirus to impact all direction, measure performance, have oversight,
planning for the next two years; undertake scrutiny and make decisions.
• even when we come out of lock down it is unlikely that It is in exceptional circumstances such as this that an
we shall return to how things were, there will be a ‘new effective board comes to the fore.
normal’;
• the rapid emergence and spread of coronavirus is an Coronavirus is not a risk in its own right – it currently
exceptional event – and there will be other such affects everything
events in the future, pandemic or not. Some charities now include coronavirus as a new risk in
their strategic risk register. This suggests that the risk
With the above in mind let’s consider some risk exists in isolation with a specific set of controls and
management tips. In writing this we are not intending to actions, impacting one part of the business or objective.
provide a recap on all good risk management practices – This is clearly not the case. Coronavirus adds a new
which we assume are already being exercised; but what dimension to strategic risks and the subsequent effects
we see as coronavirus related, based on our experiences on the charity.
so far. These will not be the only tips we are sure.
Charities should look holistically at their strategic risk
Do not throw governance out the window – it’s a profile and understand the interdependencies. If we
coronavirus necessity exclude coronavirus for the moment, it is clear that too
We encountered a few charities particularly at the start of many risks (risk registers) are reviewed on a transactional
the pandemic (and some continue to be) that took on a basis ie in parts but not as a whole.
state of emergency and ended all board activity and
interactions as well as allowing the executive a greater Tip
decision-making power. However, whilst the physical Review your strategic risks cause descriptions. This in
aspect of direction and control may be changing (likely turn will likely mean that you have to adapt your controls
forever), the fundamentals of good governance should or create new actions in the context of the risk to ensure
remain and be applied. that it is being suitably managed.
Without governance actually serving an effective purpose
(be it within a coronavirus setting or not) then the
management of risk can easily become a cosmetic
exercise.
Those charged with governance should be in a position to
monitor, guide and challenge (constructively) the progress
of a charity’s response to the coronavirus event.
Coronavirus event response monitoring and reporting ie
progress, issues, innovations and key learning should be
a standing agenda item for management.15 RSM | Charity Matters
Tips for managing risk through and
after coronavirus – continued
Coronavirus response – things do happen. evidence etc all in one place. This will provide all the main
Response or contingency planning is a key feature in the stakeholders visibility of the response and ensure a more
management of risk. It is impossible to predict or foresee coordinated and consistent approach to managing the
all future events, they happen unexpectedly, and charities unfolding situation.
need to be able to suitably respond. By now, most
charities will have some form of coronavirus response Investing in a system, with workflow, to communicate and
plan in hand to ensure the survival, recovery and track actions, progress and updates and provide useful
continuity of operations. management information doesn’t have to be expensive
and will cut down on unnecessary and inefficient
The above goes for any kind of significant event to which administration at a time when resources are tight. This will
a charity is responding, not just the current coronavirus provide a good return on investment now as it will in the
situation. Having an effective business continuity future. The old adage “what gets measured gets done” is
framework and plan (which is tested) is a must have for as important now as anytime.
all charities.
Prepare to manage the change and the (opportunity)
Tip risks this presents - take advantage of the ‘new
All charities should have a contingency framework within normal’
which it can operate when situations like coronavirus or What is a certainty is that as a result of coronavirus all
similar arise. organisations, including charities will be change.
To this end the World Economic Forum Global Risk report All charities will need to adjust to a new way of working
may be helpful. It is produced annually and focusses on and grasp the opportunities that this presents for
what might be the world shapers in the next 12 months. A increased operating efficiency and effectiveness. These
global pandemic has been in the report for a number of will be wide ranging from where we work, how we work
years. The point here is that a charity may wish to and how we engage with customers, suppliers and
consider how the realisation of such risks in the future stakeholders.
might impact on its operations and / or existence ie what
happens globally will eventually impact locally. Then In some cases this might necessitate a top to bottom
consider the charity contingency framework in that restructure to realise the benefits that this change can
context. bring. This change process will likely last a period of time,
it will not be quick.
Don’t manage the coronavirus response via
spreadsheets Tip:
We have seen a number of behemoth spreadsheets Leaders need to still be looking ahead, capturing the
created to record actions taken, as well as updates. This learning from this coronavirus event, reviewing strategy
will create difficulties when considering a wide spread and operating models, identifying emerging innovations
workforce. and opportunities, listening to stakeholders. As important
as it is to survive and bounce back, it is more important to
Spreadsheets are currently being circulated to bounce forward and be ready to capitalise on the “new
management and the board as a form of progress report. normal”.
A spreadsheet is not a reporting tool and is reminiscent of
organisations that still put the whole of the risk register (in Having appropriate mechanisms in place to prepare,
spreadsheet form) on the boardroom table. In doing this, initiate and progress the forthcoming change in the future
where do you start? It is also highly likely that it is already short, medium and longer term will be as crucial (if not
out of date by the time this happens. more so) as the initial response to the emergence of
coronavirusto ensure sustainability and growth. The main
Tip risk here is that Leaders will not embrace the change that
This is a fast-moving environment so equally make sure is ahead and take the advantage.
that the board, management and staff have access to real
time information eg updated actions, communications,RSM | Charity Matters Governance code
17 RSM | Charity Matters
An update on the Governance Code
In 2019, RSM published Decoding the Charity Governance Code, which presented
research showing the adoption and relative application of the new Charity
Governance Code for larger charities. The Code was published in July 2017, and in
December 2020 it was updated to include a new principle on Equality, Diversity and
Inclusion.
RSM research was based upon an examination of the 85 Applicable charities are encouraged to publish a brief
recently filed annual accounts from a range of charities statement outlining their application of the Code in their
registered in England and Wales. annual accounts based upon the ‘apply or explain’
approach. Charities are not obliged to outline all aspects
This update seeks to establish what progress, if any, has of recommended practice within their annual accounts.
been made towards the Code’s adoption and application
since the analysis was undertaken in early 2019.
Code consultation
Background A consultation launched in November 2019 and closed at
The Charity Governance Code for larger charities (the the end of February 2020.
‘Code’) was published in July 2017. The Code that we
reviewed is designed for use by larger charities with a The consultation focused on several key areas aimed at
minimum income of £1m, that are externally audited, and how to improve awareness of the Code, further adoption
are registered in England or Wales. It outlines seven of the Code, as well as the diversity principle,
principles of good governance and provides further safeguarding and any potentially immediate matters of
detailed guidance for areas of recommended practice. concern.
The code has since been updated in December 2020, The new EDI principle is designed to enable charities to
with a new principle on Equality, Diversity and Inclusion be bolder in this area. With charities all at different stages
(EDI). of development in these areas, it gives them accessibility
and a start pointing whatever stage they are at.
The seven principles of good governance are defined by
the following the headings: Key things from the EDI principle:
1. Organisational Purpose • Assess the current level of understanding and where
to start?
2. Leadership • Set out plans and targets tailored to your charity and
3. Integrity (updated in December 2020) its starting point with realistic and specific goals.
4. Decision-making, risk and control • Monitor and measure how well the charity is doing and
self assess regularly.
5. Board effectiveness • Be transparent and publish the charity’s progress.
6. Equality, Diversity and Inclusion (updated in
December 2020)
7. Openness and accountability
The aim of the Code is to assist charities and their
trustees to reach the highest standards of governance. In
this way, the Code is ‘deliberately aspirational’ and
intended as a tool to support organisations to continually
strive for improved excellence in governance. It is not a
legal or regulatory requirement.18 RSM | Charity Matters
An update on the Governance Code
continued
Alongside the EDI principle, there was an update on the Charity size
Integrity principle, creating more emphasis on the Analysis by income reveals that the largest charities are
meaning and focus of it. more able to demonstrate an overall adherence to
recommended standards. Despite this, reduced income
Integrity is much more than managing your financial was found to not be an insurmountable barrier to good
assets and funds well. practice.
The Governance Code stresses that it is about ethical Diversity
principles in all decision-making and creating a The principle of diversity was the weakest demonstrated
“welcoming and supportive culture”. The personal with an average rating of only 17 per cent.
behaviour of charity and everyone who comes into
contact (staff, volunteers, partners and beneficiaries) with Diversity statements were located for 19 organisations on
the charity is paramount and this has been made clearer their websites. This number represents 22.4 per cent of
in the update, in particular, to be safe and to know how to charities adhering to this piece of guidance.
speak up and raise issues.
It is hoped that RSM’s updated analysis in 2020 and
beyond can provide further insight into some of these
matters and contribute towards the on-going discussions
of Code progression, awareness and adoption.
Key findings 2019
Adoption
Of the 85 charities in the sample, approximately 44 per
cent clearly acknowledged the Charity Governance Code
within their annual reports.
Average ratings across all seven principles for charities
which stated their alignment to the Code was nearly 10
per cent higher than those that did not acknowledge its
adoption.
Areas of Activity
Charities primarily engaged in activities pertaining to
medical, health or sickness were the top-scoring with an
average good governance rating over six per cent higher
than the second-rated category and over 25 per cent
higher than the lowest-rated category.19 RSM | Charity Matters Key findings 2020 RSM returned to the same 85 charities assessed in 2019 to examine if the adoption rate of the Code has increased over the past year. Unfortunately, one charity within the sample had entered liquidation, and thus the updated 2020 assessment was performed on the remaining 84 organisations. Adoption Charities stating their adoption of the Code has increased by over ten per cent in the past year, with 55 per cent of the charities examined offering an acknowledgement the Code’s application or consideration in their organisation. The percentage increase is a result of an additional eleven organisations implementing the Code since their previous years’ filings. Two charities in our sample that were found to have clearly stated either a review or intended future consideration of the new Governance Code in 2019, failed to mention the Code in 2020. Areas of activity Charities that adopted the Code this year were relatively balanced across most areas of main activity. Increases are notable in the areas of housing and financial support, as well as general charitable purpose. *There were only 14 charities in the lower income tier segment in the updated analysis, due to a liquidation ** Adoption rate by area of activity removes the two charities included in 2019 that omitted the Code in 2020 and adjusts for the loss of one charity in the sample as noted above.
20 RSM | Charity Matters Key findings 2020 Charity by size In the past year, a greater proportion of charities in the highest income tier adopted the Charity Governance Code. The largest charities also composed the largest segment of the sample. Statement of alignment of code 27 per cent of the charities (23 charities) assessed in 2020 provided high-quality statements in relation to the Code in addition to acknowledging its adoption. This is a significant increase from the nearly 20 per cent (18.8 per cent, 16 charities) of all charities in the 2019 reporting year. The increased number of organisations taking the further step to provide a governance statement in alignment with Code and provide for any variances could be due to the additional time lapsed from the Code’s publication. This time may have enabled keen charities to implement reviews and therefore provide a more comprehensive statement. Diversity Over the past year, the number of charities in our sample that published diversity, equality or inclusivity statements increased by over ten per cent. This equates to ten additional charities within the sample publishing these statements in the past year. In the previous year, only 19 charities provided formal ‘diversity’ policy statements, with an additional two organisations offering equality policies that were substantively relevant. In 2020, we found 31 charities with related statements, 27 of which were formal diversity statements. *There were only 14 charities in the lower income tier segment in the updated analysis, due to a liquidation ** Adoption rate by area of activity removes the two charities included in 2019 that omitted the Code in 2020 and adjusts for the loss of one charity in the sample as noted above.
Authors
Nick Sladden Marketing enquiries:
Head of Charities Paige Harris
nick.sladden@rsmuk.com Business Development, London
paige.harris@rsmuk.com
Liz Wright
Risk Assurance Director, Milton Keynes
liz.wright@rsmuk.com
Kelly Adams
Partner, Scotland
kelly.adams@rsmuk.com
Adam Lickorish
Associate Director, Gatwick
adam.lickorish@rsmuk.com
Hannah Catchpool
Partner, London
hannah.catchpool@rsmuk.com
Matt Humphrey
Partner, Leicester
matthew.humphrey@rsmuk.com
Emma Kennedy
Senior Business Development Manager
emma.kennedy@rsmuk.com
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