Irish charities working towards greater transparency

It has often been said that anything which needs to be done in secret is best not done at all. That piece of advice may have helped some Irish charities avoid a lot of trouble in recent years. Had they been more open about their affairs, the wrongdoing which caused problems for them would have come to light far sooner and much damage would have been prevented.

“Transparency is absolutely crucial for charities,” says Ivan Cooper, director of public policy with charity representative organisation the Wheel. “Charities depend on public trust and confidence to continue working. Unlike private companies which can operate a business in some secrecy, charities need to operate in the open. Stakeholders need to know what is being done with funds.”

He has seen a great improvement in this area since the establishment of the Charities Regulator in 2014: “All charities are now required to register with the regulator and submit reports and accounts. The regulator is working on a financial reporting standard for charities at the moment. We are looking forward to that being progressed in the coming years. That will provide an agreed standard for all of Ireland’s charities and that will be very good.”

More change is coming. “All charities will be required to conform to a new governance code,” says Cooper. “That’s another advance and a very positive development. There has been a transformation in culture as relates to transparency and accountability. That new culture requires them to be as open and transparent as can be. Stakeholders shouldn’t need to ask to know what is being done with funds. Charities should be communicating effectively with all stakeholder groups including the public, statutory partners, donors, regulators and so on.”

One charity which is already meeting those high standards of transparency and governance is Barnardos. “We prepare our accounts to the standards set out in the charities SORP [statement of recommended practice],” says Kevin Gregory, director of finance, IT and governance, finance at Barnardos.

The SORP is a variant of existing financial reporting standards and generally accepted accounting practice agreed between charity experts from Ireland and the UK. The charities SORP requires a far greater level of information and disclosures than expected of private companies in order to provide transparency and accountability. There are more requirements for the directors’ report, more analysis of income and expenditure, and a focus on the funds position.

Best practice

“This is seen as best practice,” says Gregory. “It is not mandatory at the moment but the Charities Regulator is talking about bringing it in. We are well ahead of the curve in using it. We give people a very good picture of what’s going on. Most of the large charities and more and more of the smaller ones are starting to adopt it.”

The charity’s high standards in this respect have been recognised in the Leinster Society of Chartered Accountants Published Accounts Awards where Barnardos recently took the top accolade for large not-for-profit accounts as well as the award for sustained excellence.

“That makes a huge difference when talking to our funders,” Gregory says. “When you do the accounts to such high standards and get awards for them funders know that what they see is what they get.”

But numbers alone don’t necessarily add up to transparency. “We take the extra step of producing a narrative along with the accounts,” says Gregory. “Accounts are numeric information and we should be able to tell the story about what we did during the year in language that anyone can understand. The other thing is what you include in the accounts to be more transparent. We include salary levels as well as information on the gender pay gap. We are constantly looking for what other information we can include. It’s an incremental process and we are improving the information we provide every year. It’s not just about adding pages, it has to be as informative as possible.”

Barnardos also subscribes to the fundraising charter from the Charities Institute and the charities governance code, an initiative from some of the larger organisations in the sector. "We recognised a need to improve governance standards and got advice on it. We adopted a number of principles and a whole load of actions around areas like integrity and leadership and so on."

Governance

That governance code is quite strict, according to Gregory. “This is not some soft thing developed for the charity sector,” he says. “If you look at the State sector and the governance codes applying to it you will see they are very similar. The code is as good as any out there. The Charities Regulator has taken it and is putting its own finish to it and is looking for all charities to adopt it next year. We already have the governance code in place with any additional pieces likely to be added by the regulator already done.”

Cooper stresses the importance of the code: “Charities need to consider the make-up of their boards to ensure members have the skills and competence and experience necessary to judge the governance of the organisations. It’s all part of having high standards of openness, transparency and accountability.”

The fundraising charter relates mainly to street collections. “The aim is to have a code of practice for collecting in the streets,” Gregory explains. “One of the key things is training staff in good practice. We call the accounting standards and the governance and fundraising codes the triple lock. They are seen as the key things to look for in an organisation that adheres to good standards.”

Cooper believes the need for those high standards is now accepted and embraced across the entire sector. “There was a time when charitable organisations thought they were private institutions and not accountable to the Irish people but that has changed completely,” he says. “They now understand that the Irish people effectively own them and they have to be accountable. I am very confident that the cultural shift has occurred and that the need for openness, transparency and accountability is understood by charities. The sector has come on a journey and some of the changes were forced in it over the last six or seven years. The transformation has been immense.”

But the work must continue. “The establishment of the Charities Regulator has had a transformative effect,” says Cooper. “It is understood that there is no place for secrecy in the sector. The challenge now is to achieve higher governance standards incrementally over time.”