Ian Guider argues that the recent spate of governance issues at Irish charities means closer financial scrutiny is essential to ensure transparency and accountability
This article was first published in the June 2017 Ireland edition of Accounting and Business magazine.
Over many years I’ve had the privilege of watching the work of charities and NGOs up close at home and abroad. In the most difficult of circumstances I’ve seen people work tirelessly when, quite frankly, I and most others would quit.
Sadly, though, my more recent experiences of the non-profit sector has been reporting on yet another controversy about the use of public funds for purposes other than what they were intended for. In this instance the sums were small, barely digit thousands, but the principle still applies: those in receipt of public funding must use the money for the purpose intended.
A good deal of work has gone on to improve the governance of charities and non-profits following scandals about the misuse and abuse of funding and donations. A regulator is in place and transparency has improved. Yet we still see controversy after controversy.
As a country we have outsourced (and that is the right word to use) to non-profits and charitable organisations some services the state either doesn’t want to provide or has historically not provided. In total, charities and non-profits receive €4.4bn in funding from the Irish state. How much oversight of that money do we really have?
And what about donors from the private sector? The state may have the capacity to carry out official oversight, but how do private donors know their funds will be used for the work of the charity? If I sign up to a charity on the street, how much of my monthly direct debit goes on its expenses?
One of the recurring themes of the controversies that Ireland has seen has been the dominance of personalities associated with a charity. There are concerns the founder or CEO becomes so associated with their organisation as to make them indistinguishable from the cause. And in one small leap the division between the use of funds for official use and private risks disappearing.
Greater accountability in the non-profit sector is not a hindrance to their work but a help. Privately, I have heard from some large corporations that they have become wary of making donations because of concerns about their use and the consequences for their reputations if scandal should emerge.
What is needed is more openness and transparency by non-profits up front. How will funds be spent? What proportion of donations will go on providing services or a campaign and what for general expenses? Board members also need to be prepared to challenge CEOs. Adding a non-profit directorship to a CV comes with a responsibility to scrutinise spending and if necessary blow the whistle.
There is also one more fundamental issue to tackle. As I’ve mentioned, some non-profits provide services the state doesn’t. They can be large and professional, but many are small, single-issue groups set up with a cause in mind. However dedicated their staff and volunteers are, they are still accountable to their donors. We need the regulator to ensure they follow the rules and are well run. And that might ultimately involve shutting some of them down.
Ian Guider is markets editor of The Sunday Business Post
"Charities and non-profits receive €4.4bn in funding from the Irish state. How much oversight of that money do we really have?"