Guides
Governance in a charity: how does it work?
Governance in a charity requires a different approach because the organisation’s nature is fundamentally separate from that of a for-profit.
If you’re about to take a board role in a charity, you must be aware of the differences and how they should impact your decision-making.
How do charity goals differ from regular businesses?
Charities and for-profit businesses operate with fundamentally different objectives. The primary aim of a charity is to advance a social cause or provide a public benefit, such as alleviating poverty, promoting education, or advancing health and welfare.
Because of that, all “profits” generated by a charity go towards that cause and not towards the organisation’s value or shareholder pockets. Charities are all about impact rather than return.
This distinction profoundly influences their governance structures; whereas a business may prioritise financial acumen and growth strategies in its leadership, a charity focuses on mission alignment, ethical fundraising, and community engagement. These different priorities require tailored governance practices to ensure that all activities align with the core mission and moral standards expected of charitable organisations.
What are the governance goals of a charity?
At the top level of any charity is its defining cause – its “raison d’etre”. For example, the primary cause of the international charity Oxfam is overseas aid and development programmes.
Beyond that, the main goals of a charity are:
- Excellent use of resources.
- Clear reporting and communication strategies.
- Effective marketing and fundraising campaigns.
- Robust channels for transferring and using funds.
- Full compliance with legal and ethical standards.
Everything above comes down to efficiency and integrity because, ultimately, charities generally have a lot more spotlight than regular companies.
Scrutiny of charities comes from every angle since most of their inner workings are required by law to be publicly released. As recipients of public funds and—often enough—government aid, the spotlight is always on charities to be the gold standard of financial management—doing efficient business with next to no waste or unnecessary overheads.
What does a charity board look like?
A charity board typically comprises trustees who are legally responsible for the charity’s management and administration.
These individuals are not owners of the charity but stewards of its assets and mission. They’re the people who ensure the charity adheres to legal standards and ethical norms, and they must also act in the charity’s best interests, avoiding personal gain. The board’s composition often reflects a cross-section of skills and backgrounds, including industry experts, beneficiaries, and community leaders, to guide the charity towards effectively fulfilling its objectives.
What skill sets do you need on a charity board?
For a charity board to function effectively, a diverse range of skills is essential. Some skills are basic – the kinds you would need on any board – others are more specific.
Firstly, financial expertise is crucial for budget management and planning, ensuring the charity uses its resources judiciously and remains financially viable.
Knowledge of the charity sector, including relevant laws and operational standards, helps navigate the complexities of charity governance and compliance. Leadership and advocacy skills are important for internal motivation and external awareness, which a charity often depends on.
Additionally, fundraising abilities are invaluable, as securing funds is often critical to a charity’s sustainability. Moreover, having board members with direct experience or connections to the charity’s cause can provide insightful perspectives on the needs and best practices for serving the community effectively.
In summary
Effective governance is foundational to the success of any charity. It ensures that the organisation complies with legal obligations and aligns with its mission.
The governance framework within a charity must be built on a bedrock of transparency, accountability, and a deep commitment to the cause. As such, the composition and operation of the charity board are crucial, requiring a balanced mix of skills and a solid ethical compass. By adhering to these governance standards, charities can maximise their impact and maintain the trust of their supporters and the communities they serve.