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Charity Governance Code: Principle 4 – Decision Making, Risk and Control

15th December 2021

Charity Governance Code: Principle 4 – Decision Making, Risk and Control

In recent weeks, Kirsty McEwen in our Charity and Not For Profit team has been guiding us through the core principles of the Charity Governance Code. Today, in the fourth part of the series, Kirsty examines Decision Making, Risk and Control.

What does Principle 4 – Decision Making, Risk and Control mean?

  • The board makes sure that its decision-making processes are informed, rigorous and timely, and that effective delegation, control and risk-assessment, and management systems are set up and monitored.
  • The board has ultimate responsibility for the decisions and actions of the charity.
  • However, the board should also delegate their decision making when necessary.
  • Some decisions will be the board’s legal responsibility.
  • However, some decisions should be delegated where appropriate.

Why is Decision Making, Risk and Control important?

  • Trustees are able to delegate their authority to make decisions or to take action, however, ultimate responsibility remains with the trustees.
  • Appropriate controls and arrangements should ensure that trustees are able to oversee all delegated matters.
  • Trustees have the responsibility of identifying risks and opportunities and how best to deal with them.
  • Trustees are also responsible for identifying and assessing the risks and opportunities available for the charity. It is important that appropriate processes are in place on how to manage this.
  • Boards can achieve this by:
    • ensuring that the board is focused on strategy and assurance and this is reflected in its delegation;
    • a good decision making, and monitoring framework is in place;
    • the board should be aware of all the risks they are required to manage, whether financial or non-financial in nature;
    • promoting a culture of effective and innovative management of resources, including effective delegation and management of risk; and
    • ensuring that there is an effective oversight of any roles which have been delegated to other committees, staff, volunteers or contractors. 

How can we help?

  • Delegation and Control
    • We can advise on which matters the board should preside over and which should be delegated.
    • We can prepare a delegation’s framework document setting out boundaries for delegation so that everyone can understand their role.
    • We can advise on systems which can assist in monitoring and overseeing delegation.
    • We are able to give advice on how regularly delegation policies and procedures should be reviewed.
    • We can create key policies and procedures on delegation and ensure they remain fit for purpose and serve the charity’s purpose.
  • Managing and monitoring organisational performance
    • We can create a framework in order to delegate functions and monitor their performance. This should include a structure to support staff and also to hold accountability.
  • Actively managing risk
    • We can help put plans in place to identify and mitigate risks. These plans should be reviewed at least annually.
    • We are able to describe the charity’s approach to risk in the annual report to meet regulatory requirements.
  • Appointing auditors and audits
    • We can create a process for appointing and reviewing auditors.

Other Tips:

  • The board should ensure that its committees have suitable terms of reference and membership:
    • membership should be refreshed regularly;
    • terms of reference should be reviewed on a regular basis.
  • Where roles and functions are delegated, the board should ensure that this is in the best interests of the charity’s organisational purpose.
  • The board should have operational plans and budgets in place to further the organisational purpose.
  • The board should consider information from other similar charities in order to benchmark and compare performance.
  • Where the charity has an audit committee, its chair should have recent and relevant financial experience. The committee should include at least two trustees.

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

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