Recession Toolkit - Governance

Examples of governance risk include:

Inappropriate organisational structure

For example if there is a lack of information flow and poor internal decision making procedures; if a committee is remote from the organisation's operational activities, or; if there is an uncertainty about the roles and duties in the organisation. To mitigate this risk organisation could:

• draw up a chart to outline the roles and duties of all in the organisation
• delegate and monitor according to best practice
• review the structure and nature of the organisation
• review sub-committees and their terms of reference

Difficulties recruiting committee members with relevant skills

This could result in the organisation stagnating and failing to achieve its objectives. To mitigate this risk the organisation could:

• develop a skills audit for the committee/board. First, agreement should be reached on what level of skills, knowledge and experience is needed, and in which areas. Then a skills audit of the current committee/board members should be carried out and any gaps that need to be filled should be identified.
• co-opt external experts onto the committee/board or onto sub-committees
• communicate the skills gaps when seeking nominations and recruiting for new committee/board members and recruit to ensure these gaps get filled.
• provide committee/board members with training
• review the committee/board recruitment processes. Does all of your committee stand for re-election every year or do you have a rotational 3 year turn around to ensure continuity?

Conflicts of interest

This could result in a less effective committee/board as the members may be acting in their own interests rather than in the interests of the organisation. It could also negatively impact on the organisation's reputation. To lessen this risk the committee/board should:

• ensure that all committee/board members understand that they are legally obliged to act in the best interests of the organisation and not in their own self interest.
• manage conflicts of interest correctly and sensitively.
• adopt a conflict of interest policy and register of interest [see NICVA Advice Note 14: conflicts of interest]

Acting outside governing document

This could result in the committee being held personally liable, particularly if it is acting outside the organisation's charitable objectives. It could also be contrary to the law and result in damage to the organisation's reputation. To ease this risk the organisation should:

• ensure that its governing document is regularly reviewed so that it meets the needs of the organisation.
• review all projects before they begin to ensure that they are consistent with the governing document.
• provide a copy of the governing document to all committee members at induction and ensure that committee members are familiar with the document.

Lack direction, strategy and forward planning

The risk here is that the organisation could drift with no apparent purpose, priorities or plans. Without strategic direction decisions could be made on their own with no reference to the impact in the longer term or to the whole organisation. The organisation may find itself in financial difficulties and find that it is not best serving its beneficiaries. To lessen this risk the organisation should:

• develop a strategic plan that sets out key aims, objectives and policies.
• create financial plans and budgets.
• monitor organisational performance.
• receive and listen to feedback from beneficiaries and funders.

Collaborative working and mergers

There may be several reasons why voluntary and community organisations decide to work collaboratively with another organisation. While the current recession may have raised the issue for some organisations, others may have already been contemplating collaborating or merging due to funding pressures or indeed competition from organisations with similar purposes and/or the private sector. Some organisations have been working in partnership with others for years to pool skills and expertise of different organisations. More recently we are seeing full scale mergers between charities that have similar purposes and beneficiaries. It is anticipated that we will see more mergers and collaborations as funders are increasingly expecting the voluntary and community to reduce duplication.

Merger or collaboration?

Organisations will have to consider if they want to merge fully (come together to form one organisation) with another organisation to deliver all of the organisations' services together or if they want to work collaboratively (joint working) on:

• projects/issues
• sharing knowledge
• sharing services (eg finance and IT)
• fundraising and campaigning
• combined bids for service delivery

Any organisation thinking of collaborating with another organisation will need to consider how much commitment the collaboration will make on its resources. It is strongly advisable, and in the case of a merger absolutely necessary, for organisations to carry out due diligence on their proposed new partners. Organisations will have to consider what structure will suit their purposes best and they will need to have a written agreement which should detail the arrangement.

NICVA's Collaboration and Merger Newsletter, circulated every quarter with the latest update on this topic in Northern Ireland.

For detailed information on the key legal and practical considerations of collaborative working and mergers including information on the key formal structures available, case studies and due diligence please see The Charity Commission of England and Wales publication on collaboration and mergers and NCVO's publication on Merger - a model of collaborative working.