THE RECENT DIFFICULTIES concerning the charity Goal and AHAR may lead to a further erosion of trust and confidence in the charity sector. With an office of the Charity Regulator Authority (CRA) finally established (albeit nearly 7 years after the Charities Act was passed) public trust, confidence and transparency are now paramount.
The CRA is mandated in ensuring these core values in the sector are maintained but in doing so it also must protect the interests of existing charities Mud sticks when charities run into problems and the fall-out affects other charities.
Charities need to be above reproach
The public demand nothing less. After all it is public money that funds them. The crisis at Goal which according to its auditors may call into question its very survival, is only a symptom of a more widespread problem of inertia in this sector.
For example the Governance Code which was launch in July 2012 to
assist community ,voluntary and charity organisations develop their overall capacity in terms of how they run their organisation.
Yet as of January 16, only 359 organisations are compliant. Another 1,002 signed up to commence the journey of going through the code.
For a sector which has approximately 18,500 not for profit organisations and 8,500 charities, employing over 100,000 people, this is a poor response and demonstrates a lack of engagement by the sector. The Governance Code is an invaluable free resource which can add significant value to a charity and help it avoid many of the calamities that have beset the sector.
Founder’s syndrome
Many charities have also struggled with “founders syndrome” where the founder of a charity loses perspective and due to poor governance an autocratic form of one prevails. It becomes more about the personality and “my” charity rather than “our” charity and the privilege of serving the people it reaches out to.
The problem is exacerbated by boards that are ineffective and do not possess the requisite skill sets for the task at hand. There is no mandatory form of continuous professional development for charity trustees.
On top of this there can be a tendency to engage in groupthink as trustees see their appointment to the board as a life appointment that will enhance their own profile instead of seeing it as an opportunity to serve, effect change and advance the cause of the charity.
Celine Fitzgerald the acting general manager of Goal acknowledged
…the growth probably did get ahead of the (audit and investigation) infrastructure…
The charity expects its budget will only be half of the €210 million it received in 2015. A charity of this magnitude must invest the time, resources and money in good systems of governance and risk management and ensuring its foundations are rock solid.
Charities must recognise that they enjoy a privileged position in society
This may not always be the case and should not be taken for granted. They have freedom to promote their cause, enjoy significant tax incentives and many receive funding from the State.
Sadly this is not the case in many parts of the world. Data from the International Centre for Not-for-Profit Law found that between 2004 and 2010, fifty countries considered or enacted measures restricting civil society organisations. Reasons cited were concerns about terrorism, foreign interference and aid effectiveness.
These issues taken with the long standing debate over accountability and transparency of civil society organisations provide governments with a potent cocktail of justification to rationalise restrictions. Since 2012 more than 120 laws constraining the freedom of association or assembly have been proposed or enacted in 60 countries.
Other countries clamp down
On January 1 China brought in new laws granting the police sweeping powers over the activities of charities and non-profit groups. No grace period was allowed and charities must now find an official sponsor and file regular detailed activity plans with the police. The American Bar Association which provides training to lawyers in China announced that it intended pulling all its staff out of the country before the 31st of December.
Last week the government in Hungary sparked fears of a clamp down on civil society organisations when it signalled it would expel the Open Society Foundation from the country.
Canada has become conservative in granting charitable status to many organisation that would qualify in the UK or America. Regulation of advocacy has been very restrictive leading to a chilling effect on advocacy activity as charities fear losing their status if they over step the mark. There has been a resistance to change and reform by successive governments there.
In uncertain times, charities have an important role to play
We live in a world of heightened economic and political uncertainty. 12 months ago to most people the prospect of the UK leaving the EU and Donald Trump being elected president of America was unthinkable. Yet it has happened. During the worst years of austerity there was no shortage of voices calling for the Government to cut completely its overseas aid budget to charities.
Charities have the capacity to transform lives. Building a solid framework of good governance structures and risk management are now a mandatory part of a charity make up.
In an uncertain age the one certainty is charities will have a powerful role to play and the demand on their services will only grow. The challenge for charities is to re-assert their relevance, probity and the indispensable role they play in filling that vacuum in society that the state so often cannot fill.
CRA must reduce crises
The CRA has a key role to ensure that regulation is proportionate, sensitive and measured. While the new era of regulation will not eradicate crises in the sector it will certainly play a leading role in reducing and highlighting them. The fact that this sector was not regulated by a single designated authority up until recently has led to a deficit of internal governance and accountability in charities.
Charities had been left to their own devices. Time is running out. The sector has a lot of catching up to do.
Cormac O’Ceallaigh is a solicitor specialising in charity law.
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