A tailored approach to sports governance
13 December 2016 by Craig Beeston
The new Code for Sports Governance requires organisations receiving public money to take a closer look at their governance arrangements
The new Code for Sports Governance was published by UK Sport and Sport England on 31 October. It follows the Government’s commitment for a new Code to protect and maximise the effectiveness of public investments made in sports, which totalled over £1 billion over the past four years.
Coming into effect from April 2017, the Code sets out the requirements in terms of structures, transparency, accountability and financial control which sporting organisations will have to fulfil if they wish to receive public funding.
In its 2013−17 funding round, Sport England introduced for the first time specific governance principles into its eligibility criteria for core-funded national governing bodies (NGBs) and national partners. These included minimum governance criteria for non-core funded NGBs, bodies seeking to become recognised NGBs, county sports partnerships and other grant recipients. As a result, many of the requirements set out in the Code already formed part of the standards, which the funding bodies expected in return for investment.
Tiered structure
The new Code adopts a tiered structure and tailored approach, imposing more stringent conditions on those organisations where the financial investment is greater or is provided over an extended period of time. It is aimed at implementing good governance practices without placing an onerous administrative burden on smaller organisations, negatively affecting the essential volunteer base of many of them, or deterring bodies from making funding applications. It is recognised that the Code ‘will stretch organisations beyond where they are now’ – that, after all, is the point.
However, if the flexible approach is applied consistently and thoughtfully, and if organisations are offered appropriate guidance and support, the Code could ensure that principles of good governance are inculcated at all levels of UK sport where public money is invested. It will also give bodies across the spectrum, from grassroots to the custodians of the national game, an opportunity to take a closer look at how their organisations function.
The Code is constructed around five principles: structure, people, communication, standards and conduct, and policies and processes. These aim to establish clear governance structures with a board which holds collective responsibility for the organisation and is exclusively vested with the power to lead it (for organisations falling under the lower tier, the Code’s terminology recognises that a committee may perform this role).
The principles also aim to encourage responsible recruitment of those with the appropriate skills, experience and independence; a commitment to diversity, transparency and accountability; and responsible financial planning and risk management.
Funding applications will fall into one of three tiers which will determine what is expected of organisations in return for an award.
Tier 1
This is aimed at investments granted on a one-off basis at a value of less than £250,000. It represents the minimum level of mandatory requirements to be met by all organisations seeking funding. The requirements cover:
- An organisation’s constitution and purpose
- Regular meeting of the governing committee and recording of decision making
- Conflicts of interest
- Skills and diversity within the governing committee
- Regular election of committee members, ideally serving maximum terms of nine years
- Preparation and scrutiny of annual accounts.
They are accompanied by non-compulsory guidance as to how organisations may meet them, but allowance is made for the circumstances and resources of each body.
Tier 2
The second tier covers investments between £250,000 and £1 million, significant but one-off investments, or the start of new strategic relationships. It is, by necessity, the least clear of the three tiers in terms of what is expected of organisations. It requires all of the Tier 1 stipulations, along with some drawn from the more prescriptive Tier 3. Which of these are to be required, and the timeline for meeting them, will be tailored according to the investment and the circumstances of the organisation.
Tier 3
Tier 3 concerns funding granted over a number of years or an investment totalling over £1 million. It will place greater governance demands on organisations and will seek a formal commitment to meet them within a set timeframe. The document lays out numerous criteria which organisations might be required to satisfy, with a particular focus on the structure, composition and duties, and conduct of the board.
The board should be the ultimate decision-making body, exercising all the powers of the organisation. It ought to comprise a maximum of 12 members, but be of sufficient size to meet the requirements of the organisation, and contain an appropriate balance of skills, experience, knowledge and independence. Board directors should serve for a maximum of four terms of two years, two terms of four years or three terms of three years.
The same individual should not carry out the role of the chair and chief executive, with UK Sport/Sport England also reserving the right to require that an organisation appoint an independent chair. It also requires at least 25% of a board to be independent non-executive directors and that there ought to be a formal, rigorous and transparent procedure for the appointment of all new directors.
Regarding gender diversity, the code stipulates that organisations adopt a target of ‘a minimum 30% of each gender on its board’ and demonstrate ‘a strong and public commitment to progressing towards achieving gender parity and greater diversity generally on its board’.
The organisation should also develop a strategy for engaging with stakeholders, including elite athletes, as well as conducting an external evaluation of the board every four years. In addition, it should have in place appropriate and proportionate financial policies and procedures, and robust risk management and internal control systems, which are reviewed annually.
The unknown
As a set of principles, there is much to be welcomed. However, the test for the Code will be in its application and there remain a number of key areas where the detail of its operation is yet to be finalised. In some respects this is by necessity.
The bespoke nature of the Code, particularly for those organisations falling under Tier 2, and the consideration to be given to the size of and resources available to organisations in all tiers, means that the exact requirements for each funded body are at this time unknown. Furthermore, once decided, organisations will not be subject to immediate, outright compliance, but to a timetable for implementation.
At present the Code document has comparatively little to say on the issue of compliance. The document gives notice that separate guidance will be forthcoming on how UK Sport and Sport England will monitor and assess compliance, and the implications of failures to meet requirements.
It expects that Tier 3 funded organisations will publish an annual governance statement, part of which will comprise a summary of their compliance with the Code. This may be drawn from a self-assessment and/or a report of any external audit, which are currently undertaken under present funding arrangements. Areas of non-compliance and proposals for rectifying these are among the suggestions which the Code document makes for inclusion in organisations’ statements.
Failure to adhere
There have been a number of mooted and confirmed consequences for organisations which fail to adhere to the Code. The obvious possible sanction is the withdrawal, suspension or non-awarding of funding. Another option is the withholding of Government support for bids to stage major international events, something which may be of concern to the Football Association, given its rumoured interest in hosting the 2028 European Championships or 2030 World Cup.
As its institutional arrangements stand, the FA would fall foul of the Code’s stipulations that the board exercise primacy in decision making (requiring reform of the Association’s Council, which has long been resisted) and the new diversity targets, which encourages a minimum of 30% of each gender on boards. The FA currently has one female member on its board of 12. The Sports Minister, Tracey Crouch, has said that the FA also faces losing its £30 million of Government funding over four years if it does not undertake reform to comply with the new governance arrangements.
In response to the stream of governance issues which have blighted British sport in the past year, UK Sport has confirmed that it is considering instituting a full-time investigations unit.
Diversity issues
The Code has received criticism for its focus on gender representation on boards, but not on other areas of diversity. Only gender representation is given a target figure. An audit undertaken by Sporting Equals, released in November 2016 and including responses from organisations funded by UK Sport and Sport England, found that 26 of 601 board members (4.3%) and just one chairperson came from black, Asian, or minority ethnic backgrounds.
Sport England’s Director of Sport, Phil Smith, commented in an interview that the body would have to be prepared to remove or cease public investment if sports did not demonstrate the standards, actions or intent sought on improving diversity throughout their organisations.
Whistleblowing
In what may be a missed opportunity, the Code does not make a requirement for the establishment of a whistleblowing process, making only one mention of such a mechanism in a list of legal and regulatory obligations, which it suggests organisations may consider pertinent to them.
The issue has recently garnered attention with British Cycling, which received over £30 million from UK Sport between London 2012 and the Rio 2016 Olympic Games, undergoing an independent review into allegations of bullying and discrimination. As issues of doping, bribery, match-fixing and adverse cultures affect many sports, an established and trusted mechanism for raising issues may instil confidence in participants and administrators to raise concerns.
The Code makes a number of references to organisational culture, echoing other sectors in stating that this comes from the top, with the tone set by the board and senior management. However, other codes of governance have given robust whistleblowing arrangements an important role in establishing desirable cultures.
A firmly-stated provision in the Code for processes and practices to be monitored and challenged throughout sporting bodies might more effectively embed appropriate cultures within them, highlight and remedy incidences of poor practice and consequently deliver the level of public confidence which the authors hope will be felt towards sports receiving public investment.
Good governance derives not simply from systems and policies, but from behaviours and actions. Effective whistleblowing can improve both.
Support in compliance
Yet to be outlined is the support that UK Sport and Sport England will provide to assist organisations to comply with the Code. If the funding bodies are to be successful in their desire to ensure organisations, particularly small ones, are not discouraged from making applications, then guidance and support will be necessary, alongside the undertaking to tailor the requirements for compliance and the timeframes for meeting these.
The Code makes a commitment to giving sports bodies ‘the assistance and support they need to make our sector’s governance standards among the best in the world’. The Charter for Sports Governance, published prior to the Code, sets out a number of areas of support which UK Sport and Sport England would seek to provide, including a single assistance programme to help organisations meet the requirements of the Code; an accessible databank of qualified candidates for senior executive positions; and the possible development and publication of benchmarked data.
In its strategy for better governance, which introduced governance criteria into funding eligibility from 2013, Sport England undertook to develop and share thematic review data on governance development, fund tailored training and support for boards, and consider how to share best practice and support though related events. It also worked in partnership with the UK Sport & Recreation Alliance on a Finance and Governance Forum.
Currently available via both UK Sport and Sport England’s websites is the ‘Things to Think About’ self-help tool, intended as a resource for core-funded bodies and also to be used flexibly by those involved in governing and managing sports. It offers points for consideration on governance structures, strategic planning, financial planning, procedures, systems and reporting, HR, organisational policy and risk management.
Which of these mechanisms will continue to operate and future augmentations to them are yet to be detailed.
The Code is a welcome step in compelling bodies hoping to receive public money to take a closer look at how their organisations are structured and how they function. The financial driver may provide important impetus.
The Code’s true merit will become apparent not only over the course of the negotiations between the funding bodies and the organisations applying to them, where the requirements for each award are laid out more clearly, but also over the course of the timelines set out for satisfying the implementation of governance structures and the action taken to ensure that they are met.
As other sectors have experienced, a code only drives good governance so far. The cultural changes which the Code aims to deliver may require additional levers and practical guidance.