In the past few weeks, two important Codes within the Third Sector have been updated: the Charity Governance Code and the Code of Fundraising Practice. Both Codes have gone through a consultation process and below we provide a brief summary of the two Codes and the changes which are now in force.
This good governance guide was established in 2005 and developed by a steering group of Third Sector organisations: the Association of Chief Executives of Voluntary Organisations, the Association of Chairs, the Institute of Chartered Secretaries and Administrators, the National Council for Voluntary Organisations, Wales Council for Voluntary Action and the Small Charities Coalition. Although developed for charities registered with the Charity Commission, it is essentially guidance on best practice and principles, not a legal code; therefore it is a useful tool for charities and other not-for-profit organisations registered in Scotland. The Code is not a ‘tick-box’ governance manual: it is intended to be used and referred to throughout the life of a charity by its trustees.
The Code is built on 7 principles: organisational purpose; leadership; integrity; decision-making, risk and control; board effectiveness; diversity; and openness and accountability.
One of the key changes to the Code is the publication of different versions of the Code, one for smaller charities and one for larger charities. The steering group recognised that governance requirements vary depending on the size and structure of the charity, and it suggests that charities with an annual income of over £1 million and whose accounts are externally audited are considered ‘large’ charities for the purpose of the Code.
The new Code is more detailed, contains higher standards and has a stronger focus on the guiding principles. This reflects the general public’s expectations on charities which have strengthened over recent years. Key changes relate to the board, including diversity, composition, size and trustees’ terms, and undertaking regular reviews of both the internal and external environments faced by a charity.
Since the launch of the Fundraising Regulator for England and Wales on 7th July 2016, the Code of Fundraising Practice for the whole of the UK has been under its guardianship. One of the Fundraising Regulator’s first actions was to launch a consultation on the Code. This consultation was not a complete overhaul of the Code. It focussed on current issues and concerns e.g. vulnerable people, fundraising communications, and third party fundraising contracts and monitoring arrangements.
The most recent amendments to the Code were published on 31st July this year and, where the changes will have a significant impact on charities, they have been given a grace period to implement these changes. The grace period does not apply to all the changes (see the Fundraising Regulator’s website for more details).
Some of the recent key changes include:
- The ‘fundraising ask’ - fundraisers must not continue to ask an individual for support if that person clearly indicates by word or gesture that they do not wish to continue to engage or if the fundraiser has reasonable grounds for believing that the individual is a vulnerable person which means they are unable to make an informed decision to donate. Also, during a telephone call, fundraisers must not be unreasonably persistent or place undue pressure on a person to donate and must not ask for a financial contribution more than 3 times during the call.
A requirement for trustees to have a more active role in overseeing fundraising activities.
It is likely that the Code of Fundraising Practice will continue to be updated in the hands of the Fundraising Regulator as fundraising practice and public expectations continue to change.
Senior management teams and boards of trustees should review these changes and take any necessary steps to bring their charities “up to code”. If you have any queries on the changes or in relation to their implementation, please contact our Charities Legal Team.