Category: Governance

SORP adoption in Ireland

SORP or SORP-ish?

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Most people in the nonprofit sector are by now aware of Charities SORP.  This is a standard for financial reporting specifically devised to make the financial transactions of charities more transparent especially in terms of how and where charities have raised their funds and how the funds have been used.

Adoption of charities SORP is promoted as best practice by sector leaders and it forms one piece of the “Triple Lock” standard.  This is seen by the Charities Institute of Ireland as fundamental to restoring trust in charities (the other two elements of the triple lock are the Governance Code and the Statement of Guiding Principles for Fundraising).

Benefacts is the only source of information about which charities use the SORP standard in Ireland, where its adoption is still voluntary.  The Charities Regulator will be coming out soon with a mandatory financial reporting standard for Irish charities, generally expected to follow the FRS 102 Charities SORP quite closely.

By reviewing what all charities actually report in their annual published financial statements, Benefacts is able to provide a detailed picture about the emergence of higher reporting standards, which has never been available before now.

Currently, 488 organisations in the Benefacts database of Irish nonprofits say that they follow the charities SORP reporting standard. But on closer inspection, 87 of these have chosen to adopt some of the features of SORP and only 401 can in fact be seen to be fully in compliance in terms of the accounting policies as specificied by the SORP-making body authorised by the Financial Reporting Council (FRC).  Benefacts has used this compliance standard as verified by the entity’s auditors as the benchmark for reporting Charities SORP compliance in the future.

Interestingly, a handful (17) of nonprofits that have adopted Charities SORP are not yet publicly registered as charities in Ireland.

In 2015, the total number of SORP reporters whose accounts are publicly accessible represented 9% of all registered charities. Here’s the list.  We’ll report on trends in SORP adoption again in our 2018 Sector Analysis Report.

Benefacts.ie is the only source of up to date analysis of all nonprofits (charities or otherwise) adopting the three standards (SORP, Governance Code and Statement of Guiding Principles for Fundraising). Use the facets on the left-hand side of the Benefacts search results screen to select which reporting standard you’re interested in – see image for example.

Mary Sutton on why detailed data is essential for informed discussions about nonprofits

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‘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.

Diarmaid Ó Corrbuí considers governance structures of ‘quasi-public bodies’

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“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.

 

Read the Benefacts Nonprofit Sector Analysis 2017 here

Benefacts Perspectives: Ivan Cooper’s insight on salary levels in the nonprofit sector

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“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.

Read the Benefacts Nonprofit Sector Analysis here