Proportionate governance

Small charities and those in the early stages of development will have different governance arrangements and support needs than larger charities. 

‘Proportionate governance’ is an approach that recognises the different needs of small charities.

The approach suggests that there are three ways a charity can identify those governance best practices or requirements most relevant to its needs.

The first method works on the basis that there are some aspects of good governance that are common to all charities. 

For example, all charity trustees must ensure that a charity’s assets and funds are used only to further its purposes. This means that all trustees should have an understanding of the charity’s legal objects and how these relate to the overall aims, have oversight of the way the charity’s spends its money and how it is likely to raise money in the future. The detailed methods used will vary depending on a charity’s size and complexity, but the principles are the same. 

Trustees could follow this approach, for example, by reviewing how they fulfil their formal duties and responsibilities as trustees or how they fulfil the seven main principles in the Code of Governance.

The second method works on the basis that some aspects of good governance are more relevant to different sizes of charity. 

For example, annual accounting requirements change with a charity’s annual income. There is also a reasonable expectation that more formal or ‘sophisticated’ approaches to governance come into being as a charity grows in size and complexity.

Trustees might follow this approach by, for example, checking that their governing document is really up to date in dealing with legal requirements, for example, conflicts of interest, or considering whether a different approach is needed to recruit new trustees. For example, to ensure that the board contains the right skills mix.

The third method works on the basis that some aspects of good governance come into being as charities develop their activities and take on more risks. 

For example, a charity working with children might reasonably face greater governance requirements that a charity that publishes training materials, because of the greater legal requirements and risks involved. This might be the case regardless of the relative sizes of the two charities.

Trustees might follow this approach by checking that they are reviewing any risks facing the charity as a whole (link) and are complying with legal and regulatory requirements (link).