Compliance with the Charities Governance Code is essential for building trust in the charity sector
Since the Charities Regulator was formally established in October 2014, we have seen the Charities Governance Code become a mandatory requirement for all charities, Aedín Morkan, audit and assurance partner, Mazars points out.
A range of other non-mandatory guidelines, including those on Internal Financial Controls, Fundraising from the Public, Safeguarding, Conflicts of Interest and more, are also available to guide charities and ensure they operate appropriately.
“Making the Governance Code a mandatory requirement received a mixed reaction.
Following a number of revelations in the charity sector, which exposed not just questionable governance practices but a complete absence of any form of governance, many welcomed a code that would apply to all and set a de minimis by which all must govern their organisations,” said Morkan.
“Others, however, felt that this was a step too far in the ever-increasing compliance burden. Nevertheless, right across the country, from small local charities to large international aid organisations, many thousands of hours have been invested in governance training, updating Constitutions, drafting policy documents, completing compliance record forms and much more.”
So, are our charities better governed as a result? Can we expect fewer rogue operators, and are we assured our donations are achieving the impact we hope for?
Morkan said that as with all radical change, these things take time. “In time, the CRA may produce statistics on compliance, or otherwise, with the Code but based on my interactions with charities; I think the majority of charities fall into one of the following camps: Those who were already well-governed had a good understanding of not just how to demonstrate good governance but lived and breathed it.”
“Those who thought they were well advanced in terms of governance maturity but realised in reading the governance code and completing the required compliance record form they had quite a body of work to do. But they rolled up the sleeves and tackled it head-on, some achieving full compliance, others maybe not, but at least being clear on the gaps and having a plan to address them. And those who have not engaged due to a lack of capacity, awareness or understanding of the importance of good governance.”
While significant progress has been made, there remains much work to do, said Morkan. “Good governance is not an exercise to be completed at a point in time nor a box to be ticked; it should permeate an organisation and be part of the everyday. There is always room for improvement, always room to challenge ourselves to be even better.”
Morkan said that the non-mandatory guidelines, on the other hand, freely available on the CRA’s website, are a valuable resource but, in her view, significantly under-utilised and under-appreciated.
“It is surprising how many charities, when asked about self-assessing for compliance with, say, the guidelines on internal financial control, either return a blank look or recite the extensive body of work undertaken in relation to the governance code, not realising that there is a whole world beyond the governance code.”
“Yet the question Boards and Audit Committees most frequently ask me is how I rate the internal controls and how do the internal controls compare to other similar organisations. Self-assessing for compliance against these guidelines does not just ensure practices and processes are of an appropriate standard but also provides significant comfort and assurance to the Board, the CEO and the wider stakeholder group, including funders, the regulator, beneficiaries and the general public.”
“Rather than viewing the various guidelines as voluntary or nice to have, I would consider them essential not just for individual organisations but for building trust in the sector,” she said.”
This article first appeared in The Business Post, June 12 2022