Comment

The third sector

Oct 01, 2018
Against a backdrop of scandal and suspicion, charity leaders must prioritise trust and transparency if they are to survive.

Demand for the services of Northern Ireland’s charities and social enterprises is increasing, according to the latest research by CO3, the membership organisation for third sector leaders in Northern Ireland, in conjunction with Ulster Bank. The Q2 2018 study found that 67% of respondents experienced higher demand in Q2 and 33% have added to their headcount to help them cope with the increase.

This growing demand for services is putting pressure on resources throughout the charities sector. Many charities rely on fundraising for their income and organisations are increasingly aware that maintaining public confidence and trust must be key priorities for their leaders. The 2018 Edelman Trust Barometer recognises that trust is a valuable asset for all institutions and ongoing trust-building activities should be one of the most important strategic priorities for every organisation. So, what can organisations do to build trust? 

Building trust

As part of research undertaken by the Charities Commission for Northern Ireland, participants in group discussions believe that, to increase trust, charities need to:

  • Be more open about how they spend their money;
  • Provide better information about what the charity is doing;
  • Display information publicly on how the charity is regulated;
  • Review fundraising; and
  • Review the remuneration of senior employees.
  • Governance failures
This research found that 84% of participants considered it important that charities are well-managed and transparent about the way they spend funds and donations. However, recent governance failures illustrate just how much work many charities still have to do to comply with best practice, not least in the area of trustee responsibilities and duties.

Useful insights into the types of failings that commonly occur are included in the 2017 compliance report of the Charities Regulator in the Republic of Ireland. Listed issues include trustees being unaware of their legal duties and responsibilities; lacking knowledge of the requirements and conditions in their charity’s governing document; not holding meetings or not attending meetings; making decisions without documenting them in formal board minutes; and making significant decisions without seeking out specialist advice. Other issues include allowing one trustee or a group of trustees to control the charity and trustees not being aware of their legal obligations to the Charities Regulator.

Public perception

Factors the public associate with a trustworthy charity are highlighted in another recent study, which found that demonstrating high standards of conduct and behaviour is as important to trustworthiness as making a positive difference to a charity’s cause. This research, conducted by Populus for the Charity Commission in England & Wales, found that a person’s trust is closely associated with their donating behaviour. More than half (52%) of those whose trust has increased said they donate to charities more as a consequence, while 41% of those whose trust has decreased said they donate to charities less as a consequence.

The study highlights some key drivers of trust such as charities being transparent about where money goes, true to their values, efficient in their use of resources, well-governed and well-managed, and able to demonstrate that they are making a positive difference.

A new charities SORP

Chartered Accountants working with clients in the charities sector should note that, in January 2019, the four charity regulators of the UK and Ireland will work together for the first time to develop the charity accounting framework for use across all four charity law jurisdictions. This follows approval from the Financial Reporting Council for the addition of the Charity Commission for Northern Ireland and the Charities Regulatory Authority for the Republic of Ireland as joint members of the SORP-making body, with the Charity Commission for England & Wales and the Scottish Charity Regulator.
The enlarged SORP-making body will work towards a new charities SORP, building on the foundation of the existing SORP to promote a common approach to high-quality reporting by charities while respecting local differences and
legal requirements.

Teresa Campbell FCA is a Director at PKF-FPM Accountants Ltd.