​Jamie Davidson on the qualities that all productive charity boards should have

So, your charity board is made up of people passionate about making a difference, but are they being effective? Whether it's a housing charity or a grant giving organisation that raises funds to improve the lives of disadvantaged young people, or a charitable company that supports and promotes arts and culture, here are five things the best charity boards will have in common.

1. Trustees understand their role and responsibilities

First and foremost a charity board must discharge its legal responsibilities. A board that provides a lot of detailed operational input but has not ensured compliance with the governing document is falling short in its role. The board must make sure that the charity's activities comply with its charitable objectives and that it is accountable as required by law to the regulator (Charity Commission or OSCR), the Registrar of Companies (if applicable) and HMRC.

Trustees must:

• act in the interests of the charity and put the interests of the charity first
• ensure the charity acts in accordance with its governing document and in a manner consistent with its purposes
• act with due care and diligence
• ensure compliance with legislation.

With these responsibilities always in mind a board will be demonstrating good governance if it works to exercise control and deliver the organisations purpose.

2. Good recruitment and induction processes

Recruitment is crucial. It is not enough just to have a board made up of individuals with an interest and willingness to help. An effective board will have people with the correct mix of skills who can work together as team.

That said, trustees have a collective responsibility and shouldn't just defer to the member with a particular skill but should benefit from his or her guidance whilst forming their own judgement. Two members of the board who need particular skills are the chair and the honorary treasurer. The chair should have a background in strategy and management and needs to provide leadership and direction. The treasurer should ideally have a background in finance and risk and needs to monitor financial reporting and risk management. The relationships that these two key board members have with management are critically important in ensuring good governance. The treasurer must have a good working relationship with the head of finance such that he or she can be sure that high quality, reliable financial reporting is brought to board meetings.

However, the most important factor is the relationship between the chair and the chief executive. This must be close so that the chair is available to advise but not so close that it is seen as interference. The balance in this relationship is tricky and may vary depending on the individuals involved but it's important to get it right as most high profile cases of charities failing involve a very dominant chief executive who hasn't been subject to strong enough board oversight.

3. Strategic planning capability

The board is responsible for establishing strategies to achieve the purpose or mission of the charity. Trustees are also responsible for safeguarding its assets as well as its values and reputation. Although the long-term strategy will normally be developed with a lot of input from the chief executive, the responsibility for it lies with the board. An effective board will have developed a strategy to ensure delivery of the charity's objectives and compliance with its governing document.

4. Effective sub committees

After setting the long-term strategy it is then necessary to establish and monitor activity that ensure the charity will work to achieve that strategy. Part of this will involve employment procedures and recruiting the right people for senior positions. Maintaining fiscal oversight is a key board role as it is trustees' responsibility to manage the resources so that charitable objectives can be met. The board needs to know that there are sufficient resources available and so will need involvement in setting budgets and approving financial statements as well as monitoring spending. Risk management is also critical and it is the board's role to set and agree policies. Having a framework of delegation and internal control and ensuring that appropriate reporting is brought to board meetings is very important.

5. Regular performance reviews are held

One of the most important things that any board will do is to select and then support as well as review the performance of the chief executive. Proper systems for reporting and monitoring are essential and trustees should set the overall values framework for everyone involved with the charity.

There are a number of useful resources available for people looking to improve their boards or their own performace as trusttes. Two of the best ones are:

Code of Good Governance. Six key principles of good governance, developed for, and by the voluntary sector.

The Essential Trustee which provides an overview of the duties and responsibilities of a trustee.

Jamie Davidson is partner and head of the charities sector group at Henderson Loggie and member of the ICAS Charities Committee.