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CC10 - The Hallmarks of an Effective Charity

(Version July 2008)

You can also view the printed colour version of this publication: CC10 - The Hallmarks of an Effective Charity (PDF format 284kb).

A. Foreword
B. Introduction
C. The Hallmarks at a glance
D. The Hallmarks
E. Further information and advice
- E1 Key Commission publications
- E2 Other sources of useful information

A. Foreword

A message from the Chair and the Chief Executive of the Charity Commission to charity trustees

Dear Reader,

Charities operate for many different purposes but share a common desire to do the best for their beneficiaries. To do this, it's vital that trustees keep asking the questions: “What have we achieved?” and “what can we do to improve?” Having clear goals against which to measure performance, being well run, making the most of resources and being open and accountable, are key to finding the answer.

This revised and updated version of our guidance encourages a positive approach to improvement. It's a straightforward framework of good practice which includes the relevant regulatory requirements. Any legal requirements are clearly identified, but most of the guidance is concerned with what we, as the charity regulator, have identified as basic good practice principles or Hallmarks. Our aim is to provide a framework within which charities have the confidence to carry out their work, innovate and evolve.

The Hallmarks of an Effective Charity is designed to work in a complementary way with - not in place of - other guidance, standards and codes of governance that charities may use. If you are not following another code or standard, Hallmarks is a good place to start.

Charities have a history of innovation, and a reputation for looking imaginatively at different ways of doing things, influencing the environment in which they operate and learning from, and sharing with, others. We hope that Hallmarks will enable charities, and their trustees, continually to improve the effectiveness of their work for the public benefit.

Dame Suzi Leather
Chair

Andrew Hind
Chief Executive

Hallmarks of an Effective Charity

B. Introduction

B1. Why are we producing this guidance?

The Charity Commission is the independent regulator of charities in England and Wales. Part of our role as regulator is to encourage charities to adopt good practice in all aspects of their operations and activities. Adopting good practice can help charities keep pace with changes and make them more effective where it really counts – in providing the best possible service to the people they were set up to benefit. It can also help to ensure that they fulfil their legal responsibilities.

B2. What is this guidance about?

This guidance sets out the standards that will help trustees to improve the effectiveness of their charity, and the principles that our regulatory framework exists to support. We have divided these into six Hallmarks or principles. For each of these, we have listed a number of ways in which the Hallmarks might be demonstrated, but not every example will apply to every charity. Whilst a few of these are legal requirements, most are matters of good practice.

Although these Hallmarks will be relevant for all charities, the way in which they can be demonstrated or achieved will vary depending on the size, income, complexity and activities of each charity, although some charities may find different routes to the same end. Our experience shows that, whatever its size and activities, trustees can use these Hallmarks as a means of reviewing how their charity is performing and to identify the areas in which the charity is strong and those areas which need further development.

Compliance with the law is an integral part of good governance and effective performance. This guidance does not attempt to set out all the legal requirements that apply to charities and charity trustees. Any elements of Hallmarks that are marked with the symbol Legal symbol must be complied with as these are legal requirements. Detailed guidance on particular areas of legislation and charity administration can be found through our website.

B3. What about other codes and standards?

There are a number of other codes and standards of good practice that charities may choose to follow, or may be expected to follow because they deliver particular types of services, or as a condition of membership of an umbrella body. Some of the other codes and standards that charities may follow are mentioned in section E of this guidance. The Code of Governance (Good Governance: a code for the voluntary and community sector) is one of these and is endorsed by the Commission. This guidance and the Code are intended to be complementary.

If your charity follows another code or standard, it may already be demonstrating some or all of the Hallmarks. However, you may wish to consider whether there are aspects of the Hallmarks that could supplement or strengthen your charity's approach to effective governance, management and operation.

B4. ‘Must' and ‘should' what we mean

In our guidance, where we use ‘must' we mean it is a specific legal or regulatory requirement affecting trustees or a charity. Trustees must comply with these requirements. To help you easily identify legal or regulatory requirements we have used the Legal symbol symbol next to the relevant bullet points.

We use ‘should' for items we regard as minimum good practice, but for which there is no specific legal requirement. Trustees should follow the good practice guidance unless there is a good reason not to.

We also offer less formal advice and recommendations that trustees may find helpful in the management of their charity. As the Hallmarks are not intended to be prescriptive, most of the bullet points under each Hallmark fall within this category of advice rather than legal or regulatory requirements, unless otherwise indicated.

B5. Previous guidance

This guidance replaces the previous version of The Hallmarks of an Effective Charity (CC60), revised and presented in our new house style. As well as updating the Introduction, the Hallmarks themselves have been redefined in order to clarify the overarching principles that an effective charity will want to adhere to. For example, we have drawn together good financial practice points to create a new Hallmark ‘Financially sound and prudent'.

If you want more copies of this guidance, please note the new order code, CC10.

B6. Some technical terms used

In this guidance:

Activities means anything done using resources belonging to the charity or under its control, and include all of its work and services.

Beneficiary or beneficiaries: A legal term for a person or group of people eligible to benefit from a charity's work. The beneficiary group of a charity will be defined in the charity's governing document. Beneficiaries may sometimes be called clients or service users.

CRB means the Criminal Records Bureau which exists to help organisations identify people who are unsuitable for certain types of work, especially work involving access to or contact with children and other vulnerable members of society. It can make ‘Disclosures' of any criminal, police or similar records.

Governing document means a legal document setting out the charity's objects or purposes and, usually, how it is to be administered. It may be a trust deed, constitution, articles of association, conveyance, will, Royal Charter, Scheme of the Commission or other formal document.

Impact means the change, effect or benefit that the charity's services and activities have on wider society. It is often long term, broad and sustainable and can be positive or negative, intended or unintended.

Indicators are well-defined, easily measurable information, which show how the charity is performing.

Mission or mission statement: A term used by many charities to describe why they exist and what impact they want to have. A mission statement can:

provide an explanation of the charity's purposes in everyday language;
help to communicate the charity's ethos and values; and
provide a focus for strategic planning by defining the particular outcomes or goals that the charity wants to achieve.

A charity's mission (or mission statement) must be consistent with, and not wider than, its purposes.

Purposes (sometimes called objects) are the legal charitable purposes for which a charity exists or the things that it was set up to achieve as set out in its governing document. The purposes may be worded quite broadly and expressed in legal language. They direct (and consequently restrict) how the charity's assets must be used.

Outcomes are the changes, benefits, learning or other effects that happen as a result of the charity's services or activities. (Outcomes are distinguished from outputs - the activities, services and products that the charity provides. Outputs show the volume of work undertaken by the charity rather than its results.)

Trustee means a charity trustee. Charity trustees are the people who are responsible for the general control of the management of the administration of the charity. In the charity's governing document they may be collectively called trustees, the board, managing trustees, the management committee, governors or directors, or they may be referred to by some other title.

C. The Hallmarks at a glance

Hallmark 1: Clear about its purposes and direction

An effective charity is clear about its purposes, mission and values and uses them to direct all aspects of its work.

Hallmark 2: A strong board

An effective charity is run by a clearly identifiable board or trustee body that has the right balance of skills and experience, acts in the best interests of the charity and its beneficiaries, understands its responsibilities and has systems in place to exercise them properly.

Hallmark 3: Fit for purpose

The structure, policies and procedures of an effective charity enable it to achieve its purposes and mission and deliver its services efficiently.

Hallmark 4: Learning and improving

An effective charity is always seeking to improve its performance and efficiency, and to learn new and better ways of delivering its purposes. A charity's assessment of its performance, and of the impact and outcomes of its work, will feed into its planning processes and will influence its future direction.

Hallmark 5: Financially sound and prudent

An effective charity has the financial and other resources needed to deliver its purposes and mission, and controls and uses them so as to achieve its potential.

Hallmark 6: Accountable and transparent

An effective charity is accountable to the public and others with an interest in the charity (stakeholders) in a way that is transparent and understandable.