Charity governance reviews: A requirement and an opportunity

Governance of a charity isn’t just about keeping the lights on, it’s about building organisations that are resilient, trusted and fit for the future.

New rules now require registered charities to formally review their governance procedures, but beyond compliance, this review process offers a vital chance to strengthen leadership, drive greater impact and future-proof organisational success.

From 5 October 2023 (under section 42G of the Charities Act 2005), all registered charities must complete a governance review at least every three years. Governance procedures may be recorded in a charity’s rules or other governing documents. For those who haven’t done so, or haven’t thought about how they’re going to meet this obligation, the time has come.

At first glance, this new requirement may seem like another compliance task to add to the board’s workload. However, approached strategically, it offers far more than that.

Regular governance reviews provide not-for-profits with a genuine opportunity to strengthen governance practice, better support their charitable purpose and future-proof their organisations.

The review must specifically assess whether governance procedures are fit for purpose, whether they support achievement of the charity’s mission, and whether they enable compliance with the Charities Act. 

Boards are expected to consider whether their governance practices help the organisation adapt to change, manage risks and operate effectively in today’s environment.

Importantly, governance reviews are not about rubber-stamping the status quo. They are a meaningful opportunity to take stock of the organisation’s structures, ensuring they remain current, practical, and supportive of both operational delivery and long-term sustainability.

Good governance requires ongoing attention. Organisations evolve, risks change and operating environments shift. What was fit for purpose when an organisation was founded may no longer be sufficient.

The review requirement invites boards to pause and reflect: are conflicts of interest being managed appropriately? Are meeting processes fit for the digital age? Are dispute resolution mechanisms in place should they be needed? Are we paying attention to the right things?

It is also a timely opportunity to revisit the organisation’s charitable purposes, ensuring governance structures actively support the intended impact. In doing so, boards are not only meeting compliance expectations but strengthening the effectiveness and credibility of their organisations.

While every charity’s needs will differ, the common thread is ensuring governance arrangements support good decision-making, strategic clarity and legal accountability.

Effective governance reviews focus on practical improvements: embedding stronger risk management practices, adapting rules where necessary, and confirming alignment between governance structures and the organisation’s objectives.

Rather than viewing governance reviews as an administrative hurdle, boards can embrace them as a valuable opportunity to refresh, renew and strengthen. Regular review cycles encourage directors to remain engaged with good-practice governance, support board effectiveness and ensure structures are robust enough to meet future challenges.

Strong governance frameworks also enhance organisational reputation, support transparency with funders and stakeholders, and help attract and retain quality board members and staff. Reviews can help organisations future-proof for emerging issues, such as cyber risks, regulatory changes, climate change and evolving stakeholder expectations around environmental and social responsibility.

Ultimately, this is about more than compliance; it’s about positioning not-for-profits for long-term success and greater impact.

Formal governance evaluations remain an underused tool across the sector. According to the Institute of Directors’ 2024 Director Sentiment Survey, only 40.4% of NFP directors said their boards currently undertake formal board evaluations at least every two years. 

Undertaking a board evaluation can provide an excellent starting point for governance review discussions, helping boards to reflect on how well their current frameworks support good governance practice and identifying areas for improvement.

Recent governance reviews have reinforced the importance of formalising good practices, strengthened board independence and embedded continuous improvement. 

The Governance Thematic Review conducted by the Financial Markets Authority and the Reserve Bank of New Zealand observed that, “boards should ensure robust performance evaluations are undertaken, which includes having clearly defined and comprehensive criteria, and ensuring improvements are identified and implemented”. 

This reinforces that governance reviews should not be viewed as compliance exercises, but as opportunities to reflect, strengthen board performance and drive better outcomes.

The review also emphasised the importance of maintaining a strong governance framework that evolves alongside the organisation. As noted, “the governance framework covers all fundamental policies, processes and practices that support the board’s role in governing and providing oversight. It represents the underlying structure that allows boards to ensure accountability and transparency within the entity.”

Regular governance reviews also support public trust as an essential asset for not-for-profits. The 2024 Edelman Trust Barometer found that while NGOs continue to be viewed positively for ethics, they are no longer automatically perceived as competent.

Strengthening governance structures and demonstrating a commitment to regular reflection and improvement is critical to maintaining the trust and confidence of funders, supporters and the communities that charities serve.

Governance reviews should become part of a board’s natural rhythm; a proactive step towards safeguarding the organisation’s mission, reputation and long-term sustainability.

They provide an opportunity to lift governance practice from the inside out, ensuring not-for-profits continue to thrive and deliver on their purpose effectively.

Good governance doesn’t happen by chance. It requires regular reflection, review and renewal.

After all, governance reviews aren’t simply good compliance – they’re good leadership.