The Governance Code, alongside the best forms of financial reporting, have to be brought together in a mandatory charter, writes Fergus Finlay.

IT’S been a while since I had such a reaction to anything as the piece I wrote here last week. I said that I was fed up, as an Irish citizen, with the shenanigans of all sorts of organisations that we, the citizens, help to fund.

And it was time, I said, that the government of the day called a halt, by deciding that in future they won’t give a penny to any organisation that refuses to adhere to a straightforward code of decent practice. There should be no exceptions to this rule, and it should be based on a clearly understood and explicit charter. Not a charter of best practice — but of basic practice.

My colleague Gerard Howlin took up the cudgels the following day, with a powerful piece about how poor governance and a lack of accountability go hand in hand.

Look, I think it’s the case for most of us that we are happy to fund a variety of organisations because in broad terms we support what they do. There are thousands of organisations, all over Ireland, who do things that we agree need to be done. But either we don’t want to do them ourselves, or we know in our heart of hearts that we haven’t the skills.

I don’t know what it is, though. Maybe they get too big, or too powerful, but again and again we’re given examples of how they seem to have no regard whatsoever to the mission they’re supposed to be pursuing. All last week the example in the news was the Olympic Council of Ireland.

And yet, even when they’re exposed to criticism, the one thing that never seems to be affected is the funding we give them in the first place. In fact, every time someone talks of accountability, someone else talks about interference.

In some eyes, the idea that an organisation like the Olympic Council should be more accountable and transparent is some kind of slippery slope towards political interference in how teams are picked.

A governance code and financial reporting a must for charity sector

We need to get past that. We must, if it’s not inappropriate to quote former Minister Ray Burke in this context, draw a line in the sand. One of the questions I’ve been asked most in the past week has been what would that line look like? What ought to constitute the sort of basic practice that is the minimum acceptable?

A couple of years ago a number of organisations came together to address exactly this question. Their determination was to raise standards of governance across the community and voluntary sector, because that sector, perhaps more than any other, depends on trust.

The result of their work is known as the Governance Code, and it can easily be found on www.governancecode.ie. So can a list of nearly 300 organisations that are compliant with the Code, and nearly 1,000 more that are on the journey to compliance.

Right at the start, we need to be clear that there is a number of problems with the operation of the Governance Code. It was drawn up by people within the community and voluntary sector for the sector, and it was done on a voluntary basis. If you’re a charity, and you want to adopt the Governance Code, there’s a number of things you have to agree to do, and a number of principles you have to agree to adopt.

But there’s no compulsion on you to do it, and there’s no independent auditing of whether or not you mean what you say. You can be listed on the Governance Code website as either being compliant or on the journey to compliance, but you can’t be listed as having failed to comply or refused to comply. Console, for example, is still listed on the website as being on the journey to compliance, even though it’s pretty clear that they broke almost every single rule of good governance.

A governance code and financial reporting a must for charity sector

I’m not saying this as a criticism of the code. The organisations that developed it, all operate from the highest of motives, but they don’t have the resources or the teeth to monitor compliance or to insist on it. That needs to be a function of an independent regulator (and we don’t need to set up a new regulator either — although we might need to expand the remit of some existing ones).

But the principles of the Code are clear enough. Any organisation that is fully and properly compliant with the Code will have a clear sense of mission and purpose, set out in its founding documents. It will have clear and readily understood policies and practices that ensure it is always compliant with the law of the land. It will have a clear and open idea of the risks it faces, and it will have put appropriate controls in place, including financial controls, to manage those risks.

Governance and accountability means that there must be clear lines between the day-to-day management of the organisation and its board. It also means there must be clear procedures in place for the recruitment and turnover of board members. The duties of a board are reasonably onerous in the case of any organisation that wants to be compliant — for example, they have to have policies that promote an ethical culture, and they have to be especially aware of conflicts of interest.

The key to all good governance within the sector, though, is transparency. No organisation that fails or refuses to publish, in a readily accessible way, an annual report of its activities and properly audited accounts can ever be regarded as reliable. Although the governance code doesn’t specify that, for example, the salary levels of senior management staff should be clear, there are other standards that many charities adopt that do require that.

So here’s the thing. There is a system in place that is capable of producing much higher standards and eliminating, or at least minimising, scandal. But it’s only in place for those organisations that want to operate it, and have the resources to deal with its occasional complexity.

In my understanding, none of the large funders — the HSE or the Sports Council, for instance — ever consult the Governance Code when they’re considering whom to fund and to what extent. And of course, even if they did, the fact that it’s voluntary means they could be guilty of discriminating if they chose not to fund organisations that had chosen to ignore it.

That’s what has to change. The Governance Code, alongside the best forms of financial reporting, have to be brought together in a mandatory charter. We all have to sign up to it, and we all have to accept that we can be externally monitored as a matter of routine.

And I believe we all have to accept too that no state funding should be provided to anyone who refuses to comply. As I said last week, it’s not best practice — transparency about how money is spent and a willingness to account for it has to become standard practice. Charities are businesses now, because a lot is expected of them. And even though charities don’t operate for profit, there’s only one way to do business, and that’s the right way.


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