This morning MD of Benefacts, Patricia Quinn hosted a masterclass on governance at The Wheel’s Annual Conference 2017. Entitled ‘Transparency in Action -Disclosure Practices in Irish Charities Today’, Patricia talked about the latest regulations and best practice in governance for the nonprofit and charity sector in Ireland. View full presentation here
‘It’s importance will grow year-on-year-it’s a really important input into an informed conversation about where we want to go’
Mary Sutton, Country Director for the Republic of Ireland at The Atlantic Philanthropies, attended the Sector Analysis launch and commented on the timeliness of this information, and how the detailed trend data will help inform discussion about nonprofits, charities and philanthropies in Ireland.
“Many nonprofits provide services to the public, but a small number operate on special terms with government, inasmuch as their voluntary boards don’t exercise control over the remuneration of their employees because these are treated as public sector workers.” #BeneFACTS17
In the latest edition of the Benefacts Perspectives blog series, Diarmaid Ó Corrbuí, CEO of the Carmichael Centre, considers whether the existing governance and legal models for large charities are fit for purpose.
Recent public controversies over three of Ireland’s largest charities – National Maternity Hospital, St Vincent’s Healthcare Group and St John of God Community Service – has generated a lot of debate and questions over the ownership, control, accountability, independence, ethos and values of these organisations. In 2015, these three organisations combined received more than €400 million from the State for the provision of these services. The scale of this funding raises some very legitimate questions regarding the level and nature of government control, accountability and oversight of these monies and the services commissioned by the State. Indeed, questions about the level of control and accountability go beyond the actual provision of the commissioned services and extends to how the organisations are governed and managed.
The recent Benefacts Sector Analysis report on the Irish nonprofit sector has identified the concept of “quasi-public bodies”. These “quasi-public bodies” are all in the main nonprofit organisations operating as companies limited by guarantee with no share capital and/or as registered charities. These are nonprofit bodies that provide services to the public, but operate on special terms with government in as much as their voluntary boards do not exercise control over the remuneration of their employees.
Benefacts has identified 347 of these quasi-public bodies. They account for just 2% of the 19,505 organisations included in the Benefacts Database of Irish nonprofits, but they receive more than 70% of the reported income from government by all nonprofits which in 2015 amounted to €5.3 billion.
‘Quasi-public bodies’ are governed by voluntary boards of directors and trustees. The duties and responsibilities of these voluntary directors and trustees are comprehensive and onerous. The level of oversight and control that these board directors and trustees are required to exercise is raising the question of the suitability and effectiveness of our current governance and legal structures for the delivery of large scale and complex health and social services. For example, how much time do we think is necessary and appropriate for the unpaid voluntary non-executive directors/trustees of a hospital or disability services provider to devote to meeting their legal and governance responsibilities of leadership, control and accountability? Is 10-15 hours a month or a week sufficient? What are the skill sets and supports that need to be in place? Is there a sufficient pool of people available with the required skills and experience who also have both the ability and the willingness to commit the necessary time to take on the governance responsibility for these important but very complex organisations?
Given the complexity, the depth of responsibilities, the time commitment and the range of risks including the risk to one’s personal reputation, are our expectations and ask of these volunteers excessive and unrealistic?
In the UK, there is an emergence of a debate around the concept of having both non-executive and executive directors on the boards of larger charities and nonprofit organisations. It is quite a controversial concept. One that has its advocates and opponents. A mix of executive and non-executive on boards is the accepted governance practice in “for-profit” private sector organisations, but it is still very much a taboo topic in Ireland for nonprofit organisations.
In light of recent controversies and concerns over the governance of Irish charities and nonprofits and the increasing complexity and depth of responsibility being required of our own volunteer directors and trustees, I am becoming increasingly of the view that our current governance and legal models are no longer fit for purpose. I believe it is time to have a look at their suitability and practicality.
Diarmaid Ó Corrbuí is the CEO of the Carmichael Centre. Prior to joining Carmichael Centre, Diarmaid worked as a management consultant for over 25 years. Diarmaid has extensive experience working with boards and providing governance support and advice. He is a board member of the National Advocacy Service for People with Disabilities, a former Chairman of Acquired Brain Injury Ireland and Ruhama. He is a member of the Governance Code Working Group and a graduate of Trinity College Dublin and the Institute of Public Administration.
“In the main, Irish nonprofit workers are not highly paid; only a tiny proportion of the people professionally employed in nonprofit organisations are paid more than €70,000 per annum.” #BeneFACTS17
Ivan Cooper, Director of Advocacy with The Wheel, considers salary levels in the nonprofit sector
While salary levels in charitable nonprofits are a legitimate area of public interest – as all financial matters in charities should be – they have received disproportionate attention in recent years. This has deflected from an appreciation of the key role played by nonprofits today, and the challenges they face.
The new financial reporting standard FRS 102 requires all companies to declare the number of employees who earn over 70k per annum. Benefacts’ analysis has shown that the proportion of employees in the nonprofit sector in this category is low relative to the size of the sector (1,800 out of 149,000 or around 1%) – and ten times lower than in the wider economy.
This finding is supported by the 2015 National Guide to Pay and Benefits in Community, Voluntary and Charitable Organisations which concluded that “pay rates in the community and voluntary sector are significantly below those of the private sector, particularly in relation to higher management grades”. These are the facts in relation to the nonprofit sector – it’s a low paid sector. Why? I believe it is related to the role played by nonprofits in service provision and the way that work is funded.
Ireland’s nonprofits play a crucial role in delivering services in healthcare, social care, community services, childcare, home supports for older people and people with disabilities to name but a few. About half of the funding for this work is raised and earned by nonprofits themselves (over €5 billion a year) – providing a massive subsidy to the cost of public services. The rest comes in the form of statutory service contracts and grants.
Is this the right way to be funding public services in 21st century Ireland? Arguably this approach has resulted in essential public services being delivered by chronically underfunded nonprofits doing their best to manage insufficient resources, compelled to employ an increasingly precarious, lower-paid workforce.
I believe it is time to open a sustained dialogue on the appropriate role of charitable nonprofits in public service provision. Charitable nonprofits will more than likely continue to perform a key role – but they must be adequately and securely funded and their work better integrated to ensure people receive the high quality and seamless services they are entitled to. And if those of us who work (paid or unpaid) in the nonprofit sector don’t lead this discussion, are we conspiring in sustaining a system that doesn’t deliver the best possible outcomes for everyone: service users, nonprofits and workers alike?
Ivan Cooper is Director of Advocacy with The Wheel and joined in 2005. He is charged with progressing The Wheel’s policy positions on cross-cutting issues affecting the community and voluntary sector. Formerly Administration and Funding Manager with the Crisis Pregnancy Agency, Ivan has worked in a number of positions in the public, private and community and voluntary sectors in Ireland and Scotland.
Welcome to Benefacts ‘Perspectives’ blog series. We’ve asked a group of thought leaders from the nonprofit sector and beyond to pick a finding from our 2017 Nonprofit Sector Analysis report, and develop it with reference to their own direct experience. We’ll be sharing their insights and reflections with you over the next few months.
“Notwithstanding the public demand for transparency, more than a quarter of non-profit companies chose in 2015 to publish abridged financial statements.” #BeneFACTS17
Richard Dixon, Chair of Charities Institute Ireland, wonders what’s going on.
There’s a pincer movement in charity reporting.
At one end, the number of charities publishing to the gold standard – Statement of Recommended Practice or SORP for charities – has increased to just under 400 (out of 8,000 or so charities, of which half are registered as companies). SORP is mandatory for charities in England, Wales and Scotland but remains optional in Ireland. A disproportionate number of the charities that publish to SORP standards in Ireland are those that generate funds outside of the jurisdiction: 40% of international aid organisations reporting in Ireland use charities SORP. In most other sectors, only about 10% choose this higher standard.
At the other end of the disclosure scale, there’s an increasing number of organisations who’ve chosen to publish abridged accounts, with the latest analysis showing that nearly a quarter of charities who have company registration choosing this route (a three-fold increase over the last couple of years).
First things first: any small company, including charities, is allowed to file abridged accounts. This means even though the company has adopted a full set of financial statements, they are allowed under company law to file a summary (little more than the balance sheet, the names of the directors, and the audit opinion) when they send it to the Companies Registration Office for publication. What’s missing is information about the income and expenditure – this means the reader gets only limited information about their financial profile.
But while they might be allowed to do this, you’d wonder why they would choose to.
Notwithstanding unprecedented public and media interest in accountability and transparency, in 2015 the boards of almost 1,000 charities deliberately chose to ignore one of the more obvious tactics at their disposal which would address issues around public confidence.
The preparation of an annual report, including a narrative on performance, sources of income and, for instance, details on governance arrangements, is an incredible opportunity to influence public opinion and inspire trust.
And I would have a personal (but yet to be investigated) proposition that there is a strong correlation between charities who assume the highest standards (CII’s Triple Lock approach to reporting, fundraising standards and governance standards for instance) and public confidence, income and, ultimately, impact.
Where’s the Charities Regulator in all of this? Thankfully, crystal clear – new reporting standards will ensure that all charities will be obliged to report to minimum standards – standards in excess of those required by abridged accounts. It can’t come quick enough.