NCVO Conference – Speech1. Introduction

Thank you to the NCVO for inviting me to speak at this conference. It says much for modern society that governance can be the central focus for such an event!

My talk will take the following broad shape:An overviewAn unpacking of that overview by reference to the governance structure and governance activity within ActionAidAnd three proposals on which I would welcome questions and comments in due course

Even as a person who’s been involved in governance in one way or another all my life, whether as a lawyer in the City, or as Director of Legal and Co Sec at John Lewis or as Chair of ActionAid, the last few months have been a surprise for me. I’ve heard the word ‘governance’ used so often in the media almost on a daily basis, and particularly charity governance, that in fashion terms one might say governance is the new black!

My background is that of a lawyer specializing in planning and development, worked in the City for 20 years both opposite and with central and local government in procurement and in many regulated areas; and then as Co Sec and GC for JLP for almost 10 years. I am delighted now to be Chair of the AAUK board. As you can imagine – with that background, almost the first thing that I embarked upon on arrival at AAUK was to initiate a governance review. Not because I suspected anything of being wrong! But because I needed to assure myself of quite how right things were!We as a board of trustees are, with management of AA are not only entrusted with donor’s money; but also the outcome of the terrific input from volunteers’ and the staff’s time and energy – but there is also a huge value to the reputation and ethic of the enterprise that has been built up over the years. And this is as important a part of the organization as the people and as the financial assets. That becomes part of the Brand. That we as a board are required to protect. That’s what good governance is about. Protection of the assets, including the reputational asset. We only have to consider Volkswagon or the Co-op to recognise the importance of protecting that.

What I bring with me is a keenness for effective light touch governance; a fervour for a system that is open and transparent and a passion for a system that is easy enough for people to see and understand at a glance. A system that makes it clear who has what responsibilities and accountability so that the relationships are obvious. It should be easy to see who delegated the responsibility; who gave the duty and to whom there is therefore a duty owed. It should be clear who receives and has oversight over reports about the way in which functions are being carried out. What does that mean? It means that we need to have arranged our enterprise so that its very different from FIFA!

Accountability for AAUK has multiple dimensions – because like any other charity, ActionAid is responsible to the beneficiaries, so has to ensure continuity of funding so that committed programmes do not end suddenly and can be properly planned; and has to be accountable to donors whether they are governments, foundations or individuals and in addition because of our decentralization AAUK like the other associates and affiliates within the Federation, is

accountable to the International Secretariat. As a member of the federation has a duty to comply with the rules of the wider organization, and to carry out whatever functions it has been asked to carry out to it as part of the delegations and this makes accountability very different in the AA context, because of the Federation. More about that later.

Role of the board in accountability

An Organization has often been described as a body. The management and staff are the heart and the hands and the board is the head. The board operates to reflect the views of stakeholders and to question the heart which will have discretion as to how the resources are applied. You will only have to consider with Kids Company what can happen when the head doesn’t question the heart sufficiently rigorously. Why were there no reserves? How long had such a system pertained? As a board of trustees we have to look both to protecting and promoting the interests of the beneficiaries and ensuring the donors be they institutional or individual receive sufficient assurance about the way in which the resources are being applied and where the priorities lie from programmes and those who benefit through the campaigning and advocacy.

The role of the charitable sector in the civil space gradually disappears and is increasingly restricted by government action. Told to stick to our knitting! Lobbying Act has tried to curtail our advocacy and political work. But the Quakers historically famously built and lobbied for affordable housing; and lobbied for an end to the slave trade. So there is clearly room for the right sort of advocacy to underpin charitable operations. Is checking that we operate appropriately within the political sphere also part of our good governance mandate? Surely it must be!

The Charity Sector has been lucky in not being externally investigated up to now. Should we now be on the front foot, rather than being purely reactive. And if so, how do we persuade the public that governance is a priority for and how do we decide what resource implications this should carry? In my view the distinction between the way in which the public, charitable and private sectors consider and react to governance requirements is arbitrary! There are appalling consequences for failure to deal appropriately with this in each sector.

Let’s unpack that a bit!Last Thursday morning on the Radio 4 Today programme there was a segment on Kids’ Company – some of you might have heard it. Tim Loughton, who had been Minister for Children with oversight of the relationship between the Department for Education and Kids’ Company until 2012, said (and I quote):

Whenever you ask Kids’ Company:“Let’s have the data, let’s have the performance indicators” You’re told:“We’re not going to waste time on all that bureaucracy and if you force us then there’ll be some not very favourable media stories suggesting that you want to waste money on bureaucracy rather than spending it on the kids.

Now I don’t want to get into the rights and wrongs of who said what, because there’s already enough flying around about the demise of Kids’ Company. But on its’ own I found this very interesting, because it suggests that ‘bureaucracy’ – that is, monitoring and evaluation, governance

and the like – is considered in the mind of the media and the public to be a waste of money. More worryingly, it suggests that some charity leaders feel this way.

Governance has become a “dirty word” and there needs to be realignment in the mind of the public and media about it.

2.1 Pressure on the Charity sector

It’s been an awful year for the charity sector. A recent CAF survey found that the public’s trust in the sector has declined to 57%, down from 71% in the Charity Commission’s survey a year earlier. This is a shocking change.

Perhaps we should not be so surprised that trust in charities has declined - so many major institutions are losing public's trust compared with 20 years go.

o Police - following Plebgate and details which have emerged from Stephen Lawrence enquiry.

o Politicians – the expenses scandal and more recently cases such as Lord Sewell.o Banks and businesses - after their appalling lack of good governance and lack of

transparency led to 2008 crash, the Co-op's crashing failure due to lack of good governance and lack of effective NED scrutiny of the Board.

o International organisations such as FIFA. [elaboration on FIFA ‘s lack of transparency](Importance of joining the dots between understanding you Mission, assessing the Risks attached to its implementation, creating the structure to deliver and to oversee that delivery; and importantly creating transparency around the joining of those dots - as one speaker referred to earlier)

It seems it’s now the charity sector’s turn to come under the scrutiny of the public and media. The Olive Cook tragedy, fundraising methods, CEO salaries and governance have all been in the firing line.

While the popular media coverage has been anything but balanced, there is no question that there have been some shabby practices going on, and if we want to retain the public’s trust then we should be beyond reproach.

The common denominator in these cases is lack of appropriate scrutiny by the Board, and a lack of transparency.

2.2 What is governance for?

What is governance for? To give the public trust and confidence that the charity is doing the right thing

Trustees speak for the beneficiaries of the charity Accountable not just to beneficiaries but also to supporters. Charities don’t always do enough to

listen to our supporters and tell them how we spend their money (eg. AAUK Accountability work here in the UK).

2.3 What is the board for?

Make decisions about risk Hold the staff to account

Blue-sky thinking – ActionAid current strategy period will come to an end soon and plans are well underway to make sure the Board has sufficient time and space to think about this, and to lead the organisation forward it terms of what we prioritise over the next few years.

2.4 The question is: how can we as a sector move to prioritise improving governance practice in charities? Some suggestions!

3.1.1 Need for regular changes in charities

The Cass review Delivering Effective Governance: Insights from the boards of larger charities found that a fifth of them have no maximum terms of office for their trustees. How is the Board meant to bring in fresh ideas and move with the times if this is the case? Alan Yentob has come in for a lot of criticism for being Chair of Kids’ Company for 20 years.

This is really worrying, given that rotation and renewal is one of the most basic precepts of good governance. It rather puts paid to the idea that big charities with the resource to invest in governance always get it right.

3.1.2 Investment in Governance

As I said at the start, it used to be considered that governance is boring. Who can afford to take that view now? If the Daily Mail thinks charity governance is sexy enough

to report on then the idea that it’s boring is long past, and now it’s what might get you in real trouble.

The big issue is whether we can put more time and resource into governance while showing proudly how little we spend on governance.

We’re all guilty of it– almost all charities produce neat little tables designed to show how little we spend on governance.

I’m not suggesting that we should all ditch that type of performance reporting because I think the public does find it useful, - in fact it underlines the sort of transparency that perhaps FIFA cold have done with – giving line of sight to expenditure on the bureaucracy but we all play our part in encouraging the myth that expenditure on governance is a bad thing.

By all means keep costs as low as possible, but be clear that for the public to have trust and confidence in charities, you need strong, professional governance, and this does cost money.

The short answer is that we should all be spending more on governance, and in particular in making sure there’s someone who knows about this at the charity.

o For larger charities, there should be someone on the staff. Earlier this year ActionAid decided to create a new role for a technical governance specialist to make sure that we’re doing the right thing.

o Smaller charities this might ensure they have Trustee with experience in governance – perhaps a lawyer but not necessarily – who has particular delegated responsibility for governance within the organisation. Get them a copy of the NCVO Guide to Good Governance – it’s only £5.00!

It’s time for donors to grow up and to recognise that part of the Trustees’ duty is to have a good governance function, and this has a cost.

It's a matter of law that corporates have to have a good governance function as a response to the Audit committee oversight. Many charities have a turnover not unlike major corporates, and even where they don't they should be expected to take similar care because their stakeholders are by definition the vulnerable. It's bizarre that legislation expects more when one is looking

after the money of shareholders than of those donating in the interests of the most vulnerable in society!

Kids’ Company is testament to this. The cost of not having this function operating effectively within a charity is too much for the beneficiaries to bear. And of course in the long run it is they that have to bear the cost when programmes have to come to an abrupt and dramatic end.

3.1.3 Governance Reviews

In fairness, ActionAid has always been proactive about governance, and carries out regular reviews so there wasn’t any resistance to the request I made on arrival! So, our last review was carried out in February 2015 and the Board agreed how we would take it forward at its March meeting. Just a few months later the Kids Company story broke.

There are plenty of people out there who can come in and look at your governance and tell you where the problems are: we had two people from Cass Centre for Charity Effectiveness who produced a thorough and useful report, and the cost was reasonable.

Thankfully they didn’t find any governance gremlins in our closet, but they identified a number of areas where improvements could be made.

What did the review consist of?

As part of the review Cass benchmarked us against their 2012 report Delivering Charity Effectiveness: Insights from the boards of larger charities. It was effectively a gap analysis – where do our practices differ from those of other charities?

But as has been said comparisons can be odious: governance needs to be bespoke to the individual charity and a larger charity is rightly expected to do more than a smaller charity.

However it was a relatively straight-forward way to discover whether anything we’re doing is patently wrong, and I think smaller charities which can’t justify hiring consultants could do a lot of this themselves.

When you carry out a review you need to be clear from the start about how you’ll take it forward. If you have a governance committee already in place, as we did, this makes it easier, but otherwise consider creating a temporary panel of Trustees, and make sure they have designated staff support.

How has this improved trust and confidence at ActionAid?

Part of the problem of a governance review is that it can feel like it’s not making much difference to supporters and beneficiaries. There certainly aren’t children in Mozambique thinking how great it is that ActionAid’s committee structure is fit for purpose!

Good governance should make the charity more flexible better prepared for the slings and arrows of the difficult times we’re all experiencing. If people understand their responsibility they can exercise their discretion more readily

Good governance is also an aid to transparency, making it easier for your supporters to know what you are doing with their money.

More to the point, it will mean that your charity is not the Tabloids’ next victim, with all the diversion of energy that it takes to try to deal with and defend yourself from such accusations; and you can carry on doing what you do best; serving your beneficiaries.

[If you have not yet done so I would encourage everyone to carry out a review, even if you are from a small charity. At worst it will give Trustees and staff comfort that they are doing the right thing and won’t be the next headline, and at best it might uncover something really nasty that you weren’t aware and can fix before it’s too late.]

Role of governance in the Federation:

The focus on governance at ActionAid doesn’t just relate to what we’re doing here in the UK. Our belief in the strength of local governance systems has led us to create these around the world.

ActionAid was initially set us as a UK charity in the 1970s, and since then we have grown to operate in 45 countries around the world. In 2003 we decided to stop running programmes from the UK and to create a federal structure, in effect a union comprised of self-governing affiliates, one in each country.

The Federation is overseen by ActionAid International, based in Johannesburg, and we are the only international development charity to be headquartered in a developing country.

Different ActionAid countries are at different stages of their development, with some still directly managed by ActionAid International. However the aim is that every country progresses up the ladder from country programme directly managed by ActionAid International to Associate and finally Affiliate.

Affiliates have a legal structure and governance similar to that of the UK, with a Board of independent non-executive directors overseeing the work of national staff and steering the strategic direction of the charity. [There are 19 Affiliates, of which ten are developing countries including Guatemala, Nigeria and Malawi.]

In this way the UK is just one out of 45, and decisions about where aid money is spent are made by the communities that benefit.

This model does mean there needs to be additional scrutiny of what the other Federation members are doing, since they’re effectively our partners, and this needs to be even-handed and not patronising. However knowing that there is a board in country doing just what we do here in the UK offers a great deal of assurance.

The ActionAid International staff provide an additional level assurance, acting as the machinery for effective oversight of the compliance mechanism for the organisation as a whole.

Efficiency in one stop policy setting and oversight of implementation

The UK Board does play a role in the governance of other Federation members by taking part in the review process which sees countries develop their own governance structures.

To progress up each step in the ladder, towards independence, each country must undergo peer review. A panel of experts covering areas including finance and governance is convened and will spend at least a week in-country looking at how things are being done. At the end of this they will produce a report identifying strengths and weaknesses and setting out what (if anything) should be done to improve. Thus we protect the brand.

It would be good for the sector if charities in the UK could do something similar for each other: a peer review to protect the industry.

4. Conclusion

Boards need to stand up and be counted about governance.

Question management Carry out reviews Don’t be worried about questioning old practices Don’t worry about shifting the old guard. It’s no personal reflection on them. Laws and

expectations change. Recognise brand and reputation as an asset

Educate your donors about the benefits of spending time and money protecting all the assets

I want to be a governance evangelist to you all, as important as the brand ActionAid is to the Federation, so should the term Charity be to the Industry: something valuable; and asset to be protected!

Let’s operate as a charitable Federation here in the UK – sharing best practice and reviewing each other.

Three proposals:

1. Our governance people should be meeting informally every so often to discuss sector developments, share best practice, and help each other – we could host the first meeting at ActionAid.

The ActionAid Governance Coordinator would love to hear from your governance person. In many charities that will be the PA to the CEO, , so whether they’re a technical specialist or not we want to hear from them.

2. Should we be clubbing together to review each other, as ActionAid Federation members do? Surrendering a staff member’s time for a week is not feasible, but what if it was a day, possible a day and a half allowing for time to read relevant documents in advance? That would be feasible for most of us. I also think that the act of carrying out the review will give the reviewer pause for thought about what they are doing, so I don’t think it would just be the charity that is reviewed which benefits.

3. Learn lessons: There’s a tendency to scapegoat when charities go down, with no proper review aimed at learning lessons from it. The Commission may carry out an investigation where there’s evidence of malfeasance but this is closely tied up with its statutory powers to regulate charities. What we, the sector, really need is a review aimed at learning lessons. They say you should learn from your mistakes, but what I’d prefer is that we all learn from other people’s mistakes! When things go wrong that learning should be captured, perhaps as a case study or similar. The NCVO might be in a good position to do this, perhaps with a small subscription from charities to pay for it.

Thank you again for having me; I’ll now take questions and comments from the floor. I don’t just want to answer your questions – I’d really like to hear from you what you think about the three proposals I’ve made – is there appetite for us to move forward with one or more of them?