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Accountants build public trust in charities

Nov 10, 2019

The public trust in charities and not-for-profit organisations had been in decline, but the work of accountants as trustees and volunteers has assisted the charities sector in regaining the trust Irish society once had in them, says Liz Hughes.

We build our personal and professional relationships on a foundation of mutual trust. Where trust is present, relationships can survive difficult times; where it is lost, it can be incredibly difficult to regain.

In Irish society, trust has been significantly challenged in recent years. Like many other pillars of Irish society – politics, banks, the church – public trust in charities has seen a decline. Several high-profile failings in the charity sector have had a seriously damaging effect on public trust in this area.

Charitable engagement is part of the Irish psyche. Ireland is currently ranked the 5th most charitable nation in the world in a survey carried out by the Charities Aid Foundation. However, charities depend on trust to effectively do their job. If the public doesn’t trust the charities sector, donations of time and money decrease, often resulting in the decline of these charitable services to the people that need them most.

A good deed done

In order to regain and maintain public trust and confidence in the work of Ireland’s 10,000 charities, high governance standards are key. The new Governance Code is a welcome addition to the codes and standards that the sector has developed in recent years and because of this, confidence in charities rose to 31% – up 7% from 2017, according to Amárach for Charities Institute Ireland research.

However, navigating a host of unique regulatory, financial and operational barriers while the regulatory framework undergoes significant change can be incredibly difficult for charities, and an area where accountants step in to help, but how do they play a part in further rebuilding trust in the charity sector?

Accountants can make a real difference to charities as auditors, trustees and chairs. For example, without accountants, the Charities VAT Compensation Scheme would not have been such a huge success. The initiative resulted in over 1,100 charities submitting qualifying claims under the scheme. These claims amounted to almost €40 million, close to eight times more than the scheme cap of €5 million per year.

Accountants also receive professional training and CPD throughout their careers and, as such, are sought after as charity trustees who bring a wealth of governance, strategy and financial reporting experience.

Accountants are also bound by professional standards and obliged to behave ethically, not only on behalf of their clients but also for the public good.

Working towards SORP compliance

We know that transparency goes a long way towards rebuilding trust so clear, concise information is essential to support any decision making by management and donors. The most obvious source of information that is accessible to everyone is a charity’s financial statements.

The adoption of FRS 102 and the charity SORP has long been considered best practice for charities in Ireland, and many of Charities Institute Ireland’s members produce SORP compliant accounts. However, adopting SORP is not yet mandatory and, as a result, charities are producing financial statements that are more appropriate for a commercial entity, and when a donor, volunteer or member of the public wants to find out how a charity uses their resources to deliver the objectives of a charity, they access a version of the accounts that omits detailed information on income and expenditure. The public good would be best served by charities preparing SORP financial statements and filing these full financial statements with the Companies Registration Office. 

I encourage those working with charities to check what type of financial statements are filed and, if they are abridged, ask why. We want everyone to work towards SORP compliant accounts for 2020.

Lending your expertise

As we come to the end of 2019, we are calling on accountants to consider volunteering with a charity or not-for-profit to bring their knowledge to a charity that needs it. By doing so, you could be help build the public trust once again.

Liz Hughes is the CEO of Charities Institute Ireland.

You can learn more about leadership in the charities sector at Charities Institute Ireland’s Bolder Board Training event in Dublin on 12 November.