Independent schools are very often structured as charities. In such cases, the board of governors can, therefore, be held accountable – not only as directors of limited companies, but also as charity trustees responsible for all aspects of management.
Charity governance is the system of rules, standards, practices and processes by which a charity is directed and controlled.
The Charity Commission, which regulates the charity sector, published guidance ('Hallmarks of an Effective Charity') to assist charity trustees, but this was withdrawn in 2017 when the third edition of the Charity Governance Code was published. This code is sub-divided into a code for larger charities, aimed at charities with an income of over £1 million a year, externally audited accounts and a code for smaller charities below this threshold.
The code applying to smaller charities takes into account their general circumstances. For instance, it provides that if the charity has volunteers, the board must comply with principles setting out proper arrangements for their recruitment, support and supervision. On the other hand, bigger charities are held to more detailed standards in a number of areas including the implementation of systems to monitor and oversee how delegations are exercised.
Both codes rely on the same seven principles that can be applied to independent schools, as follows:
- Organisational purpose – With the head, the board should create and monitor development plans, operational plans and budgets appropriate to charitable purpose of the school.
- Leadership – Recruitment processes must be in place. The roles of the head, board, individual trustees and staff must be clearly defined. The members of the trustee board must give sufficient time to the charity to carry out their responsibilities effectively and lead by example, promoting the agreed values of the school.
- Integrity – The board must observe a code of conduct which will promote the organisation’s charitable purposes and maintain and promote the school’s reputation. A board must act according to high ethical standards and in the public interest. Boards will ensure open impartial and independent decision making for which they can be accountable and identify and manage conflicts of interest and loyalty. A school can use the Nolan principles of public life as guidance.
- Decision-making, risk and control – The board should set a framework of functions and responsibilities, board strategies, standards of education, finances processes, plans and reports relating to mitigation and management of risks such as the safeguarding of children. It must also regularly assess the performance of the charity.
- Board effectiveness – Regular meetings should be held. The appointment procedure must be transparent, and trustees should be appointed for an agreed length of time. Board reviews should be carried out, to ensure that trustees contribute appropriately.
- Diversity – The board should publish a description of what steps it has taken to attract a pool of trustees diverse in opinion, skills, backgrounds etc.
- Openness and accountability – The board should inform people about the school and its work. It should consult the stakeholders on significant changes to the school’s operation or policies and respond to their positive and negative feedback constructively, impartially and effectively.
It remains to be seen how effective these rules of good governance will be in practice, especially as there are only a few variations between the two codes, despite the broad differences between charities of different sizes and with different aims.
Charity law can impact on the organisation and running of independent schools in a number of fundamental ways (such as land transfer, mergers and changes to the corporate objects) and the publication of the new edition of the Charity Governance Code should, therefore, be regarded as significant.
Published May 2018