| Governance hub

As a funder, you will be interested in efficiency, effectiveness and value for money, none of which can be achieved without good governance. But do you know what good governance really means or costs? Read on to find out more. To discuss the Hub’s work with funders or comment on any of the reports and resources available, please contact Sally Hiscock on

Background

Funders' attitudes and approaches to governance development; what Hub research tells us

The cost of good governance for VCOs

Strategic issues for funders to consider

Event with funders; report from 14th September 2006

Background

We are encouraging funders to better understand the implications of poor governance - it can mean a fragile, chaotic organisation with no sense of direction. When that happens trustees are unprepared for eventualities and unclear as to how best they can contribute. Good governance on the other hand can mean a confident, forward thinking organisation, where the trustees are abreast of their duties and activities, and services are well planned and managed.

But strong systems and processes to underpin the direction, effectiveness and accountability of an organisation are not cost free. Board development to produce tangible improvements in the performance of voluntary and community organisations (VCOs) requires proper investment.

Guidance from central government has made it clear that it is legitimate for organisations to charge on a full cost recovery basis where funding is from the government. That means organisations should receive funds to cover a proportion of their central or overhead costs, as well as for the direct costs of delivering the project.

The Hub is encouraging funders, and VCOs, to apply the principles of full cost recovery and to develop strong funding relationships based on mutual understanding and honesty.

The Governance Hub has joined up with the Workforce Hub to explore both funders’ and VCOs’ attitudes and experiences of costing and funding governance and workforce development. Read on to find more more.......

Funders' attitudes and approaches to governance development: what Hub research tells us

Earlier this year, the Hubs commissioned some research to explore funders’ attitudes and approaches to supporting governance and workforce development costs. The funders interviewed represented a very wide range of philosophies, values, funding practice and focus. The full report A Matter of Common Sense is available here , or the executive summary here.

Please note this report is a starting point to further discussions, rather than a summative review of current thinking and practice.

The report emphasises that the voluntary and community sector itself needs to ‘seize the ground’ and define why investing in governance and workforce development is so vital, and how itshould best be funded. It is clear we need to ‘spread the word’ about the funding these costs and importantly to help all funders gain a sense of how, and why, such costs are important.

The report notes that the role and contribution of funders as actual or potential support mechanisms to the VCS needs to be acknowledged alongside the support offered by existing VCS infrastructural bodies. A variety of practical ideas for action emerge from the research, ranging from initiating a more comprehensive debate on Full Cost Recovery, to exploring practical initiatives around e.g. quality standards. The Hub is following up on these recommendations.

Why we commissioned the research: many organisations report difficulties in convincing funders to cover the costs of improving governance. Funders can be unclear about the benefits of governance improvement and are apprehensive about committing resources to organisational development rather than project or service delivery. Meanwhile VCOs are increasingly expected to demonstrate transparency and accountability in their governance. By learning from each other, we can ensure governance is fully invested in to meet the needs of both funder and funded.

The cost of good governance for VCOs

The Governance Hub is promoting and encouraging all organsiations to adopt Good Governance: the Code for the Voluntary and Community Sector which for many will require a significant investment, for example:

Board leadership: effective strategic planning may require an external facilitator and hire of a venue for an awayday, to ensure the organisation is effectively planning for the future.

Board in control: compliance with regulatory frameworks will incur costs such as audit fees and purchase of investment or financial advice services. To embrace diversity properly, there should be an adequate trustee expenses budget to ensure equality of opportunity within the board.

High performance board: developing the board may involve investment in a range of activities, such as purchasing information, support and advice, travel to events, subscription to journals, contribution to the running of a trustee network, funding for training/mentoring/coaching etc. The preparation of induction materials and programmes should be costed as a minimum.

Board review and renewal: trustee recruitment requires a budget which will cover advertisement and interview costs, much like staff recruitment.

Board delegation: effective delegation of duties and maintenance of clear records is often the responsibility of the (Company) Secretary, whose time and activites should be accounted for.

Board trustee and integrity: this principle is arguably cost free, given it is all about trustees not personally benefitting from the organistion's activities! Ensuring conflicts of interest are adequately handled costs time alone in devising and implementing suitable policies and procedures.

Board openness: organisations are expected to communicate with and involve their stakeholders. An open day provides a great opportunity to review, celebrate, consult or plan with users, volunteers, staff, trustees and funders, but again requires a budget!

The level of investment will vary across organisations depending on how much of the Code they feel is relevant and appropriate to them. The Code should be adapted and amended to suit organisations needs at whatever stage they have reached in their development. So, for many organisations, their governance costs will be minimal, while for others they may be significant.

In February, the Hub will publish a new guide on calcuating and funding these costs. It will set out the specific costs involved in meeting nationally recognised standards in governance and workforce development. It will help identify ways in which to present these costs clearly to funders, to demonstrate the need for and value of such investments, using case studies and templates.

In the meantime, you can read more about prelimary research looking at VCOs’ experience of seeking funding to cover such costs, how they approached funders and the different ways in which they planed for and presented this investment (including costing and budgeting). Interviews were held with 29 VCOs and some interesting learning uncovered. Download the report here.

Strategic issues for funders to consider

Through its two research projects, the Hubs have gained a strategic sense of the issues involved around funding and costing these areas, which has produced for funders in a special briefing – which can be downloaded here.

A key strategic question identified is the degree to which funders should lead the development of workforce development and governance within organisations. To a certain extent funders already encourage and ‘lead’ the development of some key areas by requiring proof of quality and having a series of checks around an organisation being fit for purpose. Given this, there were some areas where it was felt that funders could play a key role in requiring VCOs to focus on aspects of their workforce development and governance in order to improve the overall performance of the organisation (which, in turn, improves service quality and its longer term sustainability).

For example, some VCOs identified the area of trustee training as being, for them, potentially problematic and sensitive. CEOs reported that they could find it difficult to ask busy trustees to undertake training. The merits of this were not disputed, however, and it was felt that funders could play a role here by ‘requiring’ trustee training or development in some form or other. If funders set out their expectations on workforce development and governance activities, it is far less easy for these to slip off a busy VCS agenda.

This area should clearly be discussed further and be handled flexibly and sensitively, but there was certainly felt to be mileage in the role of funders leading on some of these key areas and promoting good practice through their funding requirements.

Events with funders

On 14 September, the Hubs of Expertise, in Performance, Workforce, ICT, Finance and Governance, held a seminar for funders. This provided an opportunity to share findings of various research projects and initiate a dialogue between the Hubs and 50 funders on support for organisational development. A report on the event is available here